Mauritius has long sold itself as a miracle economy, a model island where sugar gave way to services and where glass towers in Ebène proclaimed a nation’s leap into global finance. But beneath the polished façades lies a fragile dependency: almost every grain of rice, every litre of petrol, and most medicines are imported. To pay for them, Mauritius leans on an offshore financial empire whose credibility now rests on the shaky shoulders of a regulator in disarray.

At the centre of that regulator—the Financial Services Commission (FSC)—sits a leadership pairing that embodies both fragility and capture. Prakash Seewoosunkur, currently Officer-in-Charge, holds no internationally recognised qualifications for leading such a critical watchdog. Above him is Rama Sithanen, simultaneously Chairman of the FSC Board and Governor of the Bank of Mauritius, an extraordinary concentration of supervisory power over both banking and non-banking finance. The message to international assessors—from FATF to the IMF—is unavoidable: Mauritius’ system is not independent, but politicised and improvised.

Phantom Capital as Lifeline

Between 2000 and 2020, Mauritius channelled around 34% of India’s inward FDI, over USD 100 billion, through tax treaty structures. IMF analysis shows that roughly 60% of FDI routed through Mauritius is “phantom capital”—money without jobs, factories or production, existing only to arbitrage tax regimes.

For Mauritius, phantom flows keep the lights on. Foreign exchange reserves, USD 7.5 billion in 2024, cover about 9–12 months of imports, down from 17 months in 2019. Public debt hovers around 90% of GDP, and the rupee, once 43.8 to the dollar, trades nearer 50.2. Without steady offshore inflows, the island could not pay for food, fuel, or medicine.

The FSC: Watchdog or Lapdog?

Created to both regulate and promote the offshore sector, the FSC has always carried a conflict of interest. Its inspection cycles lag years behind statutory obligations; enforcement is soft, often no more than a letter. Transparency is thin: enforcement actions are rarely published, beneficial ownership registers exist but are confidential, and board appointments reflect politics more than competence.

The appointment of Aakash Mishra in September 2024 as Assistant Director, Fintech Supervision illustrates the dysfunction. With three decades in insurance and pensions—fields far removed from cryptocurrencies, blockchain or payments—Mishra now oversees fintech regulation. His nomination raised eyebrows across industry: how does a background in life policies translate into expertise on crypto exchanges? That he is also an Indian national touches on sovereignty sensitivities, given the history of Indo-Mauritian tax treaty tensions and India’s strategic base on Agalega.

Case Study: The Bramer/BAI Collapse

The FSC’s most infamous failure remains the 2015 collapse of Bramer Bank and the BAI Group, led by Dawood Rawat. At the time, BAI had an FSC-approved Related Party Reduction Plan, with extensions granted into 2016. These were suddenly reversed after a government change, the bank’s licence revoked, and assets seized.

Rawat, exiled for years, returned in 2024 and in March 2025 filed a Rs 100 billion lawsuit against former PM Pravind Jugnauth, ex-ministers, the Bank of Mauritius, the FSC, PwC, BDO and Grant Thornton. He alleges conspiracy and regulatory misconduct, insisting BAI was no Ponzi but a diversified group destroyed for political ends. The Commission of Inquiry that followed indeed found “serious procedural irregularities” and “regulatory capture” in FSC oversight. If Rawat succeeds even partially, Mauritian taxpayers face a bill running into billions.

Case Study: Silver Bank

As if BAI was not enough, the FSC in 2023 granted a licence to Silver Bank, despite opaque ownership and weak governance. Within months, the bank was under investigation for money laundering and toxic loans. By 2025, losses reached Rs 7.6 billion, and the licence was quietly revoked. FSC officials admitted they could not trace the vanished funds—a startling confession for a regulator supposedly safeguarding a global finance hub.

Board minutes leaked to the press show members questioning due diligence, but the licence was approved anyway, with “political sensitivities” noted. Silver Bank is now the subject of criminal probes, with FSC decisions under scrutiny.

International Scrutiny

The FATF grey-listed Mauritius in 2020, citing “serious deficiencies” in AML/CFT enforcement. The EU soon branded it a high-risk jurisdiction. Removal in 2022 came only after hurried legislative fixes, but compliance officers describe these as “form over substance.” Shell structures remain intact; nominee directors still sign papers for companies with no staff.

Meanwhile, Moody’s cut Mauritius to Baa3 in 2022, warning of institutional fragility and blurred fiscal lines as the Bank of Mauritius funded government deficits. By 2025, the IMF classified the country’s sovereign stress risk as “high.”

Political Capture

The FSC is not alone. The Gambling Regulatory Authority is chaired by a former campaign manager; the Mauritius Revenue Authority by another politically aligned figure. Even the Coast Guard has Indian officers in senior positions. The problem is systemic: regulators answer to politics, not rules.

And now, the Prime Minister himself—Navinchandra Ramgoolam, back in office since November 2024—faces the test. Elected on promises to restore credibility and lower the cost of living, his silence on the FSC is already noted by markets and assessors.

Competitors Move Ahead

While Mauritius stagnates, others adapt. The Seychelles diversified into blue economy and tightened AML compliance. Dubai poured investment into supervisory technology, maintaining global bank links. Singapore shows that strict oversight and offshore services can coexist. Even the Maldives, fresh from political realignment with India in 2025, explores financial diversification, while Sri Lanka, in talks with China and the IMF, eyes offshore services as a path to recovery.

Mauritius, by contrast, clings to a model under siege from OECD tax reforms, global minimum tax rules, and declining treaty arbitrage with India.

The Human Cost

The numbers are abstract until converted into shopping bills. A litre of petrol now costs Rs 78–82, up from Rs 65 two years ago. Grocery bills have risen 12–18%, with baby formula and cooking oil up even more. Imported medicines cost 20–30% more than in 2022.

Ordinary Mauritians—earning Rs 17,000 in hotels, or driving taxis—see no benefit from phantom FDI. They see only rising costs. If reserves shrink further, IMF-style austerity looms: subsidy cuts, new taxes, tighter imports.

Vencatachellum’s Poisoned Chalice

Into this mess steps Désiré Vencatachellum, named FSC Chief Executive from September 2025. A veteran of the African Development Bank, he once declined the governorship of the Bank of Mauritius, recognising the post’s political fragility. Now he inherits an FSC scarred by Rawat’s lawsuit, Silver Bank’s scandal, Mishra’s misfit appointment, and international scepticism.

Can he reform an institution where merit was sidelined for loyalty, where inspections lag years behind schedule, and where political capture runs from board to floor? Or will he manage decline, as Mauritius loses ground to hungrier, more credible competitors?

Silence as Evidence

On 22 August 2025, The State of the Mind sent formal questions to the FSC: inspection backlogs, deficiency letters, enforcement records, appointment criteria. Addresses included Officer-in-Charge Prakash Seewoosunkur, Chairman Rama Sithanen, and Assistant Director Mishra.

The deadline is 25 August at noon. As of writing, no reply has been received. That silence will be published. Because in financial regulation, silence is evidence.

Endgame

Mauritius faces three paths:

Reform—rebuild FSC independence, remove politically connected appointees, restore credibility.

Managed decline—offshore flows ebb, reserves thin, imports squeeze, ordinary people pay.

Collapse—a lawsuit, a FATF downgrade, or capital flight triggers crisis overnight.

For now, the towers of Ebène still gleam. But credibility, not concrete, holds them up. And credibility is running out.