MAURITIUS FRAUD HAVEN : BANKSTERS, FRAUDSTERS AND REGULATORS : INCEST?

‘When Destruction is near, Understanding is turned upside down’ – Old Sanskrit Proverb
ENDEMIC FRAUD CULTURE?
Over the last few decades, Mauritius has been prey to shifts in its global financial image and goodwill on international financial markets: black-listed, 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; Country Residency Certificates and Tax Residency loopholes for black money funneling through the Mauritius Financial System; Banking Scandals- (National Pension Fund-Mauritius Commercial Bank 2003; Mauritius Co-operative Commercial Bank; BCCI; STC Foreign Currency deals with Commercial Banks); Air Mauritius Hedging Contracts; STC Hedging Contracts; SICOM financial engineering and its fiduciary responsibility pertaining to balance sheet book value profit-taking schemes  – A tip of the perceived frailty in the degree of stringent standards of normal practice in financial services? Or a misplaced ‘Fraud culture’ image of our business environment?
ENGINEERED LOOPHOLES?
It is bewildering to the seasoned observer that Government, through its Central Bank, has set a loose trend in granting banking licenses to large oligopolistic conglomerates, mainly family dynasties, who are market movers and shakers in key commercial and industrial sectors of the Mauritian economy and wielding substantial muscle in terms of cash flow liquidity, both in local rupee terms and in foreign currency reserves. The financial system thus has engineered, within its very walls, the seeds of loose partition between the commercial, banking, speculative, and due diligence roles of large family conglomerates (across all communal and racial groups in the country , presumably for ensuring poise and subtle balance in financial politics?).
It is thus a herculean task to track the flow of funds audit trail in a corporate maze that regroups business segments, domestically and internationally, and, funneled into a banking organization that is niched within the Group’s stable of companies. Creative accounting and dubious auditing standards make regulatory laxity a norm rather than the exception.
OFFSHORE TAX HAVEN STATUS
GAAR has sent shivers down the offshore sector’s spine mainly due to the lack of economic substance and demonstrable commercial activity within our local offshore jurisdiction. Local auditing firms and Management Companies have been labeled as mere post office box addresses for offshore funds seeking TRC (Tax Residency Status) in our offshore jurisdiction. 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.
    The Government of India insistence on GAAR benchmark in the near future and the meek posture in our international economic diplomacy does not bode well in our bid to rid our image of money laundering and other dubious round-tripping and financial scams within our financial system.
Why has the Financial Services Commission not exercised caution via prudent stringent procedures to hinder the use of colourable devices devoid of commercial/economic substance beneath the Corporate Veil? Who will bear the responsibility of a rigorous assessment and a formal regulatory ruling pertaining to the adequacy of commercial and economic substance of a Third Party seeking the cloak of a TRC [Tax Residency Certificate]?
Has the FSC relinquished its prerogative to establish a comprehensive list of all Global Business transactions which could be legally construed as colourable devices [a dubious method or subterfuge clothed with apparent dignity] as per the Mc Dowell ruling? Is it not an opportune moment for FSC Mauritius to upgrade its own operational standards to internalise the core essence of GAAR, without duress or undue external diplomatic pressure?
RS 1 BILLION FRAUD     
Structured Financial Instruments have been termed as Instruments of Mass Destruction. The Financial Services Commission has a duty of care to protect consumers of financial products. In collaboration with the Bank of Mauritius, FSC is responsible for identifying and taking necessary measures to eliminate business abuse. Above all, the FSC has the duty to ensure the soundness and stability of the financial system in Mauritius.
The Investment companies, not licensed by the FSC, and suspected of committing a criminal act pertaining to deceit and fraudulent misrepresentation in the proposed structured returns on investment linked to the financial products under offer for contractual consideration between the parties, may assuredly be brought under the long arm of the Law and the Financial Intelligence Unit (if the latter has any significant role still). It is not a matter of regulation but of sheer criminal behavior.
BLATANT NEGLIGENCE
In terms of normal banking due diligence procedures and KYC litmus test, the Bank of Mauritius Supervision Department has to carry an urgent investigation into the Bank who failed to trigger a STR (Suspicious Transactions Report) in view of an alleged 23 year old Director who, along with his fellow Directors, carried out bank deposits and impending transfers circa MUR 700 Million (estimated to exceed MUR 1 Billion).
BOM has to severely reprimand and apply strict sanctions against the Bankers, who, as account managers, have implicitly condoned purported criminal behavior pertaining to the fraudulent transactions and transfers.
Should Accountants and Lawyers who advised in this business transaction and contractual clauses, terms and conditions, not be named and held legally liable for knowingly facilitating misrepresentation in a fraudulent business model, purportedly intended to induce unsuspecting investors, who relied on their professional integrity, to enter into a valid contractual relationship with the proposed fund managers in what effectively was a Ponzi Scheme?
REGULATORY LOOPHOLES
Have fraudsters not taken advantage of the undefined territory between the regulatory space of the Bank of Mauritius and the Financial Services Commission? Is there not a serious case for reviewing the Unified Regulatory Framework for banking and non-banking services? (I have supervised postgraduate research verifying this Regulatory Model hypothesis for the Mauritius Financial System- 2011).
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 suspicion?
INCEST or CHAOS?
Is it not high time we regulate to thwart corporate incest that hook political sponsors in a web of financial influence that spans from electoral funding to shady shareholding and baksheesh, to a barter system that trades tenders and licenses for political wealth and financial reward beyond ethical standards?

