Solomon Islands Falls Short in Anti-Money Laundering and Counter-Terrorist Financing Efforts

Vulnerability to Financial Crimes

HONIARA, Solomon Islands - A recent assessment has revealed that the Solomon Islands lacks a legal framework to combat money laundering and terrorist financing (ML/TF), leaving the country vulnerable to financial crimes.

Limited Understanding of ML/TF Risks and Requirements

According to the report, the country’s financial institutions and designated non-financial businesses and professions (DNFBPs) have limited understanding of ML/TF risks and requirements. International banks and remittance service providers have implemented automated screening software to monitor customers and transactions, but local banks, credit unions, and DNFBPs have not.

High-Risk Non-Profit Sector

The non-profit sector is considered high-risk for ML/TF in the Solomon Islands, with no strategic or operational monitoring of activities. Financial institutions’ awareness of the risks presented by non-profits is negligible.

Lack of Risk-Based Measures

While the Development Services Exchange (DSE), a voluntary national NGO umbrella body, has made efforts to strengthen coordination and provide training materials, risk-based measures have not been applied.

Shortcomings in Addressing Politically Exposed Persons and SIFIUs

The country also lacks a legal framework for dealing with politically exposed persons (PEPs) and special interest individuals or entities (SIFIUs). International financial institutions are undertaking automated screening to identify assets and funds of designated persons and entities, but smaller financial institutions and DNFBPs have not put similar measures in place.

Key Shortcomings

• The absence of customer due diligence (CDD) obligations for reporting entities in the Solomon Islands.
• Limited understanding of ML/TF risks across the financial sector.
• Inadequate implementation of mitigating measures by most financial institutions and DNFBPs.
• Lack of verification tools to support CDD measures.
• Insufficient identification of beneficial owners, particularly among casinos and other DNFBPs.

Weak Supervision Frameworks

The report also notes that supervision frameworks for financial institutions are in place, but market entry controls are weak, and there is a lack of adequate fit-and-proper requirements for persons and bodies corporate. The Solomon Islands Financial Intelligence Unit (SIFIU) has a moderate understanding of ML/TF risks but lacks risk-based supervision.

Recommendations

The assessment recommends strengthening the country’s anti-money laundering and counter-terrorist financing regime by implementing effective CDD measures, improving understanding of ML/TF risks, and enhancing supervision and enforcement.