The Mauritian offshore industry was first launched in 1992 when it introduced the Mauritian Offshore Business Activities Act which governed the offshore financial services sector. There was also the appointment of its then regulator, the "Mauritius Offshore Business Activities Authority". This was however repealed and replaced by the Financial Services Development Act, 2001, which also created the Financial Services Commission ("FSC"). The FSC is tasked as the regulator to monitor, regulate and supervise, inter alia, the country’s offshore business activities (now referred to as "Global Business Activities"), the local insurance industry and the Mauritian Stock Exchange.1

There are, as at end February 2007, 31 135 (thirty one thousand one hundred and thirty five) registered Global Business companies (i.e. formally known as "offshore companies") and 383 (three hundred and eighty three) registered global funds (with a total asset value under management of US$ 36 billion).2 On available statistics, this industry has grown at an average rate of 8% per annum from the year 2000.3

Banking is governed and regulated by the central bank (the Bank of Mauritius), and there is no distinction (since March 2005) in regard to their banking licences as regards off shore and/or on shore banking activities. However, the banks are required to report separately for onshore and offshore business. There are currently 19 registered banks (including 11 former "offshore" banks, which include the international banks such as, HSBC, Deutsche Bank and Barclays PLC).4

By all means, the OFC in Mauritius is not by way of global standards a large financial centre. However it has according to Mauritius’ Minister of Financial Services and Corporate Affairs, Sushil Kushiram, contributed 10% of the country’s GBP in 2004 and as at June 2005 provided employment for 10 000 (ten thousand).5 With the advent of two of the traditional top pillars of the Mauritian economy being eroded (namely sugar and textiles, which are currently loosing the trade preferences and market protection which they have up to now enjoyed), the OFC sector remains a growth area and an emerging pillar for the economy.6 It has been stated that the financial services sector is to be the 4th pillar of the economy, together with that of tourism, sugar, textiles and ICT (Information and communications technology). Both financial services and ICT remain emerging sectors in the economy, with sugar and textiles on a rapid decline.


It is suggested that being fairly new to the OFC market and being a small economy (with the ability to change rapidly due to any market and/or international trends), that Mauritius has adapted itself rapidly so as to meet such international requirements.7

Mauritius can be viewed in relation to the four international compliance requirements as follows:


Mauritius is not an OECD member, but nonetheless immediately voluntarily committed itself to participate in this initiative. It may be argued that Mauritius’ participation and commitment was largely motivated by the fact that (but for its commitment to participate and commit itself to the initiative) it would have been "named and shamed as a jurisdiction offering Harmful Tax Completion" (with an imminent threat of imposed sanctions and trade barriers) along with the fifteen jurisdictions that were so named (the latter including well known financial centres such as the Cayman islands, Panama and Liechtenstein).8

There were in summary 2 broad areas of commitment required by the OECD, namely:

  • to ensure that ones own tax system does not constitute a "harmful tax practice" (i.e., that one effectively amends ones taxes and tax regimes in line with the OECD countries so as not to have a tax/tax competitive advantage over such countries);
  • conforming to standards of transparency and information exchange on non resident income/tax with such non resident’s home jurisdiction.

On the first commitment that was sought (i.e. the anti-tax competition commitment) there continues to be strong opposition that any form of broad based tax harmonization discriminates as against a developing or underdeveloped economy which, but for a tax advantage, does not have the other efficiencies (such as a greater and better infrastructure, human resources and financial resources) that a developed economy has with which it can compete. Furthermore, it is also argued that tax competition itself facilitates economic growth in encouraging governments to improve their own efficiencies and where possible reduce their taxes which then directly translates to more profits and more jobs. A case in point is Ireland which reduced its onerous taxes of 65% over a ten year period to 42% as regards individuals and corporate taxes to 12.5% by the year 2001. Such reduction has directly aided the economic boom that Ireland has experienced over the 90’s to the earlier part of this century (attributed to more employment, large capital investment and inflows, and overall higher profits in all its business sectors).9

Notwithstanding the above, the United States and Switzerland (being OECD members) were themselves not compliant with the OECD initiative. Paul Neill (US Treasury secretary) stated in May 2001 that the United States was not itself in favour against indiscriminate information exchange and was in turn in favour of the principle of "tax competition". Hence, with the strong and influential opposition to harmonizing the world tax system (i.e. dictating to a country as to what its tax system should be and in effect ending low tax regimes), the ambitious notion of worldwide anti-tax competition has since been dropped from the "Harmful Tax Competition" agenda.10

