Financial Crime World

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Assessment of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures in Solomon Islands

In 2019, the Asia-Pacific Group (APG) evaluated the AML/CTF measures in place in Solomon Islands. The report highlights significant deficiencies in the country’s framework, particularly in relation to Customer Due Diligence (CDD) obligations, understanding of money laundering and terrorist financing (ML/TF) risks, and implementation of mitigating measures across various sectors.

Preventive Measures

Customer Due Diligence (CDD)

The report notes that CDD obligations are set out in several provisions of the Money Laundering and Proceeds of Crime Act 2010. However, section 12B(a) to (c) appears to exclude all reporting entities in Solomon Islands from being required to apply CDD.

Understanding of ML/TF Risks

The understanding of ML/TF risks is variable across the financial sector:

  • Foreign banks have some understanding due to their parent company’s policies.
  • Other institutions, such as insurance companies, microfinance, and credit unions, have very limited understanding of ML/TF risks.

Application of Mitigating Measures

Banks, money changers, and money remittance service providers are applying some mitigating measures commensurate with their institutional risks. However, implementation is almost absent in other financial institutions (FIs), including insurance companies, microfinance, and credit unions.

Supervision

Licensing Frameworks

Licensing frameworks for FIs are in place through various legislations administered by the Central Bank of Solomon Islands (CBSI). DNFBPs are subject to licensing under sectoral legislation.

Market Entry Controls

Market entry controls in the FI and DNFBP sectors are weak, and there is a lack of adequate fit-and-proper and enhanced due diligence measures on persons and body corporates.

Understanding of ML/TF Risks

SIFIU (Solomon Islands Financial Intelligence Unit) and its peer regulators have a moderate understanding of ML/TF risks but limited understanding of sectoral ML/TF risks inherent to FIs and cash dealers.

Notable Deficiencies

The report highlights the following notable deficiencies:

  • Absence of verification tools: Undermines the effectiveness of CDD measures.
  • Casino operations: Casinos are not fully verifying customer identity and are not applying other preventive measures, including suspicious transaction reporting (STRs), Politically Exposed Persons (PEPs) screening, and sanctions screening.
  • DNFBP compliance: Other DNFBPs are not implementing mitigating or preventive measures at all.

Overall, the report emphasizes the need for significant improvements in Solomon Islands’ AML/CTF framework to effectively prevent money laundering and terrorist financing.