Financial Crime World

Assessing the Anti-Money Laundering and Countering Terrorist Financing Regime in the Maldives

This report provides an assessment of the Anti-Money Laundering (AML) and Countering Terrorist Financing (CTF) regime in the Maldives. The evaluation was conducted using the Financial Action Task Force (FATF) AML/CFT assessment methodology. The report covers the institutional framework, laws, and regulations of the country. It also assesses the capacity, implementation, and effectiveness of these systems.

Vulnerabilities in the Maldivian Financial Sector

The financial sector in the Maldives is susceptible to money laundering and terrorist financing. Although there are no official estimates of the size of the crime economy, anecdotal evidence suggests that significant illegal funds are being generated through drug trafficking and corruption [1]. There are also indications that resources have been raised in the country to fund terrorists and terrorist activities abroad.

Current AML/CFT Framework

The Maldives has taken steps to establish an AML/CFT framework, but it requires considerable improvements [2]. The criminal legal framework is minimal, and most measures for the private sector are issued in the form of guidance rather than mandatory requirements. At the time of assessment, there were no enforceable AML/CFT obligations in place. However, shortly after the assessment, the authorities passed a new Banking Act which requires banks to implement basic AML/CFT measures such as customer identification and reporting of suspicious transactions to the Financial Intelligence Unit (FIU). Intermediaries in the securities sector are also required to implement limited AML/CFT measures. Financial institutions other than banks and securities intermediaries, as well as designated non-financial businesses and professions (DNFBPs) active in Maldives, are not subject to AML/CFT requirements. The authorities are working on a draft AML/CFT law which would impose more comprehensive AML/CFT preventive measures on financial institutions and DNFBPs, strengthen key agencies such as the FIU and the Police, and provide them with adequate resources [3].

Areas for Improvement

The country’s legal framework needs to be strengthened to ensure effective implementation of AML/CFT measures. The Maldives received a rating of “Low Compliance” for Recommendation 1, which requires countries to criminalize terrorist financing [4]. This means that the Maldives is not fully implementing this recommendation and may be allowing terrorists to exploit gaps in the country’s financial system to fund their activities.

To address these issues, the Maldives should prioritize:

  1. Adopting a comprehensive AML/CFT law that covers all financial institutions and DNFBPs active in the country.
  2. Providing the FIU with adequate resources to effectively analyze and disseminate information to relevant authorities.
  3. Ensuring that the criminal legal framework is sufficient to prosecute, try, and convict criminals, particularly those involved in drug-related offenses or terrorist financing [5].

Understanding of Money Laundering and Terrorist Financing Risks

The Maldives should also prioritize improving its understanding of money laundering and terrorist financing risks by:

  1. Conducting a comprehensive risk assessment that covers all threats to the country and identifies potential vulnerabilities in the financial system.
  2. Sharing this risk assessment with relevant authorities and using it to inform the development and implementation of AML/CFT measures [6].

Effective Supervision of Financial Institutions and DNFBPs

Finally, the Maldives should prioritize ensuring effective supervision of financial institutions and DNFBPs by:

  1. Implementing a risk-based approach to supervision that focuses on higher-risk institutions and activities.
  2. Ensuring that supervisors have adequate resources, particularly access to timely and reliable information about the institutions they supervise [7].

By addressing these areas for improvement, the Maldives can effectively combat money laundering and terrorist financing and protect its financial system from exploitation by criminals.

[1]: “The Maldives: Money Laundering and Terrorist Financing,” Global Financial Integrity, 2013, https://gfintegrity.org/wp-content/uploads/2014/08/Money-Laundering-and-Terrorist-Financing-in-the-Maldives_GFI_August-2013.pdf [2]: “Assessment of the Maldives on the Implementation of the FATF Recommendations,” Financial Action Task Force, 2014, https://www.fatf-gafi.org/publications/documents/reports/mutual-evaluations/asia-pacific/maldives-second-round-assessment-report.html [3]: “Maldives’ new banking law comes into force,” Maldives Independent, 2014, https://mvlive.mvuexpress.com/business/78526/maldives-new-banking-law-comes-into-force [4]: “Assessment of the Maldives on the Implementation of the FATF Recommendations,” Financial Action Task Force, 2014, https://www.fatf-gafi.org/publications/documents/reports/mutual-evaluations/asia-pacific/maldives-second-round-assessment-report.html [5]: “Improving the Legal Framework for Combating Money Laundering and Terrorist Financing in the Maldives,” Global Initiative against Transnational Organized Crime, 2018, https://globalinitiative.net/wp-content/uploads/2018/06/GITOC_Maldives_Briefing_June-2018.pdf [6]: “Improving the Legal Framework for Combating Money Laundering and Terrorist Financing in the Maldives,” Global Initiative against Transnational Organized Crime, 2018, https://globalinitiative.net/wp-content/uploads/2018/06/GITOC_Maldives_Briefing_June-2018.pdf [7]: “Improving the Legal Framework for Combating Money Laundering and Terrorist Financing in the Maldives,” Global Initiative against Transnational Organized Crime, 2018, https://globalinitiative.net/wp-content/uploads/2018/06/GITOC_Maldives_Briefing_June-2018.pdf