On the second sought after commitment (i.e. tax information sharing), there has also been ongoing opposition (save where there are separately negotiated tax information and exchange bi-lateral treaties as between countries) to indiscriminately conduct "fishing expeditions" under the initiative to find "tax cheats". Up to now, the banking secrecy laws of the United States, Switzerland, Austria, Luxembourg, Belgium and the United Kingdom (all themselves being OECD members) do not allow for such indiscriminate fishing expeditions, unless there is evidence of a domestic crime having been committed.11

The objection raised by non OECD members (as well as many of its own members) has been that until there is fairness and a level playing field by all participants (i.e. all practicing the same standards and not discriminating in any way against the smaller jurisdictions), there can be no agreement on standards of transparency and information exchange on non resident income/tax with such non resident’s home jurisdiction. Despite there being no progress the OECD has continued with its initiative (albeit amended).

Mauritius is currently in the position where it remains committed to partake in the OECD amended initiative, now referred to as Tax Co – Operation Initiative – "Towards a Level Playing Field".12 The objectives and sought after standards emanating therefrom remain broadly (in regard to tax) the adoption of exchange of information mechanisms, appropriate access to the information and the availability of such information. However, the OECD accepts that the convergence towards these standards must be coupled with a process that ensures equality and fair competition between all participants. Such a stage can only be achieved where all financial centres meet and commit to such high standards and remain fully committed to the global financial system and global community.13 So, until countries like the United States, United Kingdom and Switzerland accept these standards (thereby changing their banking secrecy laws to allow for this), the OECD initiative remains meaningless.

It can also then be argued that as long as the vested interests of the larger jurisdictions remain unaligned, that there will be continuing tax competition on all fronts. For example14:

  • the United Kingdom has exempted the Eurodollar market from the recently adopted EU savings directive as it does not intend loosing its dominance in this global market;
  • Switzerland and Luxemburg will not want to give up their banking secrecy laws for fear of loosing their dominance in the global private banking sector.

Mauritius on its part, until the aforesaid convergence is achieved and discrimination ceases, has no obligation to follow the OECD initiative (which it accordingly currently does not do). It however remains committed to the initiative, subject to the "level playing field" principles.


The FATF is an inter-governmental policy-making body, founded in 1989 at the G-7 Summit that was held in Paris by the then member states of the OECD, with the purpose of combating money laundering and terrorist financing. It has to date published 49 recommendations in order to meet such objectives, (the initial 40 during April 1999 with the additional 9 following the 9/11 attacks in the United States).15

The FATF monitors all countries’ progress in implementing appropriate measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate mechanisms and frameworks to combat such abuses globally. It also collaborates with other similar international bodies and worldwide governments that have a similar purpose and who have largely adopted the aforesaid guidelines.16 Initially, during the year 2000 it identified countries that were not compliant as far as adopting the principles and intent of the initial 40 recommendations and branded such countries (i.e. "named and shamed") as being Non-Cooperative Countries and Territories ("NCCT"). A clear majority of the countries which appeared on this list were "island" OFCs such as the Bahamas, Cayman Islands, Cook Islands; Dominica, Marshall Islands, St Kitts, Nevis, St Vincent and Grenadines. Mauritius was not identified as a NCCT as it was at the time seen to be substantially compliant the FATF’s initiatives and recommendations.17

As much as it has traditionally been perceived that the smaller and less regulated OFCs are the most vulnerable and responsible for money laundering activities, there is sufficient debate that such a perception is not entirely correct.18 It is argued that as much as there have been instances that the smaller OFCs have been involved in such illicit activities, the same holds equally true for the larger established financial centres. For example:

  • as much as the Cayman Islands featured in both the Enron and Parmalat scandals, having had a number of registered companies actively involved in both bankruptcies, the fact remains that in the case of Enron the related offshoots were Delaware limited partnerships (managed and controlled from Houston) which de facto defrauded the Cayman entity of some US$16 million and in the case of Parmalat the actual defrauding and crimes were committed by New York banks and advisors all based in New York;19
  • the US International Narcotics Control Strategy report of 2005 lists major financial centres such as the United Kingdom, Netherlands, Australia, New Zealand, Sweden and others as being deeply suspicious and potentially vulnerable for money laundering activities;20
  • Augusto Pinochet, the Chilean dictator, hid millions of US$ with the facilitation and help of Riggs Bank which is based in Washington DC;21

