“One way to fight corruption is to run a cashless economy”
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We do not hear about the MBA a lot as a voice, with communication remaining sparse. Why is that so?
In our last bureau, we told our CEO, Daniel Essoo, that we would like him to have a leading interview with Business Magazine. We are giving him time to settle as his background is primarily Global Business, because if you haven’t made the front cover of Business Magazine, then you are not a prominent businessman. We agreed to move to MBA 2.0. Earlier we had MBA 1.0, which has driven us over 15 years under the able Aisha Timol. We are now moving to the next stage of our industry journey. That’s why we hired a new CEO. We also have PwC working on a strategic document. I would just ask people to be a little accommodating for the time being while things roll out.
Aside from the communication aspect, how is the MBA reinventing its image?
We have devised a strategy for that. At one point in time, it was known in the market that the MBA was having some challenges with the regulator. A banking association cannot have problems with the regulator and the governor. So, we were forced to collaborate with the governor and agree on the direction forward. The transformation of the MBA was organized hand in hand with the industry and the regulator. We have devised a strategic document of which some of the pillars are communication, financial literacy and training, amongst others. For instance, we will have a very active website and we will be hiring someone who will be coordinating the training and communication soon. Give us some time since we started 2.0 recently, after 15 years. You must however recognize that we’ve changed things; starting with the new CEO.
}The former Governor, just before leaving office, invited the MBA to reinvent itself. Is this normal?
How did you welcome this suggestion? The former Governor told us that he has travelled the world and that he has engaged with several bank associations. He had a feeling that we should step up our game and so that was our engagement. This was enough – because when a Governor tells you to reinvent yourself, you need to draw your lessons out of this.
How did members react to that?
People are different. A few thought that the Governor had been intrusive. Others took it as wise advice from somebody who is competent and respected in the industry and that it was just a call for improvement; which is normal. There is nothing to say on Aisha Timol, who has done a fantastic job over the last fifteen years but that is the nature of things: that they must change.
Are you of the opinion that the MBA in its actual form is outdated?
The strategy devised is to take the association in the next phase of its journey. We haven’t started executing it yet and it is normal, because you need to adapt to a changing world.
}The former Governor, in a press interview, also stated being in favour of a demonetization exercise for Mauritius, with new bank notes to come in circulation. To recall, this project was in the pipeline for the Central Bank and then was shelved. What is your view on this in an era where Mauritius is trying to go cashless?
I come from a continent where corruption is rife. I was part of the Banking Association there and took time to reflect on corruption. I must observe that Standard Chartered takes this very seriously by the way. During my reflection, I realized that one way to cut the grass under those guys is to run a cashless economy. One way to fight corruption is to run a cashless economy. There are two things coming into play: embezzlement and corruption. These are done in cash transactions so that there is no easy trace. Thus, if you run an economy and foster electronic payment, you foresee the traceability of transactions and you reduce corruption. Secondly, coming to the cash aspect, you need to demonetize your economy from time to time; notes are only paper and it is the economy that gives them value. If we demonetize our currency, like they did in India, banks give you a period to bring all your money to exchange in the bank. This is the way to fight the underground economy, estimated at Rs 35 billion, according to the interview given by the governor. To note, informal does not mean illegal. 90 per cent of the workforce in Cameroon works in the informal sector, with only 4 per cent in the formal private sector and 6 per cent in government. In Mauritius, the figures are nothing in comparison. The problem we have in Mauritius, I think, being here since three years, is everything going around drug trafficking. It scares me! This is being reported internationally and is very damaging for Mauritius’ image internationally. The country has to do something about that. It is not only up to the deciders but everyone as well because this is about the future of our children. We must cut the grass below them and demonetization is one way to do it.
It seems that this exercise backfired in India however?
Let us look at the long term and positive aspect when Indian Prime Minister, Narendra Modi, decided to demonetize the Indian economy. There was more liquidity in the Indian market. We lost business because we were lending to them and because of the increase in local liability as well; cash became more available over that period. There are a lot of positive things in India that resulted. It was done in a brutal way maybe – this needed a soft landing but that’s all. Why should you be ashamed of justifying the source of your income if its money properly earned?
}Have there been discussions at the level of the MBA to review what has been mentioned about banks in the LSL report on drug-trafficking?
There is quite a portion on how banks are exposed to black money and money laundering… To be honest, no. I want us to talk about broad financial crime because drug trafficking is only one aspect. The problem is that Mauritius as a jurisdiction has spent two years addressing a tag that was harmful for the country: a tax haven. These challenges came from the forum on harmful tax practices led by the OECD and EU. There are three things that Mauritius has to address.
Namely, the minimum implementation of BEPS, tax transparency and sharing of information and, finally, ring-fencing and fair taxation. Those three things have taken a lot of time and energy of our deciders. We have to recognize that the government has done a fantastic job with industry bodies with the help of some friends of Mauritius, like Philip Baker.
On the 5th of July 2017, Mauritius signed the MLI for 23 DTAA, carving out 19 DTAA for bilateral negotiations until the 31st of December 2018; failing which it will enforce the MLI automatically. I know that the bilateral negotiations are not moving that fast; we only started with India, Singapore and other international markets. The 21st of August 2017, Mauritius was declared a tax compliant jurisdiction by the OECD because of the implementation of CRS.
Due to all of this engagement, the DFTC has been abolished. I want people to know that we’ve also ticked that box by abolishing GBC1 and GBC2. I told Prime Minister Pravind Jugnauth: while we are closing one door on the tax haven tag, we should be mindful that we are not opening another door on the money laundering platform tag.
The problem indeed on the money laundering platform, is that it implies three things. Namely, anti-money laundering, combating the financing of terrorism, fighting corruption and sanctions. We should not neglect any of them because you might be looking only at money that has been laundered.
What if it is being laundered through Mauritius from criminal activity? What if Mauritius is being used to transact with sanction countries like Cuba, Sudan or Syria? It would be harmful for the jurisdiction.
