INTERVENTION OF MINISTER SEERUTTUN ON FINANCE BILL 2021

FINANCE BILL 2021

Mr. Deputy Speaker, Sir, 

During my intervention on the Budget Speech, I highlighted, that this Budget, comes as a new breath to the economic sector and the entrepreneur community. 

In fact, 

Mr Deputy Speaker Sir, this Budget is definitely, a key step, in helping us, recover from the impacts of the Covid 19 pandemic, which has certainly not spared our country.  

You will recall that, in my intervention, I also highlighted the reactions of the captains of the industry, who has applauded the range of measures and policies, which have been announced, to shore up business confidence and sentiment, which is vital for investors to look our way.  

Mr Deputy Speaker, Sir,

I also mentioned, that the financial services sector, is one of the few sectors, which has remained resilient, to the impact of the Covid 19 pandemic, and that, inspite of the inclusion of Mauritius, in the list of jurisdictions under increased monitoring, by the Financial Action Task Force. 

While we are faring well, inspite of the current situation, we cannot sleep on our laurels. This is the reason for which, Mr. Deputy Speaker, Sir, we are already ensuring that the measures, which have been announced, can be implemented at the earliest. 

Allow me to enumerate these measures.Mr Deputy Speaker, Sir, coordination and exchange of information domestically, is key for the development and implementation of, policies and activities to combat money laundering, terrorist financing and proliferation financing.  

A Core Group with the Financial Secretary as Chairperson was set up to develop and coordinate the strategy, policies and actions required to ensure the implementation of the recommendations made by the Mutual Evaluation Report. 

The National AML/CFT Committee, had set up 11 Immediate Outcome Sub-Committees, to enhance, institutional, technical and operational coordination, to ensure Mauritius implements, an effective AML/CFT system, which meets international standards. 

The Inter-Agency Coordination Committee, regrouping all AML/CFT Supervisors, has proved to be an effective, platform, to continuously improve AML/CFT supervisory effectiveness, in different areas, notably, in pulling resources together, to conduct joint training, for the benefit of supervisors and outreach sessions, for the industry. 

These key coordination mechanisms, have enabled Mauritius, to ensure a well-organized and timely implementation, of the recommended actions, under the Mutual Evaluation Report and FATF Action Plan, to reform the AML/CFT system.

I wish to highlight here, that the ESAAMLG Secretariat, has commended this coordination mechanism, that Mauritius has put in place.  

The amendments made to FIAMLA, will give legal status to the AML/CFT Core Group and Interagency Coordination Committee, as opposed, to their current administrative set up.  

This, in fact, goes in the right direction, in demonstrating the commitment of this Government, to sustain the reforms, and maintain a high level, of effectiveness, at all times.  Mr. Deputy Speaker, Sir, 

Mauritius will be going through the onsite assessment, of the FATF during the period 13 to 15 September 2021, to verify that the implementation of Mauritius’ AML/CFT reforms, has begun, and is being sustained, and that the necessary political commitment, remains, in place, to sustain implementation in the future.   

The onsite report, will be considered at the October 2021 FAFT Plenary, when a decision will be taken, for the exiting of Mauritius, from the FATF grey list.Mr. Deputy Speaker, Sir, 

All measures taken so far, demonstrate the underlying unflinching commitment of the Government, to ensure the sustainability and effectiveness, of our efforts, to combat money laundering, terrorism and proliferation financing, in the future.  

Mauritius is committed to continue along this path, not only, to confirm the progress made, during the onsite assessment, but to take, all necessary steps, to sustain reforms, well beyond the ICRG process, in order to strengthen, our AML/CFT system, thereby strengthening our financial system. 

This is the reason for which, we need to be ready. Mr. Deputy Speaker Sir, to position ourselves, as the most attractive international financial centre, 

in terms of products and services, 

in terms of ease of doing business, 

in terms of cost of doing business, 

in terms of skills and 

in terms of infrastructure. 

For this to become a reality, we need to pick our poles of focus. Mr. Deputy Speaker, Sir, 

An important aspect, of the financial services sector, which needs our full attention is, fintech. 

