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What are financial services?

State what have brought about the latest different financial


legislations in Mauritius
Money can buy distinct things which are either tangible or intangible as a service. A financial
service is not a financial good in itself but is best described as the process necessary to acquire
the financial goods.
In the Mauritian context, financial services are facilities such as saving accounts, leasing, money
transfers, and insurance among others that are regulated by both the Financial Services
Commission (FSC) and the Bank of Mauritius (BOM). Financial Services are so large in variety
and quantities, as there are many institutions that are involved in offering them in different
forms.
The Financial Services Act (2007) defined the financial services by make referring the second
schedule of the Act which stipulates the following:

Assets Management;
Credit Finance;
Custodian Services (non-Collective Investment Scheme);
Distribution of financial products;
Factoring;
Leasing ;
Occupational Pension Scheme;
Pension fund administrators ;
Pension Scheme Management;
Retirement Benefits Scheme;
Superannuation Funds Registrar; and
Transfer Agent Treasury management. and other financial business activity as may be
specified in Financial Services Commission Rules.

In Mauritius, financial services are divided into 2 business:


a) The banking business
It is was the bank provides service such as credit card, checking one account balance, deposit of
money, exchange money, opening of a saving account, online banking and money transfer money
among others.
b. The non-banking Business.
Non- banking businesses are mainly categories in terms of global business, insurance firms and
stock brokerage firms. Global businesses are also referred as offshore companies which activities
fall under the new legislative framework.
What has brought a concern in the legislative in Mauritius?

The activities over our International Financial Center are definitely, to a large extent influenced
by what goes on in Hong Kong and Singapore. Mauritius has always caused the required
legislations to be enacted to pave the way for a secured financial services environment.
Mauritius is considered as a new age International Banking and Financial centre that does offer
world class ICT infrastructure, transparent legal structure, regulatory framework, business
friendly environment, good governance bilingual multi-ethnic workforce and skilled manpower
(Bosco 2011). Financial institutions are the core of the financial system and thus it plays a prime
role in the proper functioning of an economy.
Mauritius is known for its strong economic performance and this has contributed in the
development of a profitable and sound banking sector (World Bank 2003). The banking system is
liquid, profitable, highly concentrated and well-capitalised (IMF 2003).
The different Legislation that guide the financial Services in Mauritius:

Financial Services Act 2007


Insurance Act 2007
Private Pension Schemes Act 2012
Protected Cell Companies Act 1999
Securities Act 2005
Securities (Central Deposit, Clearing and Settlement Act 1996)
Trust Act 2001

Due to the massive international trading and being a financial hub, Mauritius was not exempted
from the issue of Money Laundering.
The article of Dr Sadek Ruhmaly in LeMauricien clearly explained the different causes that had
asked to bring amendment and new legislation in the financial services in Mauritius.
Dr Sadek depict the image of Mauritius to be the pray of many financial issues that has affected
the Mauritian Financial services sector goodwill on international financial markets through the
following:
Black listed and then grey-listed as an offshore tax haven for tax evasion
Suspicions of round-tripping in Foreign Direct Investment to India via Mauritius offshore
Money laundering international markets tag on our offshore activities
Tax residency loopholed where black money funneled through the Mauritian financial
system
Banking scandals such as :
a. National Pension Fund & Mauritius Commercial Bank (2003)
b. Mauritius Co-operative Commercial bank
c. STC Foreign Currency deals with Commercial Banks
Air Mauritius Hedging Contracts

STC hedging Contracts


According to Dr Sadek, he observed that the government through its central bank has set a loose
trend in grating banking licenses to large oligopolistic conglomerates, mainly family dynastie.
This makes it a herculean task to track the flow of funds in this corporate maze that regroups
different types of business segments. Dubious auditing standards make the regulatory more laxity
norm than the exception.
Moreover, Dr Sadek voice out the following; Our Trust Legislation has left ample room for
offshore operators to make use of colorable devices that includes using local auditing firms as
local directors and administrators of offshore funds that carry international suspicions of tax
evasion with no commercial substance despite Government reassurances to the contrary.

Based on the above the following questions were asked to assess whether there were a regulatory
loopholes:
Have fraudsters not taken advantage of the regulatory space of the Bank of Mauritius and
the Financial Services Commission?
Is it not high time to also implement the Asset Recovery Act, and apply the most stringent
litmus test to Government Officials and Ministers who should be above all suspicious?
Is it not high time to regulate corporate incest that hooks political sponsors for financial
influence?
To answer the above, more emphasis has recently being put on Money Laundering under the
Financial Intelligence and Anti-Money Laundering Act (2002). Together with that, the FSC has
signed a memorandum of understanding with the Financial Intelligence Unit which describes the
ways in which both institutions will cooperate in preventing Money Laundering and the
Financing of Terrorism.
In addition, FSC voluntarily requested Financial Sector Assessment Programme (FSAP) to
conduct by the International Monetary Fund having as main objectives to assess the Mauritian
financial sectors strengths, weaknesses and vulnerabilities to macroeconomic shocks, as well as
the contribution of the financial services to economic growth. The FSC takes measures to prevent
and address investment business abuse, market abuse and financial fraud in relation to any
activity conducted in the non-banking financial services and global business sector by
implementing an Anti-Money Laundering and Combating the Financing of Terrorism
(AML/CFT) framework and adhering to international norms and standards.
Kireyev (2002) studies the impact of the liberalisation of trade in financial services under WTO
on the stability of the financial system. He finds that liberalisation in trade in financial services is
conducive to financial stability. Moreover, according Kono et al. (1997), GATs offers a vehicle

for securing progressive liberalisation on a non-discriminatory basis and reaping the benefits of a
more efficient, stable and diversified financial sector. Trade liberalisation can make the financial
services sector more efficient and stable