BLACK MONEY CURSE
This Ponzi Scheme Episode serves to prove a blatant fact: Mauritius is awash with black money desperate for elaborate investment schemes to undergo dirty cash laundering. Our tax authority, financial intelligence and banking regulators have to be summoned to enhance our goodwill as a credible world financial centre. The irony being that many significant Ponzi Investment Fraud Victims will not testify due to their illegal source of funds. Dirty money laundering is on a regional scale in foreign currency. Mauritius has woed Russian, Gulf, South African and other unverified jurisdictions funds; we need to be seriously concerned as to when the bubble will burst and Cyprus contagion reach our financial shores.


Commentaires

how do you report tax fraud anonymously in Mauritius? I there such thing in Mauritius?

Its high time for the prime minister to wake up from his sleep adorned by pretence.

He should act like in a statemanship mode rather than a diplomatic type.
Much of manliness is required from him concerning placement of elements in key positions and likewise of its removal when competence does not shine.

The PM is more preoccupied with his image and popularity rather than doing the job as it should be.

Well, example comes from above, a merry making leader makes merry making citizens.

The proof of the pudding is on the eating.

Root causes of the present financial mess are not being addressed at all.
Government should pass a law to ban the giving and taking of interest, pensioners and the unemployed, as well as other vulnerable members of society, being protected through income support schemes; this will prevent both the swelling of banks’ and insurance companies’ profits and the emergence of Ponzi schemes, which, presently, allow too much money to remain idle. The accumulation and hoarding of money, as in insurance, banking and financial companies should also be banned; these institutions should be encouraged to enter into partnership with private individuals and companies on a profit-and- loss shared basis. Part of excessive profits from all institutions – governmental or non-governmental – should be channelled into special funds for budgetary purposes. Strict control of government financial expenditure is to be exercised to obviate the need for presenting ESE’s in Parliament. All insurance companies should be gradually phased out over a period of time and given other roles. Financial services’ and banks’ role should be changed into one of facilitating the movement of money and services. The closing of stock exchanges and money exchanges and the taking of other appropriate measures should be able to ban speculation, hedging and artificial means of acquiring money. The buying and selling of foreign currency are to be reduced to a minimum and should be done at par against the introduction of a nominal fee.
In brief, people should be made to be more responsible; mutual solidarity encouraged among all members of society; human greed and cupidity banished for good. Money will then revert to its original, natural role of a means of exchange for goods and commodities. Inflation – both internal and imported - will be a thing of the past.

This is an exchange I had earlier Friday on Facebook with Sadek REuhmally:

Jooneed Jeeroburkhan Timely piece, given the WhiteDot affair and Russian oligarchs getting trapped in the Cyprus banking crisis (the apparent suicide of Boris Berezovsky in London may not be just a coincidence). But the bulk of your arguments are mere generalizations with no specific cases, names and data backing, and a lot of rhetorical questions. You display a certain virtuosity in your mastery of financial/economic concepts, but I doubt you really connect with the average reader. For starters, a short glossary and explanation of the terms and acronyms you use would help the average reader understand a lot, and would compensate for the dearth of reference to specific cases of "fraudsters, banksters, black-money launderers and Ponzi-schemers". C'est que ton article me laisse sur ma faim!
8 hours ago · Like · 2

Sadek Ruhmaly I deliver more technical insight to my M.Sc. Financial Engineering research students ... my previous status as a Central Banker necessitates restraint and legal finesse....i am not writing as a Prof.... nor to educate the non initiated...but to address poignant issues in our policy making arena where I have spent part of my career..... but, point taken, Jooneed Jeeroburkhan...and grateful for your views, Sir.
7 hours ago · Like

Jooneed Jeeroburkhan I doubt it not, but when you write in Le Mauricien (or for any other media), you are addressing not your MSc students but the public at large on a platform for public debate. Keep at it!
7 hours ago · Like

Most countries go through phases from DARK AGES TO CIVILISATION then eventually to a DECADENT STATE.

We, in Mauritius , we went from Dark ages to a Decadent state without the benefit of CIVILISATION !!

We are madly and dangerously IN LOVE....with MONEY !!

GREED, (Big way) drives our existence.

If everyone else is doing it, then I can do it, too. I can and will do it BIG !!

What on earth BOM, FSC , FU etc, what have they been up to? I guess, CONSPICUOUS BY THEIR ABSENCE & INCOMPETENCE.FIRE FIGHTING AS ALWAYS.

Burglars operate a simple rule of the trade. If a property is vacant, or if the Guards are absent or sleeping, then they, (Burglars) will hit !! Simple.

Brilliant exposure. Well said, doc! But you seem to forget that Mauritius is a big socio-cultural organization and what you have learnt ( and what you may be teaching ) does not apply here. Just watch the CT Power episode.

P.S. How did you like the Guljaury and Bangaleea episodes? Hundreds of millions involved there also. And poor Manou is like a bom-fizette in the BOM tower.

When will our financial system Burst? It is only a question of time. The system relies on money laundering, drugs trafficking and recently weapons traffic. The poles of our economy: sugar, manufacturing, mainly textiles and tourism are not performing well. Yet, we see astonishing signs of wealth with road development, sky crapers, large commercial centres with branded shops. It is a paradox. Something is certainly wrong even if we might argue that we are selling our patrimoine to enjoy ourselves. Mais, pu ena pu payer plus tard. Mo esperer qui nu pas vine commer la grece.

Aurore if I go to the CID and accuse you of stealing an egg, you will be in custody quick smart.Minister and top lawyers were accused of weapon traffic,and are still .......at large.

The system relies on money laundering, drugs trafficking and recently weapons traffic. Indeed. You seem to have overlooked bootleg (fake products especially fashion and music)trading that gets the nod for "enn sel kalite dimounn kapav vinn ris dan sa pei la" !

Excellent comment! But how do you report the defrauders?