Financial Crime World

Maldives Banks Crack Down on Money Laundering

Combating Financial Crimes in the Maldives

In a bid to prevent money laundering and terrorism financing, banks in the Maldives are working closely with the central bank and government agencies. The Prevention of Money Laundering and Financing of Terrorism Act (10/2014) requires all banks operating in the country to implement strict measures to prevent illicit activities.

How Banks Prevent Money Laundering

Banks in the Maldives follow a three-stage process to prevent money laundering:

Placement

  • The first stage involves identifying and reporting any suspicious activity related to the placement of funds derived from illicit sources into legitimate financial institutions.
  • This stage requires banks to monitor transactions closely and report any unusual activities to the authorities.

Layering

  • The second stage involves layering those funds in order to disguise their origins, often through complex transactions or transfers between different accounts.
  • Banks must be vigilant and detect any attempts to hide the origin of funds through sophisticated transactions.

Integration

  • The final stage involves integrating the laundered funds into the mainstream economy, often through a series of legitimate-looking transactions.
  • Banks play a crucial role in detecting and preventing the integration of laundered funds by monitoring customer activities closely.

Banks’ Responsibilities

Under the Prevention of Money Laundering and Financing of Terrorism Act, banks are required to:

Acquire Valid Information

  • Acquire valid personal or business information from all customers and beneficial owners
  • Verify income and expenditure details of customers

Report Suspicious Transactions

  • Report suspicious transactions to the authorities
  • Refuse to establish or continue relationships with customers who fail to provide required information

Consequences of Non-Compliance

Failure to comply with these regulations can result in severe consequences, including:

  • Imprisonment for up to 10 years and/or a fine of up to MVR 1 million (approximately USD 65,000)
  • Suspension or revocation of banking licenses
  • Damage to the bank’s reputation and loss of customer trust

International Efforts

The Maldives is part of international efforts to combat money laundering and terrorism financing. The country has ratified several global conventions, including the United Nations Convention against Transnational Organized Crime and its protocols.

According to the United Nations Office on Drugs and Crime (UNODC), an estimated USD 800 billion to USD 2 trillion is laundered globally each year. The Maldives government and banks are working together to combat this issue and protect the country’s financial system from illicit activities.