Financial Crime World

Risk-Based Approach to Anti-Money Laundering in Maldives: A New Framework

The government of Maldives has taken a significant step towards strengthening its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime by adopting a risk-based approach. This new framework aims to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified.

Understanding the Risks

The Maldives government has recognized the importance of identifying, assessing, and understanding the money laundering and terrorist financing risks in the country. AML/CFT risk assessments will be conducted on an ongoing basis to inform potential changes to the country’s AML/CFT regime, allocate and prioritize resources, and provide information to financial institutions and designated non-financial businesses and professions (DNFBPs).

Key Considerations for Risk Assessments

  • Identifying high-risk areas and individuals
  • Assessing the likelihood and impact of money laundering and terrorist financing
  • Evaluating the effectiveness of existing controls and measures
  • Updating risk assessments on a regular basis to reflect changing circumstances

Implementing a Risk-Based Approach

The government has emphasized that a risk-based approach is an effective way to combat money laundering and terrorist financing. Financial institutions and DNFBPs will be required to take appropriate steps to identify and assess their AML/CFT risks, document those assessments, keep them up-to-date, and provide risk assessment information to competent authorities.

Requirements for Implementing a Risk-Based Approach

  • Identifying and assessing AML/CFT risks
  • Documenting and updating risk assessments regularly
  • Providing risk assessment information to competent authorities
  • Applying appropriate controls and measures to mitigate identified risks

Simplified Measures for Lower-Risk Transactions

Countries may allow financial institutions and DNFBPs to apply simplified customer due diligence (CDD) measures for lower-risk transactions. However, these requirements must be met, including documenting the basis of the risk assessment and keeping it up-to-date.

Simplified CDD Measures

  • Applying reduced due diligence for low-risk customers
  • Documenting the basis of the risk assessment
  • Keeping the risk assessment up-to-date
  • Reviewing and updating simplified CDD measures regularly

Exemptions and Supervision

The government has also introduced exemptions for certain low-risk activities or occasional transactions, provided that there is a proven low risk of money laundering and terrorist financing. Supervisors will ensure that financial institutions and DNFBPs are effectively implementing their AML/CFT obligations.

Exemptions

  • Low-risk activities or occasional transactions
  • Proven low risk of money laundering and terrorist financing
  • Subject to review and approval by competent authorities

Key Takeaways

  • The Maldives government has adopted a risk-based approach to AML/CFT, which aims to ensure that measures are commensurate with identified risks.
  • Financial institutions and DNFBPs must identify, assess, and document their AML/CFT risks and provide information to competent authorities.
  • Simplified CDD measures may be applied for lower-risk transactions, subject to specific requirements.
  • Exemptions apply to certain low-risk activities or occasional transactions.

By implementing a risk-based approach to AML/CFT, the Maldives government aims to strengthen its regime, reduce money laundering and terrorist financing risks, and enhance transparency and accountability in financial transactions.