Financial Crime World

Solomon Islands Fails to Implement Anti-Money Laundering and Counter-Terrorist Financing Measures

Shortcomings in Preventive Measures

A recent report has highlighted significant shortcomings in Solomon Islands’ efforts to prevent money laundering and terrorist financing. The country lacks a legal framework for implementing the Financial Action Task Force (FATF) recommendations, leaving financial institutions and non-financial businesses vulnerable to illegal activities.

  • Financial institutions have limited understanding of money laundering and terrorist financing risks.
  • Many do not undertake required customer due diligence measures.
  • Local banks, credit unions, and non-bank financial institutions are particularly lacking in this regard.

High-Risk Sector: Non-Profit Organizations (NPOs)

The NPO sector is considered high-risk for money laundering and terrorist financing, but it remains unregulated. No strategic or operational monitoring of NPO activities occurs, and financial institutions’ awareness of the risks posed by NPOs is negligible.

  • Risk-based measures have not been applied.
  • The Development Services Exchange (DSE), a voluntary national NGO umbrella body, plays a limited role in regulating NPOs.

Solomon Islands has no legal framework or policies in place to deal with PEPs and SRFs. Only international financial institutions are undertaking automated screening to identify assets and funds of designated persons and entities, while smaller financial institutions and non-financial businesses have not implemented measures to give effect to these requirements.

Consequences

The report concludes that preventive measures are lacking in Solomon Islands, with a significant deficiency in the implementation of customer due diligence obligations. The country’s understanding of money laundering and terrorist financing risks is variable across the financial sector, and many financial institutions do not apply mitigating measures commensurate with their institutional risks.

  • Supervision of financial institutions is also inadequate.
  • Licensing frameworks are in place but weak market entry controls and a lack of adequate fit and proper and enhanced due diligence measures on persons and body corporates exist.

Urgent Need for Reform

The report’s findings highlight the urgent need for Solomon Islands to strengthen its anti-money laundering and counter-terrorist financing measures to prevent illegal activities and protect the country’s financial system.