Mumbai: Market regulator Sebi on Tuesday said foreign investors from Mauritius will continue to be eligible for FPI registration with increased monitoring as per international norms.
The regulator issued clarification after the tax haven was put on the “grey list” of Financial Action Task Force (FATF) — an inter-governmental policy making body that sets anti-money laundering standards.
A significant percentage of foreign portfolio investors (FPIs) investing in the Indian market is registered in Mauritius.
The island nation is the second largest source after the US from which foreign portfolio investments come into the country. As per January NSDL data, assets under custody of US FPIs are worth Rs 11,62,579 crore and those from Mauritius stood at Rs 4,36,745 crore.
Following the FATF notice, some fund managers knocked on Sebi’s door overnight, raising concerns over validity of FPI registration done through the tax haven.
The regulator on Tuesday said, “Foreign investors from Mauritius will continue to be eligible for FPI registration with increased monitoring as per FATF norms”. “It is noted from FATF website that when a jurisdiction is placed under increased monitoring, it construes that the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring,” Sebi said.
In a detailed statement, Sebi said that FATF does not call for the application of enhanced due diligence to be applied to these jurisdictions, but encourages its members to take into account this information in their risk analysis.
Referring to the above, Sebi said that intermediaries should take note of it.
FATF identifies jurisdictions that have significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and financing of proliferation.
Jurisdictions under the “grey list” face increased monitoring. Currently, there are 18 jurisdictions identified as having “strategic deficiencies”, including Mauritius and Pakistan, as per the FATF.
For several years, there have been apprehensions about Mauritius being a money laundering route for FPIs due to its limited regulatory oversight. But, the Indian Ocean island nation has been taking several steps in recent years to address the concerns.
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