Financial Crime World

Solomon Islands Fails to Implement Anti-Money Laundering Measures

AML Regime in Disarray: Financial System at Risk

A recent assessment by the Anti-Money Laundering (AML) authorities has revealed that Solomon Islands lacks a legal framework for implementing anti-money laundering measures, putting its financial system at risk of being exploited by criminal organizations.

Lack of Oversight and Supervision

The report highlights the absence of a supervisory body to monitor the implementation of AML measures by financial institutions and designated non-financial businesses and professions (DNFBPs). This lack of oversight has led to a situation where many financial institutions and DNFBPs are not taking adequate measures to prevent money laundering and terrorist financing.

International Banks vs. Local Institutions

International banks and remittance service providers have implemented strong automated screening software to monitor customers and transactions, but local banks, credit unions, and DNFBPs have limited understanding of AML requirements despite not engaging in international fund transfers.

Non-Profit Sector at Risk

The non-profit sector (NPO) is considered high-risk for money laundering and terrorist financing due to a lack of regulation and strategic monitoring. Financial institutions are also unaware of the risks posed by NPOs.

Shortcomings in Solomon Islands’ AML Regime

  • Absence of Legal Framework: There is no legal framework or policies to deal with Politically Exposed Persons (PEPs) and Sanctions-Imposed Individuals (SIFIUs).
  • Limited Understanding of Money Laundering Risks: Limited understanding of money laundering and terrorist financing risks across the financial sector.
  • Inadequate Customer Due Diligence: Inadequate implementation of customer due diligence measures by many financial institutions and DNFBPs.
  • Verification Tools: Lack of verification tools, making it difficult to verify customer identity and beneficial ownership information.

Recommendations

The report recommends that Solomon Islands establish a legal framework for AML, implement risk-based supervision, and strengthen its monitoring of the NPO sector.

Source: APG (Anti-Money Laundering and Combating the Financing of Terrorism) Report 2019.