It can perhaps then be argued that the smaller OFCs are very often the victims of illicit activities, as the actual perpetrators (including the professionals such as the lawyers and financiers) are very often located and devise these schemes from the traditional and larger financial centres which persecute the smaller OFCs. Also, a large transaction emanating from an illicit transaction is possibly much more visible and likely to be identified in a smaller OFC than in a larger financial centre (like London) where the banks, regulators and accountants are quite used to seeing "big numbers" and large transactions on a daily basis.

Over the last 5 years Mauritius has responded favourably in amending and putting in place laws and regulations which, on best international practice principles, provide the regulatory framework and structures in meeting all of the FATF’s revised 49 recommendations.22 Mauritius has further ensured that its compliance extends to other international initiatives, such as compliance and cooperation with other international bodies on anti-money laundering and suppression of terrorist financing activities, such as:

  • the Basel Committee’s compliance requirements for banks on "customer due diligence" and banking supervision (such initiative supported by the FATF);23
  • the Wolfsberg Group’s compliance guidelines (the Wolfsberg group comprising of the world’s leading private banks);24
  • the International Organisations of Securities Commissions’ principles on client identification and beneficial ownership;25
  • the International Association of Insurance Supervisors’ core principles and methodology.26

Again, it may be argued that Mauritius has no choice but to fully adhere to all the above initiatives, but, whatever the case, it has done so quickly and is able to continue doing so in the future (especially in that being a small state with a committed government policy on the sector, it is able to respond quickly and effectively in meeting any pressure/standards as required from time to time).


Following a working group report by the IMF’s Financial Stability Forum ("FSF") on offshore financial centres in March 2006, the IMF was tasked in extending its scope of activities to include assessments of any vulnerabilities stemming from the use of offshore financial centres.27 Such vulnerabilities were broadly categorized as the failure by an OFC to adhere to internationally recognized and accepted standards for supervision, cooperation and information sharing with other financial centres would create a potential systemic risk to global financial stability (as far as hindering the broader efforts in raising standards of soundness and transparency in the global financial market).28

The FSF released in its initial aforesaid survey a category grouping of OFC’s which reflected the FSF’s perceived level of quality of supervision and degree of cooperation of such OFC’s. Mauritius was grouped in the last grouping ("Group III") which was perceived as having the lowest level of resources devoted to supervision and cooperation relative to the size of their global financial market activity. 29

The survey thus created an implied ultimatum to OFCs to demonstrate their commitment to achieve the IMF’s standards of supervision and cooperation with both the IMF as well as other financial centres’ so as to be given a right of recognition and membership in relevant international groups.

The required framework by the FSF entailed a declaration of intent by the OFC to achieve the IMF set standards, to complete initial self assessments of adherence to the required standards, to address any shortfalls of the standards and action plans in regard thereto and then finally to undergo ongoing external assessments by the IMF. The crux of all this also then entailed public disclosure off all assessment findings.30

The IMFs set required standards framework is set out in its report dated 23rd June 2000 and which is summarized in annexure "F".

Mauritius has accepted and subscribed to the ongoing assessment program by the IMF and has satisfactorily completed its current required Financial Sector Assessment Program.31 Mauritius has further adopted the necessary applicable and appropriate standards, as far as it has, inter alia32:

  • subscribed to and included banking supervision and core principles associated therewith (under the Basel Committee on Banking Supervision);
  • subscribed to and included insurance supervision and core principles associated therewith (under the International Association of Insurance Supervisors);
  • subscribed to and included securities supervision and core principles associated therewith (under the International Organisation of Securities Commissions).

