09 Apr Future funding
Dhanesswurnath Thakoor, CEO, Financial Services Commission (FSC), explains why the financial services industry will play an increasingly important role in Mauritius’ economy as the economy continues to develop.
You have been CEO since May 2020, taking on a leadership role during a challenging time with the Covid-19 pandemic. How did you handle this unprecedented challenge? Were there any surprising outcomes for how the FSC changed its operations in this new paradigm?
Indeed, when I took office in May 2020, we were knee-deep in the pandemic and our inclusion in the EU list of High-risk Third Countries (“EU Blacklist”) was already looming on the horizon. I was focused only on implementing the FATF Action Plan. Of course, the challenges were abundant. We were already in lockdown, so I was not able to meet my staff in person. Additionally, as per our Risk Based Supervision framework with the 20,000 licensees that we have, we typically end up carrying out 350 onsite inspections in a year’s cycle. Imagine doing this remotely. I first requested that we quickly develop an IT platform for rapid data feeding. We requested all staff with experience at the FSC to carry out inspections. After an initial stage of resistance, people started to understand the need and loved the new platform. Naturally, this required a few bold decisions, but the board supported me in going with a full-fledged IT platform.
To what extent did Fintech play a role in helping Mauritius exit the FATF Grey List?
The cornerstone of what we tried to do was a succinct list of KPIs designed to demonstrate the extent to which we were adopting practices to meet compliance. The bottom line of what the FATF required was to essentially create a culture of compliance within the whole industry, principally with regard to Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT), KYC, and in general the financing of terrorism. When it comes down to it, it is not what is seen on the surface or in a specific case on a specific day. One must demonstrate, overall, that the system has a procedure while at the same time showing comparable results from one period to another. Time was the biggest restraint for us. Due to the pandemic, we had to minimize the exposure time of our staff on site. We came up with a hybrid mode on inspections where documents could be seen through video calls and submitted on our servers for validation leading to a shorter onsite inspection time.
What does the country’s exit from the list mean for Mauritius more generally?
It means a lot. The financial services sector is an important pillar of our economy. It contributes to more than 6,000 direct employment and many more indirectly. It is a sector which recorded positive growth despite the pandemic and despite being in the FATF grey list. Exit from the EU list means that we can now focus on the growth of the sector and look forward to attracting new business and new investors.
How will the FSC ensure its jurisdictions keep a high level of compliance and accountability to guarantee the country’s future international standing? Following the exit from the FATF Grey List, what will be your primary areas of focus?
By the end of the FATF action plan, when we started to see the light at the end of the tunnel, we already began to focus on what would be our first exit strategy. This involved a myriad of initiatives, the first of which was to rebrand Mauritius as being clean and fully compliant with international norms. In other words, we are now playing in a whole new league. We have upped our game to deliver the services you would expect from a jurisdiction compliant with international norms. The FATF and the EU are just one side of things. We are also compliant with the OECD Harmful Tax Practices, which means that we are not a tax haven. These are the values on which we are moving forward which gives credibility and reassurance to our international investors.
Another aspect of what we are demonstrating is in the area of the sustainability, especially with respect to FATF. I always stress that what we have done is not a one-off exercise. To achieve this, we have rolled out in parallel actions or amendments to a number of our laws to ensure that going forward, it will be a regulatory requirement to carry out the AML/CFT related action items. We focused first on our FIAMLA, or Financial Intelligence Anti-Money Laundering Act 2002, which lays down the requirements to be AML/CFT compliant. Secondly, the FATF requires you to have a political commitment. In fact, the FATF recognized that we were a rare case because they were able to meet the prime minister in person when they visited us. Our whole process is coordinated through an inter-ministerial committee chaired by the prime minister in person.
The Mauritius Africa FinTech Hub was started in 2018 to make the country a hub for fintech in Africa. What has been Mauritius’ experience in adopting these innovative technologies, as well as positioning itself as a regional hub for fintech?
