AAMIL: Celebrating 25 Years

IFC: 2022 marks the 25^th anniversary of AAMIL as a leading international financial services provider. What have been the biggest achievements of AAMIL since its establishment?

LV: One thing which comes immediately to mind is that with our offices both in Port-Louis (Mauritius) and in Geneva (Switzerland), we have worked as a link between Europe and Mauritius. Back in 1997, it was a kind of missionary work to promote Mauritius as a Financial Centre; not many people were aware of it, even among professionals. We are glad to have been one of the first to promote Mauritius and contribute to its success.

Also, throughout this period, we have maintained our independence, being privately owned and therefore not subject to potential conflicts of interest.

In addition, over the years, we have broadened the number of regulatory licences we are benefitting from and services we propose to our clients. Next to the incorporation and administration of companies, investment funds, trusts and foundations, we also provide asset management and private banking services, legal advice through AAMIL Chambers, as well as relocation assistance.

Over and above providing investment management services in Mauritius and abroad, AAMIL Asset Management Ltd, is also licensed as a Foreign Portfolio Investors (FPI) Category 1 (Cat 1) for clients willing to tap the Indian market. Mauritius based funds, with more than 25 per cent of control by resident Indian (RI), non-resident Indian (NRI) or overseas citizen of India (OCI) may seek AAMIL FPI’s licence to invest into the Indian market. AAMIL’s unrestricted Investment Advisor licence, a specialised licence issued by the Financial Services Commission of Mauritius (FSC), allows it to offer guidance and advice to investors, through discretionary or non-discretionary mandate, to enter into securities transactions.

We are now increasingly turning our attention to promoting and assisting investments in Africa. To this end, we have set up AAMIL Africa Capital Partners as a Protected Cell Company, to provide investors with the tools to develop their projects in that continent.

AAMIL Group has been operating for 25 years. Our clients rely on our global strength, expertise and leadership across our lines of business. AAMIL Group is the unique contact point and a one-stop shop for investors. It offers a bouquet of financial services. AAMIL has grown from a two-employees company in 1997 to 40 staff today, several having been with us for over 10 years.

IFC: How has the industry developed and evolved during your time in the business?

LV: We could talk for hours about the many changes which have occurred over the past three decades. These changes were mainly brought about under guidance, pressure or coercion (you choose the word) from the OECD, FATF and EU.

Just to name a few: the gradual decrease in the use of the term “Offshore”. This results from the abolition of “ring fencing”, which meant that previously in certain countries (mostly previously so-called “Offshore Centres”), some fiscally advantageous laws could only be used by non-residents.

Another major change refers to vastly increased regulation, allegedly to combat terrorism financing and money-laundering, among others. This has resulted namely in increased compliance issues and work and therefore costs, increased control and supervision of standard commercial operations, often creating avoidable inefficiencies.

As an example, one very regrettable consequence of this new world order is that the required level of compliance both at the onset of a relationship and thereafter on a continuous basis is so high and therefore costly, that many financial institutions, including banks, refuse to onboard clients resident in “high-risk” countries (many in Africa), solely for that reason, because the costs associated with maintaining such a relationship are too high compared to the potential revenue. This is also the case for so-called PEPs, politically exposed persons.

Exchange of information is another global feature. Many countries have adhered to this procedure, allowing authorities in one country to request for information on individuals or corporates from another signatory country. This is now well established.

As a result, we live today in what is supposed to be a transparent world, on financial and tax issues. I would claim that today it is impossible to hide assets, in the sense that the beneficial owner would be unknown to the financial intermediaries involved. In addition, these newly enacted laws provide for sanctions, both criminal and financial, to those financial institutions who would not abide by the law.

The laws enacted worldwide by the many targeted countries provide the legal framework covering these issues. These laws are generally inserted in the national body of law through a cut and paste procedure from documents emanating from the relevant international bodies.

However, the application of these laws, in particular the enforcement by local tax or judicial authorities to some groups, varies greatly from one country to another. This results in what could be called “inefficiencies”. I am sure more work will have to be done on this in the years to come.

IFC: How important are IFCs in general within the global economic ecosystem? What makes a successful IFC?

LV: IFCs are the necessary basis for the global economic and financial system. They provide the necessary environment and expertise to conduct transactions. Just to name a few, New York, London, Switzerland, Singapore and obviously Mauritius now.

Although they provide many services, IFCs are generally somewhat specialised. For example, Switzerland is particularly attractive for international trade and private banking (roughly a third of the world’s wealth). On the other hand, Mauritius specialises more within the Indian Ocean, historically for investments into India and other Asian countries, now increasingly towards Africa.

I would claim that the very first key to success is the supremacy of the rule of law and its permanency. The environment must be stable and predictable.

