Financial Crime World

Mauritian Financial Regulator Revokes Licenses of Fund Manager Linked to Adani Group

In a significant move, the Mauritian Financial Services Commission (FSC) revoked the business and investment licenses of Emerging India Fund Management Ltd (EIFM) in May 2022. This action came eight months prior to the release of the Hindenburg report, which raised concerns about financial irregularities within the Adani Group.

Breaches of Anti-Money Laundering and Corporate Governance Laws

The FSC’s decision was based on various alleged breaches by EIFM. The fund manager was found to have violated several sections of the:

  • Financial Services Act
  • Securities Act
  • Financial Intelligence and Anti-Money Laundering Regulations (FIAMLR) of 2003 and 2018
  • Code on the Prevention of Money Laundering and Terrorist Financing

Non-Compliances and Failings

The non-compliances by EIFM included:

  • Failure to maintain proper client and transaction records
  • Violation of accounting and auditing standards
  • Lack of safeguards against dummy officers
  • Non-adherence to prescribed mechanisms for identifying money laundering and terrorist financing risks

Impact on Adani-Linked Funds

The revocation of EIFM’s licenses has led to the winding down of their operations, affecting two investment funds linked to the Adani Group:

  • Emerging India Focus Funds (Mauritius)
  • EM Resurgent Fund (Mauritius)

With EIFM identified as a controlling shareholder for both funds, they are currently under investigation by the Securities and Exchange Board of India (SEBI) alongside 11 other overseas Adani investors.

Global Opportunities Fund and Shell Companies

Although EIFM was not mentioned in the Hindenburg report, a recent investigation by OCCRP and the Financial Times claimed that funds from unknown sources were channelled through two English-based shell companies:

  • United Arab Emirates national Nasser Ali Shaban Adil’s Gulf Asia Trade and Investment Limited
  • Taiwan national Chang Cung-Ling’s Lingo Investment Limited

These funds were then transferred to Emerging India Focus Funds (Mauritius) and EM Resurgent Fund (Mauritius) under the Global Opportunities Fund (Bermuda). The shell companies were linked to the Adani Group through records from the Pandora Papers investigation.

Initial Assessment and Penalties

An FSC official had conducted an initial assessment of Adani-linked entities in Mauritius earlier in the year and did not find any law violations. However, confidentiality constraints kept the FSC from disclosing further information.

EIFM had held significant stakes in Adani Power Limited, Adani Transmission Limited, and Adani Enterprise Limited through their Mauritius funds in March-April 2018. Despite the non-compliance incidents, they had held:

  • 3.9% of Adani Power Limited
  • 3.86% of Adani Transmission Limited
  • At least 1.73% of Adani Enterprise Limited

The FSC’s decision to revoke EIFM’s licenses adds to the concerns surrounding the Adani Group’s overseas investments.