EU list of non-cooperative jurisdictions for tax purposes: Anguilla and Barbados added, Cayman Islands and Oman removed
The EU Council today decided to add Anguilla and Barbados to the EU list of non-cooperative jurisdictions for tax purposes. Cayman Islands and Oman were removed from the list, after having passed the necessary reforms to improve their tax policy framework. The EU list of non-cooperative jurisdictions for tax purposes is part of the EU’s external strategy for taxation and aims to contribute to ongoing efforts to promote tax good governance worldwide. It lists non-EU jurisdictions that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement reforms to comply with a set of objective tax good governance criteria, concerning tax transparency, fair taxation and implementation of international standards against tax base erosion and profit shifting. Anguilla and Barbados were included in the EU list following peer review reports published by the Global Forum on Transparency and Exchange of Information for Tax Purposes, which downgraded the ratings of Anguilla and Barbados, respectively, to “non-compliant” and “partially compliant” with the international standard on transparency and exchange of information on request (EOIR). Cayman Islands was removed from the EU list after it adopted new reforms to its framework on Collective Investment Funds in September 2020. Oman was considered as compliant with all its commitments after it ratified the OECD Convention on Mutual Administrative Assistance in Tax Matters, enacted legislation to enable automatic exchange of information and took all the necessary steps to activate its exchange-of-information relationships with all the EU member states. Following this update, twelve jurisdictions remain on the list of non-cooperative jurisdictions: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.
EU takes legal action against ‘golden passport’ schemes in Cyprus, Malta
The European Union’s executive said on Tuesday it was launching legal action against Cyprus and Malta over their investor citizenship programmes, also known as “golden passport” schemes. The schemes allow wealthy foreigners to buy citizenship in exchange for an investment of around 1 million euros ($1.2 million) in Malta and 2 million euros in Cyprus. The European Commission said the decision was taken because the two member states granted nationality – and thereby EU citizenship – without requiring “a genuine link with the country”, as passport holders were not obliged to reside there. The Commission also sent a letter to Bulgaria raising concerns about its passport-for-sale scheme, it said in a statement. “There cannot be a weak link in EU efforts to curb corruption and money laundering ” Values and Transparency Commissioner Vera Jourova said. Malta’s Finance Minister Edward Scicluna said on Tuesday the country was replacing its current scheme with a new programme that would introduce tighter vetting of applicants, who will have to be residents of the islands for a year before their applications can be considered. The commission has refrained from launching legal actions against EU states that sell residence permits, also known as “golden visa schemes”, without requiring investors to stay in the country for a meaningful period, despite a European Parliament resolution urging such a move. In a 2019 report the commission acknowledged golden visa and golden passport schemes posed similar money-laundering and organised crime risks. Portugal, Greece and Bulgaria currently offer golden visa schemes under these lax conditions, a practice of which Latvia was pioneer in Europe. Cyprus said last week it was suspending its citizenship-for- investment programme, ditching a scheme the government had acknowledged was open to abuse after an investigation by Al Jazeera, a media outlet. The commission said it would need concrete actions to stop the practice. The EU cannot ban such schemes, but it can force countries to require “effective residence”, meaning physical presence for a regular and extended period in the territory of the state concerned. Both states circumvented those rules, the commission said. The Cypriot and Maltese governments have two months to take action. Without meaningful changes, the commission could refer them to the bloc’s Court of Justice and ultimately it can ask the court to impose penalties.
