INSUBCONTINENT EXCLUSIVE:
of Financial Action Task Force (FATF) -- an inter-governmental policy making body setting anti-money laundering standards.
As the
jurisdiction comes under the strict monitoring of FATF, there is a question mark on whether foreign portfolio investors (FPIs) from
Mauritius will receive registration from Indian authorities and to what extent they can trade in Indian securities.
As soon as they grasped
the implications of the development, custodian banks and advisors to foreign portfolio investors (FPIs) rushed to Indian capital market
regulator Sebi on Monday morning to figure out the future course of action and enquire whether stocks purchased by FPIs on Monday can be
within agreed timeframes and is subject to increased monitoring
From an FPI regime perspective, if the concerned jurisdiction of FPI is listed in FATF public statement as "high risk" and "noncooperative"
jurisdiction, then such FPIs are barred from making fresh purchases till the time the jurisdiction is compliant
However, the FPI shall be allowed to sell the securities or continue to hold the securities already purchased by it
Accordingly, in our preliminary analysis, Mauritius may not be construed as "high risk" and "noncooperative" jurisdiction from the
perspective of existing FPIs
investment funds (AIFs) further analysis will have to be done to find out any immediate impact
In 2012 FATF further tightened its standards.
Mauritius, which has been improving its compliance and AML regulations since last few years,
is expected to make a media statement soon
About 15% of FPIs invest in India via Mauritius while it is estimated 25% or more of the total inflow is through structures set up in the
foreign investors from non-FATF member countries (like Mauritius and Cayman) at a serious disadvantage
For instance, no Category-I FPIs -- which alone are allowed to issue participatory notes, or offshore derivative instruments to trade on
Indian stocks as underlier -- can be based in Mauritius
Mauritius is tapping diplomatic channels -- using whatever leverage it has or thinks it has with India -- to preserve its position as a tax
Over the past four months, chairman of FSC Mauritius has had multiple meetings with Sebi top officials followed by visits by senior leaders
