In a significant development that has caught the attention of financial regulators and investors alike, Mauritius’ Financial Services Commission (FSC) revoked the business and investment licenses of Emerging India Fund Management Ltd (EIFM), the controlling shareholder of two Mauritius-based funds that invested in publicly listed Adani companies. The revocation, which occurred in May 2022, took place eight months before US-based short seller Hindenburg Research released an explosive report accusing the Adani Group of accounting fraud and stock manipulation. The move by the Mauritian FSC was based on allegations of multiple breaches of money laundering and corporate governance laws, which has put the Adani Group under scrutiny.
Mauritian FSC’s Allegations
The Mauritian Financial Services Commission, responsible for regulating financial activities in the country, alleged that EIFM had violated several provisions of laws meant to curb money laundering and ensure corporate governance. The FSC stated that EIFM “acted in breach” of various sections of the Financial Services Act, the Securities Act, the Financial Intelligence and Anti-Money Laundering Regulations (2003 and 2018), and the Code on the Prevention of Money Laundering and Terrorist Financing.
The specific breaches included non-compliance in maintaining records of clients and transactions, accounting and auditing standards, safeguards against dummy officers, corporate governance, and the prescribed internal mechanisms to identify risks of money laundering and terrorist financing. EIFM was found guilty of breaching both the 2003 and 2018 versions of Mauritius’s Financial Intelligence and Anti-Money Laundering Regulations.
Adani Group’s Connection
As per the latest available records, EIFM’s two Mauritius funds held significant stakes in Adani Group companies, including approx. 3.8% of Adani Power Limited, 3.8% of Adani Transmission Limited, and at least 1.7% of Adani Enterprise Limited. This raises questions about the implications of the license revocation on the Adani Group’s financial stability.
Moreover, the Adani Group faced additional scrutiny when US-based short seller Hindenburg Research alleged accounting fraud, stock price manipulation, and improper use of tax havens. This prompted the Indian Supreme Court to instruct the Securities and Exchange Board of India (SEBI) to investigate these allegations. SEBI, in its status report, mentioned that it had completed the probe in 22 of the 24 matters against the Adani Group and is awaiting information from five tax havens on the actual owners who had invested in its group firms.
The Pandora Papers Investigation
Further complicating matters, the Financial Times reported that funds from unknown sources were channeled through two British Virgin Islands shell companies—Gulf Asia Trade and Investment Limited and Lingo Investment Limited—into the Emerging India Focus Funds and EM Resurgent Fund under the Global Opportunities Fund (Bermuda). These two individuals, Nasser Ali Shaban Ahli and Chang Chung-Ling, were associates of Adani Group chairperson Gautam Adani’s brother Vinod Adani. As part of the Pandora Papers investigation, it was revealed that these shell companies registered in the BVI were indeed connected to the Adani Group.
The revocation of EIFM’s licenses by the Mauritian FSC has added a new layer of complexity to the ongoing investigations into the Adani Group’s financial activities. The allegations of money laundering and corporate governance breaches, coupled with the Hindenburg report and the Pandora Papers revelations, have put the spotlight firmly on one of India’s largest conglomerates.
Investors and regulators around the world will be closely monitoring the developments surrounding the Adani Group, as the outcomes of these investigations could have far-reaching implications for the group’s reputation and financial stability. The Adani Group, meanwhile, continues to face questions about its financial practices, leaving stakeholders eagerly awaiting the results of the ongoing probes.