India-focused funds may soon get fast approval from Mauritius
Mauritius had been taking a bit longer to greenlight India-focused funds in the recent past, with the country’s financial services regulator busy in activities aimed at exiting the grey and black lists of the Financial Action Task Force (FATF) and the European Union (EU), respectively. That may be about to change as Mauritius is done with most of its submissions and progress reports. “After the EU’s decision to include it in the list of “high-risk” countries, the Financial Services Commission (Mauritius) has presumably taken a number of steps that include a thorough inspection of funds, holding companies and SPVs (special purpose vehicles) and implementing the new AML/CFT (anti-money laundering/countering the financing of terrorism) regulations. While the FSC’s efforts are in the right direction, there have been delays in processing new fund applications. In May, the EU included Mauritius in its revised list of high-risk nations with strategic deficiencies in their AML/CFT frameworks. In February, Mauritius was included in the “grey list” of jurisdictions that require increased monitoring by the FATF. Jurisdictions under increased monitoring actively work to address strategic deficiencies in their regimes. These are done to counter money-laundering, terrorist financing, and proliferation financing in a more efficient manner. Market observers also said the approvals depended a lot on the funds themselves, and the extent to which they followed the new norms introduced last year. The FSC had tightened rules for processing India-focused applications that included thorough checks on KYC information of new fund applications, as well as extensive background checks on fund sponsors and fund managers. The FSC was also reaching out to regulators of countries in which these sponsors or managers are based to verify their antecedents. In terms of processing time, by and large, the licences have been issued within the FSC SLA of four-six weeks from the date of submission.
Mauritius Listed on EU High Risk List – Why not to Panic!
News that Mauritius was added to the EU list of high-risk third countries on 7 May 2020 has understandably caused much consternation amongst fund managers who have fund structures and investment holding vehicles domiciled in Mauritius. While this is certainly a cause of concern, the following should be borne in mind: This is not new. The Financial Action Task Force (FATF), the global inter-governmental body responsible for setting best practice standards and enhancing the implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other similar threats to the integrity international financial systems, placed Mauritius on its ‘grey list’ on 21 February 2020 (being ‘Jurisdictions under Increased Monitoring’). FATF “grey listing” is afforded to jurisdictions identified as having strategic deficiencies in their anti-money laundering and combating financing of terrorism (AML/CFT) regimes. The FATF has, as a result, placed Mauritius under increased monitoring. It is the FATF listing that has led to Mauritius being placed on the EU high risk list. The EU listing is not yet in force. The list is not final and needs to be submitted to the European Parliament and the EU Council of Ministers for approval, following which it will then become effective on 1 October 2020. Mauritius is committed to addressing the issue. Following the FATF grey listing, Mauritius immediately made a high-level political commitment to continue to work with the FATF to swiftly strengthen the effectiveness of its AML/CFT regime. It is either compliant or largely compliant with 35 out of the 40 FATF recommendations and it has already met the FAFT expectations in respect of the ‘Big Six Recommendations’. All indications are that Mauritius will address the FATF concerns swiftly in order to be removed from the FATF grey list (and consequently the EU list) as quickly as possible. There is a plan. The FATF Action Plan being implemented by Mauritius includes: (i) demonstrating that the supervisors of its global business sector implement risk-based supervision; (ii) ensuring access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (iii) demonstrating that its law enforcement agencies have capacity to conduct money laundering investigations (including parallel financial investigations and complex cases); (iv) implementing a risk based approach for supervision of its non-profit organisation sector to prevent abuse for Terrorist Financing purposes, and (v) demonstrating the adequate implementation of targeted financial sanctions through outreach and supervision. In a communique from the Mauritian Ministry of Financial Services and Good Governance on 9 May this year, Mauritius reiterated its commitment to implementing the FATF Action Plan as soon as possible and a first progress report has already been sent to the FATF. It does not mean you have to move existing fund structures and companies. Once the list becomes effective, and for as long as the Mauritius is on the list, then, in terms of EU regulations, certain categories of EU financial services institution, credit institutions, banks, insurance companies, investment firms, trust and company service providers and the like will be required to apply enhanced customer due diligence with respect to business relationships or transactions involving Mauritius. Furthermore, persons and entities deploying EU funding or budgetary guarantees shall be prohibited from entering into new or renewed operations with entities incorporated or established in Mauritius, except when an action is physically implemented in Mauritius. Accordingly, while EU development finance institutions should continue to meet existing obligations to Mauritian-domiciled funds, they will avoid investing in any new Mauritian fund structures (or through Mauritian entities) until the AML/CFT compliance issues are resolved. Fund managers looking to raise capital from EU development finance institutions in the short-term may need to house such commitments in parallel funds in other acceptable jurisdictions (such as South Africa). Fund managers should also pay attention to “excuse” provisions inside letters with all investors when investing into or through Mauritian entities (not just EU investors given the FATF listing applies more broadly).
