Financial Crime World

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Solomon Islands Fails to Meet International Standards on Terrorist Financing Prevention

FATF Assessment Reveals Shortcomings in Anti-Money Laundering and Counter-Terrorism Financing Regime

A recent assessment by the Financial Action Task Force (FATF) has revealed that the Solomon Islands has failed to implement several key measures to prevent terrorist financing. The country’s rating, which reflects its compliance with international standards, was found to be woefully inadequate in many areas.

Key Areas of Concern

The assessment highlighted a number of shortcomings, including:

  • Weaknesses in assessing risk and applying a risk-based approach (R.1): The Solomon Islands has failed to implement an adequate system for assessing the risks of money laundering and terrorist financing.
  • Lack of national cooperation and coordination (R.2): The country lacks effective mechanisms for cooperation and coordination between different agencies and departments to combat terrorist financing.
  • Inadequate laws and regulations (R.3 & R.4): The Solomon Islands’ laws and regulations are insufficient in addressing the offense of money laundering and confiscation, as well as provisional measures.

Additional Areas of Concern

Furthermore, the Solomon Islands was found to have failed to implement targeted financial sanctions related to terrorism and terrorist financing (R.6), as well as those related to proliferation (R.7). The country’s laws governing non-profit organizations were also deemed inadequate (R.8).

Additionally, the assessment revealed weaknesses in:

  • Customer due diligence (R.10): The Solomon Islands has failed to implement adequate customer due diligence procedures.
  • Record keeping (R.11): The country lacks effective record-keeping mechanisms for financial transactions.
  • Transparency and beneficial ownership information (R.24 & R.25): The Solomon Islands has not implemented adequate measures to ensure transparency and provide beneficial ownership information for legal persons and arrangements.

Partial Compliance with Key Requirements

The Solomon Islands was found to be only partially compliant with several key requirements, including:

  • Correspondent banking (R.13)
  • Money or value transfer services (R.14)
  • New technologies (R.15)
  • Wire transfers (R.16)
  • Reliance on third parties (R.17)
  • Internal controls and foreign branches and subsidiaries (R.18)
  • Higher-risk countries (R.19)
  • Reporting of suspicious transactions (R.20)
  • Tipping-off and confidentiality (R.21)
  • DNFBPs customer due diligence (R.22)
  • Regulation and supervision of financial institutions (R.26)
  • Powers of supervisors (R.27)
  • Statistics (R.33)

Conclusion

The Solomon Islands’ failure to meet these international standards poses a significant risk to the global financial system and highlights the need for urgent action to improve its anti-money laundering and counter-terrorism financing regime.

Rating: Partially Compliant (PC)