Financial Crime World

Maldives Struggles to Combat Money Laundering and Terrorist Financing

The Maldives has taken steps to establish an anti-money laundering (AML) and combating the financing of terrorism (CFT) framework, but significant gaps remain, according to a recent assessment by international experts.

Laying Down the Foundations

In 2011, the country passed new banking regulations requiring banks to implement basic AML/CFT measures such as customer identification and reporting of suspicious transactions to the Financial Intelligence Unit (FIU). Intermediaries in the securities sector were also required to implement limited AML/CFT measures.

Challenges Ahead

However, the current framework is still in its infancy, with many areas requiring significant improvement. The criminal legal framework is minimal, and most measures for the private sector are issued in the form of guidance rather than mandatory requirements.

  • The authorities have been working on a draft AML/CFT law, but it remains unclear when it will be passed and implemented.
  • The country has criminalized money laundering only in relation to drug-related offenses.
  • The framework for provisional measures and confiscation suffers from major shortcomings, with limited opportunities for property confiscation.

Inadequate Action Against Money Laundering

The authorities’ action against money laundering is not commensurate with the risk. Despite drug trafficking being a significant problem in the Maldives, generating an estimated US$57 million per year, no investigations or charges have been brought under the Drugs Act.

  • The country has failed to criminalize terrorist financing in a separate and autonomous way.
  • There are no laws or procedures in place to freeze terrorist funds or assets in line with United Nations Security Council Resolutions (UNSCR).
  • Intelligence suggests that funds may occasionally be raised in the country to support terrorism abroad.

Challenges Facing the Maldives

Experts have identified several challenges facing the Maldives, including:

  • Shortcomings in the overall criminal legislative framework
  • Lack of resources among competent authorities

FIU: A Key Player

The authorities set up an FIU within the central bank in 2006, but it has not become fully operational. The FIU is responsible for receiving reports of suspicious transactions from financial institutions, but its effectiveness is limited by the absence of a legal basis for mandatory reporting requirements.

Conclusion

While the Maldives has made some progress in combating money laundering and terrorist financing, significant challenges remain. It will be important to monitor the country’s progress in addressing these shortcomings.