New Mauritius Banking Bill Will End Onshore/Offshore Divide

by Lorys Charalamabous, for Lawandtax-news.com, Cyprus

30 August 2004

The Mauritian government will shortly be placing a new Banking Bill before the National Assembly whose goals are to end the distinction between onshore and offshore banking sectors, while modernising banking legislation, and establishing a banking Ombudsperson.

The new Bill was presented to the Council of Ministers on Friday by Finance Minister Pravind Jugnauth. Once the new law is in force, the Bank of Mauritius will offer only one type of banking licence as opposed to the two (onshore and offshore) currently available. The bill clarifies the division of responsibilities for the financial; sector between the central bank and the Financial Services Commission. The bill will also annul the existing Foreign Exchange Dealers Act; in future, such dealers will fall under the aegis of the central bank.

The existing rule that 40% of a bank's directors should be independent, currently forming part of the Rules on Corporate Governance issued in 2001, will become part of the new law. The definition of independent director will be: 'having no relationship with, or interest in, whether past and present, the financial institution or its affiliates, which could reasonably be perceived to materially affect the exercise of his judgment in the best interest of the financial institution'.

The minimum capital requirement for a bank will be increased from Rs 100m to Rs 200m, but banks will be allowed to increase their capital in two stages, from Rs 100m to Rs 150m by 1st July, 2005, and then to Rs 200m by 1st July, 2006.

The new law will give the central bank power to appoint a 'Conservator' to protect the assets of a bank's depositors if 'the financial institution has, or its directors have (i) engaged in practices detrimental to the interests of its depositors, (ii) knowingly and negligently permitted its chief executive officer, any of its managers, officers or employees to violate any provision of the banking laws, any enactment relating to anti-money laundering or prevention of terrorism or guidelines and instructions issued by the Central Bank. The law also enables the central bank to establish a deposit insurance scheme as a protection 'against the loss of part of all of deposits in a bank that will contribute to the stability of the financial system in Mauritius and minimize the exposure to loss'.

Other provisions include a strengthening of KYC rules, laying down that 'every financial institution shall only open accounts for deposits of money and securities, and rent out safe deposit boxes, where it is satisfied that it has established the true identity of the person in whose name the funds or securities are to be credited or deposited'. Banks will also have to rotate their auditors at least once every five years.

Confidentiality of client information is however protected under the new Bill, which requires any access to banking information to be authorised by a judge, as follows: 'The Commissioner under the Prevention of Corruption Act 2002, the Chief Executive of the Financial Services Commission, established under the Financial Services Development Act 2001, the Commissioner of Police, the Director General of the Revenue Authority, the Revenue Commissioner under the Unified Revenue Authority Act or any other competent authority in Mauritius or outside Mauritius who requires any information from a financial institution relating to transactions and accounts of any person, may apply to a Judge in Chambers for an order of disclosure'.

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