My Ministry has conducted a call for views, on 19 March 2021, which has yielded more than 25 responses. 

Based on information gathered, from this call for views, we have come up with, key proposals. 

There is no doubt, that the development of Fintech, is the future, of the financial sector in Mauritius. 

There can be no more, opportune time, to re-engineer our current legislation, to cater for the fintech sector.Mr Deputy Speaker, Sir,

A major step, was taken, by introducing a definition for fintech, in the Financial Services Act. 

This clearly demonstrates, the importance being given, to the growth and development of this sector. 

Furthermore, the amendment brought to, Section 14 B, of the Financial Services Act, will now ensure that, the Financial Services Commission, will be vested with the authority, to issue Regulatory Sandbox authorisation. 

This new regime of authorisation, will bring more clarity, to the types of fintech activities, which will fall under the purview of the Financial Services Commission or the Bank of Mauritius. 

The new FSC Regulatory Sandbox, will enable licensees of the Commission, namely, entities operating in the mainstream financial services sector of the Mauritius IFC and Fintech incumbents, as well, to apply, for such an authorisation.

Government, through this particular amendment of financial services laws, is aiming, to accelerate the adoption of new, and emerging technologies, such as blockchain, artificial intelligence, big data analytics, amongst others.Allow me, Mr Deputy Speaker, Sir, to underscore the attributes of the Fintech Innovation (now commonly referred as ‘Finnovation’) Hubs. 

This innovation, combines all the elements of a, conducive ecosystem for the growth, of the FinTech sector. 

Through this amendment to the Financial Services Act, we are facilitating the operationalisation of Fintech Digital Lab(s) to enhance connectivity and interoperability between Financial Institutions and established technology providers as well as other relevant parties, in cost-effective and scalable ways.Mr Deputy Speaker, Sir,

Other jurisdictions (such as Singapore and Abu Dhabi), have also established, similar Digital sandboxing or Labs, on cross-border basis. 

The Fintech Innovation Hubs, would be valuable, to the Fintech stakeholders/community in Mauritius, who will, in turn, benefit from a range of exclusive services/benefits, such as the availability of office space,  incubation and acceleration spaces, IT infrastructure and shared platforms to develop software. 

This measure, will be complemented, by networking opportunities and creativity experiences, from local/international experts of the Fintech industry.  Mr Deputy Speaker, Sir,

The implementation of such, a strategic project, by the relevant regulatory agencies of the financial sector will be, inter-alia linked with, the following key requirements:

First, there will be the absolute need, for constant dialogues and collaboration, with interested parties to establish the, necessary operational foundations of the Finnovation Hubs, and to develop a, dedicated physical space, which will cater for private offices, meeting rooms, communal lounges, co-working spaces, media studios and event space.  

In fact, there should be active, engagements with partners, to help define the FinTech infrastructure requirements.

Secondly, we should endeavour, to provide support, to engage with stakeholders, interested in setting up Fintech incubation or acceleration programmes, within the Finnovation Hubs;

Thirdly, the creation of a special desk within the Finnovation Hubs’ initiative – to encourage dialogue, on potential regulatory implications at an early stage of development, of innovative products/services or business models and

Fourthly, regular engagement with the Fintech community, to discuss innovation developments and policy proposals.Mr Deputy Speaker, Sir,

The introduction of this innovative section 14 C, under the Financial Services Act, will provide industry stakeholders, with the appropriate controlled testing environment and safeguards, to apply technologically enabled financial innovations. 

The FSC, will have the responsibility, to issue further guidelines, to facilitate  the orderly administration, of the regulatory sandbox regime.

This new authorisation, will be applicable for a defined time-frame, as determined by the FSC and also, allow successful applicants, to benefit exemption from any relevant regulatory requirement.Mr Deputy Speaker, Sir,

As I had mentioned in my previous intervention, the financial services sector includes the banking sector, the global business sector, the investment and asset management sector, the insurance sector as well as equity and securities markets, which, all together play a prominent role, in the Mauritian economy.

The FSC, will work jointly, with the Bank of Mauritius, to implement, the new regulatory Sandbox regime across the financial system. 

