Maldives Faces Challenges in Compliance with Financial Action Task Force Recommendations

Progress Made in Improving Technical Compliance

The Maldives has made significant progress in improving technical compliance with the Financial Action Task Force (FATF) recommendations on combating money laundering, terrorist financing, and proliferation financing. According to a landmark report based on data from FATF and FSRB mutual evaluation reports since 2013, the country has satisfactorily implemented 76% of the FATF’s 40 Recommendations.

Key Statistics:

• In 2012, Maldives had only implemented 36% of the FATF’s recommendations.
• The positive impact of the FATF Mutual Evaluation and Follow-up processes is evident in this significant improvement.

Ongoing Challenges

Despite progress made, Maldives still faces substantial challenges in taking effective action to address these risks. The report highlights that many countries struggle with investigating and prosecuting high-profile cross-border cases and preventing anonymous shell companies and trusts from being used for illicit purposes.

Key Challenges:

• Investigating and prosecuting high-profile cross-border cases
• Preventing the use of anonymous shell companies and trusts for illicit purposes

FATF’s Strategic Review and Changes to Assessment Process

The FATF’s Strategic Review aims to make the next cycle of assessments more timely, risk-based, and effective. As part of this review, the FATF has made changes to how countries will be assessed in the 5th Round of mutual evaluations.

Key Changes:

• Significantly shorter mutual evaluation cycles
• Greater emphasis on major risks and context
• Results-orientated follow-up assessment process

Implementation of New Methodology and Procedures

The FATF’s new methodology for assessing technical compliance with its recommendations and effectiveness of anti-money laundering/combating the financing of terrorism (AML/CFT) systems is expected to come into effect when the 5th Round of mutual evaluations commences.

Key Developments:

• Implementation of new procedures for AML/CFT mutual evaluations, follow-up, and International Cooperation Review Group assessments

Conclusion

Maldives must take concrete steps to address its ongoing challenges in compliance with FATF recommendations to avoid reputational risks and prevent potential sanctions. The country should focus on areas where the risks are highest and prioritize specific actions to tackle money laundering, terrorist financing, and the financing of weapons of mass destruction.