Then of course, you need expertise. If not local, this can be imported. Such was the case for several Caribbean IFCs, who invited mainly UK and Dutch nationals, to create and build their financial services industry. The same could be said in part about Mauritius.

These experts need then to bring in efficiency to their work and the institutions.

This implies that an IFC must be well regulated, to enable its users to have access to financial institutions worldwide, without impediment. Being on any blacklist these days is certainly no good advertisement!

Then there is the geographical element. Mauritius is a perfect example, active mainly in the neighbouring Indian Ocean countries. The same goes for the Caribbean IFCs, involved essentially in North and South America, less in Europe and in Asia, almost not in Africa.

IFC: Do you feel that increasing regulatory demands from international bodies are hampering innovation and increasing compliance burdens?

LV: I do not think the increasing regulatory demands are hampering or will hamper innovation. Maybe even the contrary. I am convinced we will see increased use of Artificial Intelligence (AI) to conduct a lot of the compliance work. This is the only way to reduce the burden and great costs of current procedures.

As I indicated earlier, this leads to many businessmen not able to open bank accounts and being restricted in their absolutely legitimate commercial activities. The problem is crucial for Africa. We hear and read, that the continent needs yearly investments in US$100 billion, yet this can not be processed, since traditional commercial banks do not open accounts and do not want to finance transactions.

Might the solution be that countries open state banks to cater for such individuals, or better yet, that the World Bank set up a commercial bank to do that work, to facilitate further development in Africa?

IFC: How has the role of Mauritius changed within the industry over the past 25 years? Which areas are currently seeing growth?

LV: Mauritius started off in the early 90s as a gateway to invest in India. Thanks to its double taxation agreement with India, capital gains realised on disposal of assets in India were not taxed in India. Mauritius abolished taxation on capital gains when it set itself up as an offshore centre, and such repatriated gains remained thus untaxed. This is now abolished; taxation takes place in India.

This advantage induced many investment funds to set up in Mauritius, en route to invest in India. Many were affiliates of feeder funds in the Cayman Islands. This activity provided the basis to develop an efficient financial centre, gradually expanding its product offering and expertise.

Growth is now coming more from and towards Africa. But Asia, in particular India and China, remain important to Mauritius. Several recent free trade agreements bear witness to these close links. I believe that, given its geographical location, Mauritius will further fulfil its role as "Stella Clavisque Maris Indici", meaning "Star and Key of the Indian Ocean", as indicated in its Coat of Arms.

IFC: How important is Mauritius in the efficient flow of investment around the world, particularly to Africa?

LV: Good proof of the importance of Mauritius in the international finance arena are the numbers and size of Special Purpose Entities (SPEs) being set up in Mauritius and investing in third countries. A new IMF database for the first time measures cross-border flows and positions of SPEs resident in 26 participating economies, based upon an international definition. Foreign direct investment positions channelled through resident SPEs in some places are remarkably high, in Luxembourg they are 45 times the size of its economy, 30 times in Mauritius, and 28 times in Bermuda^[i].

I do not know the importance of Mauritius in the efficient flow of investments around the world, but its place is certainly growing fast with Africa as well as in Asia. There are numerous reasons for this, namely local expertise and stability, good connections (flight and internet), no need for visas for most African and Asian nationals, proximity and historical ties.

IFC: Where do you see the industry in 2050?

LV: The need for well-tailored financial advice will always be there. With it comes the need for and use of Trusts, Foundations and corporate entities, primarily for the protection and conservation of wealth.

I see mainly disintermediation, meaning that new sources of supply of funds are being put in place constantly. Further use of AI will make these new avenues very efficient and therefore cost-effective.

As such, traditional commercial banks might just disappear, becoming irrelevant, too bureaucratic and too expansive. They cannot compete with new and agile internet banks.

Footnotes:

[i] https://blogs.imf.org/2022/03/25/special-purpose-entities-shed-light-on-the-drivers-of-foreign-direct-investment/).

Dr Ludovic C. Verbist
PhD, LLM, TEP, Managing Director of AAMIL (Mauritius) Ltd. Ludovic has contributed to a number of articles and interviews, including: Prudence et Préservation du Capital - Business Magazine (October 2017); Guaranteed Real Estate Investment – Cap Sur Maurice Magazine (October 2018); Luxury Property Market in Mauritius – Cap Sur Maurice Magazine (October 2019); Vendre Maurice comme une destination refuge – Le Mauricien Newspaper (May 2020); Jouer à fond la carte africaine dans l’ère post-Covid-19 – Business Magazine (May 2020); Global Business « Désamorcer la Bombe » - Business Magazine (June 2020); Liste Noire – La bataille se jouera sur le terrain diplomatique - Business Magazine (July 2020); Interview – « Parlons économie » - Radio Lac (October 2020); «Maurice face à la menace d’un maintien prolongé sur la liste noire » - Business Magazine (February 2021).