Financial Crime World

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Maldives Banking Regulations: An Overview

The Maldivian banking industry is subject to a comprehensive regulatory framework overseen by the Maldives Monetary Authority (MMA), the country’s central bank. The MMA ensures the stability and integrity of the financial system while regulating and supervising banks operating in the Maldives.

Licensed Activities

To operate a banking business in the Maldives, an institution must hold a valid banking license issued by the MMA. A banking license permits entities to engage in various activities, including:

  • Accepting deposits
  • Granting loans
  • Providing other financial services

Different Licenses for Different Services

The regulatory regime recognizes different licenses for different banking services. For example:

  • Payment service providers (PSPs) require a separate license from the MMA to operate in the Maldives.
  • Other activities such as broker-dealer operations or e-money issuance may require additional licenses.

Sandbox Regime and Innovative Financial Products

The MMA has established a sandbox regime, which allows licensed banks to test innovative financial products and services with limited regulatory oversight. This regime enables banks to innovate while ensuring that their activities comply with regulations.

Crypto Assets and Regulations

The Maldivian regulatory framework acknowledges crypto assets as a distinct category of assets. While there are no specific restrictions on the issuance or custody of crypto assets, licensed banks must comply with:

  • Anti-money laundering (AML) regulations
  • Combating financing terrorism (CFT) regulations when dealing with crypto-related transactions

Deposit Insurance and Segregation of Funds

Client deposits in Maldivian banks are protected up to a certain amount by the Deposit Insurance Scheme. Crypto assets held by licensed banks are subject to segregation of funds requirements, ensuring that these assets are kept separate from other customer funds.

Capital Requirements and Risk Management

The MMA has established capital requirements for banks operating in the Maldives, including:

  • Risk-based capital adequacy ratios
  • Liquidity requirements
  • Corporate governance standards
  • Risk management frameworks

Application Process and Timing

The application process for a banking license in the Maldives typically involves submitting an application to the MMA, providing detailed information about the applicant’s business plan, financial projections, and governance structure. The average timing for approval can range from several months to over a year.

Cross-Border Activity

Mere cross-border activity is not permissible in the Maldives without proper authorization from the MMA. Licensed banks must comply with all applicable regulations and obtain necessary approvals before engaging in cross-border transactions.

Organizational Requirements

Licensed banks in the Maldives are subject to various organizational requirements, including:

  • Corporate governance standards
  • Risk management frameworks
  • AML/CFT compliance procedures

Remuneration Policies

The MMA has implemented restrictions on remuneration policies for banking executives in the Maldives, aimed at promoting fair compensation practices and reducing excessive risk-taking behavior.

Basel III Framework

The Maldives has adopted the Basel III framework for regulatory capital requirements, with some minor deviations. Licensed banks are required to meet strict capital adequacy ratios and liquidity requirements to ensure their stability and resilience.

Liquidity Requirements

Licensed banks in the Maldives must comply with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), which ensure that they maintain adequate liquidity to meet short-term obligations and funding requirements.

Reporting and Approval Requirements

The MMA requires licensed banks to submit regular financial reports, including audited annual financial statements. The regulator also imposes approval requirements for the acquisition of shareholdings in or control of banks.

Conditions for Eligible Owners

The regulatory regime imposes conditions on eligible owners of banks, including restrictions on major participations and foreign shareholdings.

Foreign Shareholdings

There are specific restrictions on foreign shareholdings in banks operating in the Maldives, aimed at promoting domestic ownership and control.

Special Regime for Domestic and Foreign Banks

The MMA has a special regime for domestic and foreign banks, which provides different requirements and regulations for each type of bank.

Recent trends in bank regulation in the Maldives include increased focus on risk management, AML/CFT compliance, and financial stability. The MMA has implemented various measures to enhance regulatory oversight and ensure the integrity of the financial system.

Biggest Threat to Financial Sector

The biggest threat to the success of the financial sector in the Maldives is the increasing risk of cyber attacks and data breaches, which can compromise the security and stability of financial institutions.