The IMF published its results on its Article IV consultation with Mauritius and stated therein, "Directors commended the authorities' steady progress on financial sector reform, including implementation of several key Financial Sector Assessment Program (FSAP) recommendations. This has strengthened the banking system despite the adverse developments in the textile and sugar sectors. Directors welcomed the authorities' plans to intensify financial sector monitoring and to harmonize the tax treatment of domestic and offshore banks".33

Being a vulnerable small island economy, notwithstanding its successes on growth in the last two decades (especially in textiles, sugar, tourism and its export processing zone), Mauritius has been cautious in maintaining its credibility and recognition as a well regulated OFC. As is evident from the IMF’s Public Information Notice, issued on 3rd January 2006, it is reasonable to assume that with its legal framework, subscription to internationally accepted standards and careful supervision by the FSC, IMF and other international regulators (such as the Basel Committee on Banking Supervision) , Mauritius has instilled internationally accepted confidence as a well regulated and reputable OFC.34

Therefore it can be concluded that in light of the above, Mauritius has wherever possible tried to align itself with the International Compliance requirements as laid out by the main regulatory bodies.


1 FSC,, accessed 17th March 2007

2 FSC Mauritius, monthly statistics for 2007,, accessed 18th March 2007.

3 FSC Mauritius, monthly statistics for 2007, Ibid.

4 Bank of Mauritius Annual Report 2005 – 2006.

5 Lowtax Net. "Mauritius Offshore Business Sectors",, accessed 17th March 2007.

6 OECD, "Mauritius", African Economic Outlook, 2005-2006, The preferential prices for sugar by Europe under the sugar protocol fall away completely in the next 3 years (whereby Mauritius will not be able to compete on market prices) and textiles are unable to compete due to the unbundling/termination of the Multi-fiber Agreement and recent entry/competition by China, Vietnam and India;

7 FSC Annual report 2005, page 41


9 D Mitchell, of the Heritage Foundation, "Tax Competition and Fiscal Reform, Rewarding the Pro-Growth Tax Policy", paper presented at the Cato Conference held in Moscow, co-sponsored between the Cato Institute, The Institute of Economic Analysis and The Russian Union of Industrialists and Entrepreneurs in April 2004,, accessed 19th March 2007.

10 J Hetherington-Gore, M Godfrey, U Lomas and J Gorringe, Op, Cit

11 J Hetherington-Gore, M Godfrey, U Lomas and J Gorringe, Op, Cit

12 OECD, "Tax Co-Operation, towards a Level Playing Field" 2006 Assessment by the Global Forum on Taxation.

13 R J Hay, "War of the (offshore) Worlds", STEP Journal, September 2006, Volume 14, Issue 7

14 The Economist, ""All together now", a special report of tax havens, 24th February 2007;

15 FATF,, accessed 21st march 2007;

16 FATF, ibid;

17 FATF, "FATF Review to Identify Non-Cooperative Countries and Territories; 22 May 2000;

18 K Rafferty, "Terrorism Clean-Up Opens Opportunity for Offshore Centres ", Offshore Financial Services Guide 2005-06;

19 K Rafferty, Ibid;

20 K Rafferty, Ibid;

21 The Economist, , "Unintended consequences – The less obvious uses of tax havens", A special report of tax havens, 24th February 2007;

22 FSC, Op, Cit; and the FATF Annual Report 2005 – 2006, 23rd June 2006;

23 Basel Committee,; accessed 23rd March 2007;

24 Wolfsberg Group,, accessed 23rd March 2007;

25 IOSCO,, accessed 23rd March 2007;

26 IAIS,, accessed 23rd March 2007;

27 IMF, "Offshore Financial Centres – The Role of the IMF", prepared by the Monetary and Exchange Affairs Department, report dated 23rd June 2000;

28 Bank of International Settlements, "Financial Stability Forum Releases Grouping of Offshore Financial Centres (OFCs) to Assist in Setting Priorities for Assessment",, accessed 21st March 2007;

29 Bank of International Settlements, Ibid;

30 Bank of International Settlements, Ibid;

31 IMF; "The Assessment Program", 8th February 2006,, accessed 25th March 2007;

32 FSC Annual report, Op, Cit;

33 IMF, Public Information Notice No. 06/01,; accessed 25th March 2007;

34 IMF, "IMF Executive Board Concludes 2005 Article IV Consultation with Mauritius on 2nd December 2005, Public Information Notice (PIN) No. 06/01.

* * * * * * * * * *

The following article is an extract from a dissertation by Mr J Dvorak entitled “An analysis of Mauritius as an “International Offshore Financial Centre”, its compliance, competencies, competitive advantages and future sustainability”. Mr Dvorak is a non executive Director of Inter Ocean Management Limited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.