Solomon Islands Fails to Implement Effective Anti-Money Laundering Measures

A recent report has highlighted significant shortcomings in the Solomon Islands’ efforts to prevent money laundering and terrorist financing. The country lacks a legal framework to regulate these activities, leaving it vulnerable to financial crimes.

Limited Understanding of AML/CFT Requirements

According to the report, the country’s Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) have limited understanding of anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements. While international banks and remittance service providers have implemented automated screening software to monitor customers and transactions, local FIs and DNFBPs have not.

High-Risk Areas for Money Laundering and Terrorist Financing

The report flagged the Not-For-Profit (NPO) sector as a high-risk area for money laundering and terrorist financing, with no strategic or operational monitoring of activities in place. Financial Institutions’ awareness of the risks presented by NPOs is negligible.

Lack of Legal Framework for PEPs and SIFUs

In addition, Solomon Islands has no legal framework or policies to deal with Politically Exposed Persons (PEPs) and Sanctions-Related Individuals/Entities (SIFUs). While international financial institutions are taking measures to identify assets and funds of designated persons and entities, smaller FIs and DNFBPs have not.

Shortcomings in Regulation of NPOs

The report also highlighted shortcomings in the regulation of NPOs, which are mitigated in part by the Development Services Exchange (DSE), a voluntary national NGO umbrella body. However, risk-based measures have not been applied.

Recommendations

To address these shortcomings and bring the country in line with international standards, the following recommendations are made:

• Establish a legal framework to regulate anti-money laundering and combating the financing of terrorism activities
• Implement risk-based measures to monitor NPOs and DNFBPs
• Strengthen regulation of PEPs and SIFUs
• Enhance understanding of ML/TF risks across the financial sector
• Implement mitigating measures commensurate with institutional risks
• Improve reporting of suspicious transactions or activities
• Conduct joint FI on-site inspections with a prudential and AML/CFT focus

The Solomon Islands government must take immediate action to address these shortcomings and ensure that its anti-money laundering and counter-terrorism financing measures are effective and in line with international standards.