Maldives Financial Crime Risk Assessment Raises Concerns

A recent assessment has highlighted the Maldives’ vulnerability to financial crimes, citing a lack of effective measures in place to prevent and detect money laundering, terrorist financing, and other illicit activities.

Concerns Over AML Framework

The report points out that while the country has made efforts to strengthen its anti-money laundering (AML) framework, there are still significant gaps in its regulatory and supervisory mechanisms. Specifically:

• Lack of risk-based approach: The assessment highlights that the Maldives lacks a risk-based approach to AML, making it difficult to effectively identify and mitigate high-risk transactions.
• Inadequate national cooperation and coordination: Concerns have been raised about the absence of effective national cooperation and coordination among relevant authorities, which can hinder efforts to combat financial crime.
• Limited powers of supervisors: The report notes that the Maldives’ regulatory and supervisory mechanisms lack the necessary powers to effectively supervise and enforce AML regulations.

Terrorist Financing Concerns

The assessment also highlights that the Maldives lacks effective laws and regulations to prevent terrorist financing, including:

• No specific offence defined in criminal code: The country’s criminal code does not have a specific offence related to terrorist financing, making it difficult to prosecute individuals involved in such activities.
• Limited targeted financial sanctions: The report notes that the Maldives has no targeted financial sanctions related to terrorism or proliferation, which can make it challenging to effectively combat these threats.

High Risk of Illicit Activities

The report also notes that the Maldives has a high risk of being used as a conduit for illicit activities due to its geographic location and lack of effective regulations. The country’s financial institutions have been found to be vulnerable to money laundering and terrorist financing, with inadequate customer due diligence and record-keeping practices in place.

Recommendations

To address these concerns, experts recommend that the Maldives:

• Implement a risk-based approach: Strengthen its AML framework by implementing a risk-based approach to identify and mitigate high-risk transactions.
• Improve national cooperation and coordination: Enhance national cooperation and coordination among relevant authorities to effectively combat financial crime.
• Enhance regulatory and supervisory mechanisms: Improve the powers of supervisors to effectively supervise and enforce AML regulations.
• Introduce targeted financial sanctions: Introduce targeted financial sanctions related to terrorism and proliferation to effectively combat these threats.
• Improve customer due diligence and record-keeping practices: Enhance customer due diligence and record-keeping practices in the country’s financial institutions.

International Scrutiny

The assessment has been welcomed by international bodies, who have called on the Maldives to take immediate action to address these concerns. Failure to do so could result in further scrutiny from the international community and potential economic sanctions.

Government Response

In response to the report, a spokesperson for the Maldivian government stated that the country is committed to strengthening its AML framework and will work closely with international partners to implement the recommended measures. However, critics have expressed skepticism about the government’s ability to effectively address these concerns given its track record on financial crime regulation.