It is to be highlighted that, the Banking Act, is equally being amended, to embrace regulatory sandboxing.  Mr Deputy Speaker, Sir,

Some specific changes, have been brought to   Section 23 of the Financial Services Act, to improve the regulatory purview, of the FSC for both, issues and transfers of shares, for companies holding licences for financial business activities.

Furthermore, in the same spirit, of increasing the oversight, of the FSC on its licensees,  Section 42, of the Act, has also been amended, to ensure that, there is adequate sharing of information, between an insolvency practitioner and the Commission. 

As the law currently stands, the Commission, is unable to access information, relating to its licensees, upon the appointment of a liquidator or Official Receiver, Administrator or Special Administrator.  

The FSC, usually needs such information, to discharge its functions under the relevant Acts, or to adhere, to its commitments under arrangements.

However, when the FSC, makes a request, to obtain information from a liquidator, the latter may ignore the request given the absence of any statutory obligation to respond.  

Given this absence of appropriate direction, there was a need, to address this issue, which would allow the FSC, and the Insolvency practitioner, to rely on the exchange of information. 

Furthermore, the amendment is also proposed, in line with FSC’s vision, to be an, internationally recognised Financial Supervisor,committed to the sustained development of Mauritius, as a sound and competitive Financial Services Centre.  

In its commitment, towards this objective, the FSC is signatory, to many international arrangements and admitted, on high level committees, within international standard setters. 

One of the main expectations, from the FSC, is the removal of barriers, to facilitate the exchange of information, in the wider common objective, which is the fight against financial crimes.Mr. Deputy Speaker, Sir, 

Please allow me, to elaborate on changes brought, in respect to the insurance sector. 

The management of insurance claims has, over the years, been a subject of continuous discussions, given the increasing complexity of insurance claims. 

Fundamentally, to ensure that a fair, and reflective, sum of insurance premium is paid by a policyholder, premiums should be proportional to, the risk, which the policyholder represent to an insurer.Ideally, Mr Deputy Speaker, Sir, an individual, causing less accidents, should be charged a lower premium and belong to a category of low risk policyholders, while a driver, with previous claims history, with responsibility for accidents, should be paying an insurance, proportionate to the risk he or she represents. 

Hence, the introduction of a bonus-malus system. 

This system, will add fairness in the calculation of motor insurance premiums, reduction of insurance fraud, duplication of claims and contribute to improve road safety levels in the long term. 

Accordingly, section 86, of the Insurance Act is being amended. 

There have also been, numerous complaints, on the business conduct of insurers, that have been officially filed with the FSC in the past, and also with the Ombudsperson for financial services. 

The FSC acknowledges that, access to information, delays the ability for authorities to, rapidly bring changes at macro-level, in the claims management processes of insurers. 

Timely access to information, and the completeness of information received, are the two identified root causes, of the issues raised by policyholders and third party claimants.Mr Deputy Speaker, Sir,

For a holistic approach, to this sector-wide issue, the Insurance Act, is being amended, to include a new Section 6C, regarding the introduction of a National Insurance Claims Database. 

The FSC, will develop a unified platform,that will capture, all motor insurance claims. 

This platform, will allow the FSC, to observe the business conduct of licensed insurers and insurance intermediaries. Insurers, will also benefit, from the ability to detect, the duplication of insurance claims and other instances of insurance fraud.

The FSC, will then have, a complete picture of the position taken by insurers, in their business conduct, and their claims management processes. 

It is expected that, visibility provided by this platform, will encourage orderly business conduct by licensed insurers and insurance intermediaries.

The FSC is required, under the Insurance Act, to ensure that licensed insurers, are treating policyholders fairly. 

With a complete and accurate picture, the FSC, will be able to make evidence-based interventions, and require remedial action from its licensees, where necessary. 

I wish to highlight that, similar systems are being introduced, on a pilot basis, by the Singaporean Government, to regulate medical insurance claims.Mr Deputy Speaker, Sir,

The amendment being proposed in the Insurance Act, also caters, for the importance of the role, being played by insurance agents. 

