HYDERABAD: Foreign investors from Mauritius will continue to be eligible for FPI registration with increased monitoring as per global norms, Securities and Exchange Board of India (SEBI) clarified on Tuesday.
The move comes days after the Financial Action Task Force (FATF), an inter-governmental body that sets anti-money laundering standards, on Friday placed Mauritius in the list of ‘jurisdictions under increased monitoring’, or grey list. Mauritius is the second-largest country after the US that pumps in capital into Indian markets. In 2019, FPI inflows from Mauritius stood at Rs4.3 lakh crore.
A greylist indicates loose ends in regulatory practices to prevent money-laundering or combating terror-financing. But according to SEBI, when jurisdiction is placed under increased monitoring, it construes that the country, in this case, Mauritius, has committed to resolve swiftly the identified strategic eficiencies within agreed timeframes and subjects itself to increased monitoring.
“Additionally, FATF identifies jurisdictions that have significant strategic deficiencies in their regimes to counter money-laundering, terrorist financing, and financing of proliferation. For all such countries, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence and in the most serious cases, countries are called upon to apply countermeasures to protect the international financial system. This list is often referred to as the blacklist,” SEBI stated.
Quashing fears, it added that market participants from Mauritius won’t have registration restrictions in India despite the island nation coming under the FATF’s grey list. But market participants are apprehensive that funds from Mauritius will be subject to stringent compliance and regulatory scrutiny. As per estimates, about 15 per cent of FPIs invest in India via Mauritius, while over 25 per cent of the total inflows is via structures set up in Mauritius.
It may be noted that early this month, Mauritius made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its anti-money laundering regime. Mauritius will work to implement its action plan, including implementing risk-based supervision, ensuring access to accurate basic and beneficial ownership information by competent authorities.
Significant contributor
The FPI inflows from Mauritius stood at Rs4.3 lakh crore in 2019. According to estimates, 15% of FPIs invest in India through Mauritius