What Mauritius exiting FATF grey list means for India?

• IAS NEXT, Lucknow
• 26, Oct 2021

The Financial Action Task Force (FATF) has moved Mauritius out of its grey list.

Why is Mauritius no longer subject to FATF’s increased monitoring process?

Mauritius has strengthened the effectiveness of its anti-money laundering and terror financing process, and has addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2020.

Why was it included in the list?

For several years, there have been apprehensions about Mauritius being a money laundering route for FPIs due to its limited regulatory oversight.

Implications for India:

• The move would enable Indian non-banking and other financial services companies to receive foreign direct investment from funds and vehicles incorporated by international investors in Mauritius. This may indirectly lead to higher investment to India from the Island nation.
• It is also expected that now there would be less scrutiny by custodian banks on the ‘beneficial ownership’ (BO) of Mauritius vehicles coming in as FPI and FDI.

Background:

Mauritius, which has been one of the largest contributors of FDI, has been recently losing out to jurisdictions like Singapore, Cayman Island, etc., partly because of amendment in the tax treaty with India and also due to it being put on the FATF grey list. Mauritius was put on the list in February 2020. After inclusion in the list, FDI inflow from Mauritius fell from Rs 57,785 crore in 2019-20 to Rs 41,661 crore in 2020-21.