Section 71 of the Insurance Act, has been amended to ensure that, there is an ongoing reporting obligation for insurance agents. Mr. Deputy Speaker, Sir, to ensure a sound insurance business, insurers have the obligation, to ensure that their insurance agents are, compliant with the licensing and regulatory requirements of the FSC, during the length, of their business relationships.

Furthermore, it has also been noted over the years that, stakeholders, such as travel agents, surveyors, and claims administrators, do not all operate, on the same level playing field, and have varying degree of difficulty.

For instance, Travel agents are already selling travel insurance policies, as an ancillary service. 

Nonetheless, they play a key role, at the start of the business relationship, between the insurer and the policyholder, as insurance intermediaries. 

Travel agents, are remunerated, through commissions paid by insurance companies. 

Their activities are, presently restricted to travel insurance, and it is being proposed that, less stringent licensing requirements be imposed, in the case of travel agents.

Surveyors, an important actor in the insurance eco-system, play a determinant role, in the claims management process. 

Presently, insurers remunerate surveyors, for their surveys, and in turn rely, on the estimated figures in the procured surveys, to settle insurance claims. 

Ordinarily, motor insurance and building insurance claims, require the involvement of surveyors. 

The elevated risks, to the independence of judgment of surveyors, lack of transparency, reported instances of unethical behaviour, and the potential for conflicts of interest, are issues, the Commission need to address, to protect consumers of financial services and, bring an orderly conduct of business, in the insurance sector.Mr Deputy Speaker, Sir,

Another set of stakeholders, are the Claims administrators, who play a key role, in the administration of health insurance claims. 

Claims administrators, are presently unregulated, and are found to play key roles, at the start of business relationships, between licensed insurers and policyholders and, throughout the business relationship. 

The FSC, has noted the rise in insurance complaints, highlighting unethical conduct by claims administrators during the last few years.

Therefore, Section 78A, of the Insurance Act, has been introduced,  which will allow, for the licensing of other insurance professionals, and the conduct of their business.

For the Commission, to capture surveyors and claims administrators, under its regulatory purview, these two activities will be recognised, as licensable activities, in the form of insurance intermediaries, and Regulations, will be drafted, to ensure the orderly conduct of business, by surveyors and claims administrators.

Although Third-Party Administrators, play a vital role in the insurance value chain, and provide a number of services, to insurance companies, they are currently, not regulated by the FSC. 

Amendments to the regulatory framework, will therefore be made, to bring Third-Party Administrators fall under the ambit of the Insurance Act, and provide for a regulated environment, for Third-Party Administrators to operate.Mr Deputy Speaker, Sir, 

Alongside measures to promote the jurisdiction, we have implemented key measures, to protect the financial services sector. 

The Financial Reporting Act, has been amended, to give more clarity to penalties, for licensed auditors and audit firms in case of breach, of the Financial Reporting Act.Mr Deputy Speaker, Sir, 

You will appreciate, that another bold step was taken by the Government by repealing the Section 46(3) of the Income Tax Act which will now prevent the Trusts and Foundations set up in Mauritius from filing declaration of non-residence before the Mauritius Revenue Authority. 

Whilst we do understand that this will have an impact on the industry however this is mandatory to be compliant with the norms of the OECD. 

I wish to highlight that the Forum on Harmful Tax Practices has informed the Government on 09 June 2021 that the practice of filing of non-residence which exempts the trust from tax payment is actually enabling ring-fencing of funds and also the possibility for entities to be exempted from substance requirements. 

Accordingly, repealing this section will ensure that entities set up in Mauritius will be deemed as resident. 

However, we also need to ensure that the financial services sector is not adversely impacted especially at a phase where Mauritius is rebuilding its economy. 

It is therefore being proposed that appropriate measures in consultation with industry players be taken to give more clarity and certainty to investors. Mr Deputy Speaker, Sir, 

We need to understand that Mauritius is at a cross road whereby we cannot afford to be on any other list which can again impact on our attractiveness before our investors. 

This is the time to rebuild the country and not to take any uncalculated risk.