This is an extremely exciting journey. Instead of just adopting technology randomly, we have had a precisely planned approach at the FSC. Back in 2018, we already had the blueprint for financial services, in which fintech was one of the main pillars and for which we set up a regulatory sandbox license, providing space for testing activities. Our National Regulatory Sandbox License (NRSL) Committee was chaired formerly by Lord Dessai from the House of Lords, U.K. and then in, 2021/22, by Lord Anthony St John of Bletso. These high-profile individuals supporting us backed by the committee gave us some international weight, credibility, exposure and experience. We pushed the number of applications, and some have graduated from the sandbox to become real-life implementations, such as our Peer-to-Peer lending, crowdfunding and others. These came up through these ranks to become full-fledged operations. Following the amendment to the Financial Services Act 2007 in 2021, the FSC Mauritius is now empowered to issue Regulatory Sandbox Authorizations for fintech activities pertaining to the non-banking financial services sector. Consequently, the NRSL Committee was discontinued on 21 November 2021.
What are the biggest challenges in adopting these techs and how can Mauritius continue to solidify its positioning and reputation?
Challenges always exist when you have new technology, not only due to its disruptive nature but also because there are always money laundering risks. We are extremely conservative and cautious about it. In the case of crypto and being a regulator, there is a need for constant education and a way to quickly create a framework within which they can operate. The baseline is that if you do not provide a regulated framework, it will operate in an unregulated manner, which is much messier to control. People are happy to operate without a license until something happens, at which point they will complain to the regulator for letting things get out of hand. Financial literacy is a major part of it.
We have come up with the Virtual Assets and Initial Token Offering Services Act 2021 which was just passed in February of this year to create a regulatory framework for virtual assets to be licensed and operated, but the biggest risk in parallel is again AML/CFT. We carried out a national risk assessment concerning virtual assets, and we have now laid out a foundation for sound practices in this area.
In the World Bank’s 2020 ease of doing business report, Mauritius ranked first in Africa and 13th in the world. To what specific factors do you attribute this ranking and how can Mauritius continue to compete internationally in enhancing the ease of doing business?
Ease of doing business is one of the indicators that Mauritius uses to market itself. In terms of processes, we have come up with a number of sustainable means to ensure that we constantly improve on our procedures. The ease of doing business index is based on factors such as depth of obtaining credit, time for licensing and turnaround times, and since its creation, we have improved constantly. Our country’s registrar website can electronically issue certificates to incorporate, register and allocate business registration numbers in a short span of time. A vast amount of information around creditworthiness is also available. Moving forward, we need to continue with this ease and facility for people to work smoothly.
Last year, despite the challenges, we launched the FSC One Platform to allow online licensing of all our activities with the main capability of tracking the status of your applications. It is fully interactive. Whereas before you had no way of knowing what the status of an application was, now you are kept informed every step of the way. The beauty of the platform is that, when an application is incomplete, it does not even reach us. This streamlines the process and has improved our turnaround times massively. From over a month to license a fund, we have now cut down the time to 15 days. Secondly, the investor needs not resubmit any information that the commission already possesses. If your company’s directorship is live from another transaction, that information is automatically applied to your new application.
Mauritius can act as a “gateway to Africa” in many respects, with the country acting as a pivot for investments into Africa. Mauritius is well-positioned to benefit from FDI inflows globally and provides a unique opportunity for the international business community. What would you say to investors who are looking to Mauritius as a potential foothold in the continent?
Firstly, Mauritius is uniquely and strategically positioned for people to use as a gateway for diverse investments within Africa. We have highly skilled talent in financial services and a high number of local graduates in the area of finance. More than 80 percent of the whole African company can be covered because we speak both French and English. Within Africa, we benefit from the regional blocks in which we are located. We are in the Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA), and also have double taxation agreements with several countries. On top of this, Mauritius has 23 Investment Promotion and Protection Agreements (IPPAs) which protect investments.
What is your final message to the readers of Newsweek?
We are not only a tourist destination. There is another side of us in the financial world, and the beauty is that you can do both here.