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Solomon Islands Fall Short in Fight Against Financial Crimes, FATF Report Reveals

The Financial Action Task Force (FATF) has released its Mutual Evaluation Report on the Solomon Islands, rating the Pacific Island nation partially compliant (PC) or non-compliant (NC) in various areas related to financial crime prevention.

Risk Assessment and Risk-Based Approach

  • The FATF noted that while authorities in Solomon Islands generally understand the importance of assessing risk, there is no formal process for documenting and regularly reviewing the risk assessment.
  • As a result, the country was deemed partially compliant (R.1).

Cooperation and Coordination

  • Authorities in Solomon Islands made progress in improving national cooperation and coordination.
  • However, they could still benefit from enhancing communication channels between local regulatory and law enforcement agencies, earning them a largely compliant (LC) rating (R.2).

Money Laundering Offenses

  • The Solomon Islands government partially met the requirement of having adequate legal frameworks to address money laundering offenses.
  • The FATF highlighted the need for enhancing law enforcement’s capacity to investigate and prosecute these offenses (R.3).

Confiscation and Provisional Measures

  • The Solomon Islands government demonstrated limited progress in implementing systems to confiscate proceeds of money laundering crimes or freeze related assets.
  • As a result, the country was rated non-compliant (R.4).

Terrorist Financing Offenses

  • Solomon Islands was deemed largely compliant with both FATF Recommendations related to terrorist financing offenses (R.5 & R.6).

Targeted Financial Sanctions

  • The country partially met the legal requirements to implement targeted financial sanctions related to terrorism, proliferation, and other relevant activities (R.7 & R.8).

Non-Profit Organizations

  • The FATF noted Solomon Islands’ failure to introduce and implement any specific legislation related to the regulation of non-profit organizations.
  • As a result, the country was rated non-compliant (R.9).

Financial Institution Secrecy Laws

  • Solomon Islands was rated compliant with this FATF Recommendation.

Customer Due Diligence

  • The FATF noted limitations in the customer due diligence processes used by banks in Solomon Islands and deemed the country partly compliant (R.11 & R.22).

Record Keeping

  • Both money and value transfer services providers and financial institutions in Solomon Islands were found to have ineffective record-keeping procedures, earning them a non-compliant rating from the FATF.
  • As a result, the country was rated non-compliant (R.13 & R.14).

Politically Exposed Persons

  • The authorities in Solomon Islands have created a register of politically exposed persons, but the FATF reported limited evidence of its usage in customer due diligence processes, leading to a partly compliant rating.
  • As a result, the country was rated partly compliant (R.12).

Correspondent Banking

  • Solomon Islands was rated non-compliant with FATF requirements related to correspondent banking.

Higher-Risk Countries

  • The authorities in Solomon Islands were deemed partially compliant with the FATF Recommendation to address the financial risks emanating from higher-risk countries.
  • As a result, the country was rated partly compliant (R.19).

Suspicious Transactions Reporting

  • The country meets the FATF requirements to report suspicions of money laundering and terrorist financing activities.
  • However, there are weaknesses in the actual implementation of such reporting systems, earning the country a partial compliance rating (R.20).

Tipping-off and Confidentiality

  • The FATF noted that regulations in Solomon Islands require the reporting entities to maintain confidentiality when filing suspicious transaction reports.
  • However, there are no provisions preventing such entities from disclosing suspect information to the persons or institutions under investigation, earning the country a non-compliant rating (R.21).

International Cooperation and Assistance

  • The Solomon Islands were deemed compliant with most FATF requirements related to international cooperation, except for the prevention of cash courier activity and the implementation of centralized financial intelligence units.
  • As a result, the country was rated partly compliant in this area.

Sanctions

  • The authorities in Solomon Islands have implemented laws and regulations to enforce international and domestic financial sanctions.
  • As a result, the country was rated compliant (R.35).

In conclusion, the FATF Mutual Evaluation Report highlights several areas where the Solomon Islands could strengthen its financial crime prevention measures, particularly in areas related to record-keeping, customer due diligence, and international cooperation.