Following the blowup of
a financial scam and the crackdown on unlicensed investment activities by the
regulatory authorities concerned, namely the Bank of Mauritius and the
Financial Services Commission, an interesting exchange of crossfire has taken
place in the media, involving the ministry of finance, and the current and
former BOM Governors. The present BOM Governor
was quick to direct his diagnosis towards legal and regulatory gaps, especially
between the BOM and the FSC. The Ministry of Finance, for its part, felt it was
premature to pin the blame on legal shortcomings, while the rumblings from
Government appeared instead to reflect dissatisfaction with the FSC's role,
rather than the BOM. A former BOM Governor authoritatively supported the notion
of regulatory gaps, while another shot it down to pieces without any
equivocation.
While the public is
anxious to understand the reasons for these shocking scandals, it is despairing
to watch the spectacle of our financial high priests taking potshots at each
other and quibbling about issues that have more to do about protecting their
lower backs. It is always right to strengthen regulation, but little or
nothing is being said about the enforcement of existing legislation, and how to
better educate the public on dealing with unlicensed entities.
To
foster
the layman's confidence and trust in licensed institutions, advising for caution in a press notice is simply
not enough. The
regulatory and other authorities must visibly demonstrate their
enforcement powers on licensed
institutions. Unfortunately, the enforcement record is this respect is pretty
dismal.
The MCB scandal was the
greatest financial ripoff that Mauritius has ever known, badly damaging the
country's reputation. Yet, a decade later, we still have not reached the
bottom of it, and probably never will. The financial regulators passed
the buck to the police, the anti corruption agency, and the prosecution
authorities, and went on vacation. The least that was expected in the wake
of this huge scandal was for sanctions to be taken by the BOM to hold top bank
management accountable for the failure of the MCB's internal controls. For the
extradition of the main protagonist from the U.K., one is left to pray devoutly
for some form of divine or extraterrestial intervention.
There is no public benefit in taking advantage of the latest
financial shenanigans to push specific agendas and settle individual scores.
The Whitedot hustle is not dissimilar to the internet scams that populate the
internet, whether of Nigerian or other origin, or akin to deceitful schemes
that are revealed periodically in the local press. Greed and stupidity cannot
be regulated in every aspect of life, and financial activities are no
exception. While many of the victims are honest but financially
illiterate persons lured by swindlers, tax evaders and shady characters looking
to stash away ill-gotten gains also abound.
The size of the
underground economy in Mauritius is far greater than thought. The exposed
crooked scheme included the setting up of car rental companies and pizzerias,
which had more to do with money laundering than boosting tourism or food
consumption. Our anti money laundering legislation has flashing sharp
teeth, but, again, getting them to really bite would provide an immediate and
effective response to addressing financial crime.
The division of regulatory responsibilities between the BOM and
the FSC is straightforward. The BOM is meant to license and oversee banks and
other deposit taking institutions, while the FSC handles all other financial
activities. Instead of reducing the analysis of financial misdemeanors to a
matter of regulatory scope, it may be more worthwhile to focus on the
enforcement of existing legislation on licensed financial activities especially
by a less-lethargic Ministry of Finance (MOF), and on better educating the
public about the risks and perils of dealing with unlicensed entities. The MOF
should be taking the issue of black money more seriously and could be more
pro-active (commissioning some studies for e.g) in dispelling the view that “ Mauritius
is a conduit through which Indians send and bring back black money” (The
Economist March 23rd 2013 ).
