Financial Crime World

Solomon Islands Tightens Banking Regulations and Exchange Controls

The Solomon Islands has taken steps to strengthen its banking system and exchange controls, with a view to promoting financial stability and preventing money laundering and other illicit activities.

Banking Regulations

The Central Bank of Solomon Islands (CBSI) plays a key role in regulating the banking sector, while the Financial Institutions Act 1998 and related regulations govern the licensing and operation of banks. Under the Financial Institutions Act:

  • Banks must be licensed by the CBSI to operate in the country.
  • The act sets out rules for ownership, minimum capital requirements, business restrictions, and auditing standards for financial institutions.
  • The CBSI has issued prudential standards covering issues such as:
    • Capital adequacy
    • Asset classification
    • Liquidity management

Securities Laws

The Solomon Islands does not have specific legislation governing securities. However, the Companies Act 2009 contains a general restriction on persons engaging in conduct in relation to any advertisement or generally for any debt and equity securities or any dealings in debt and equity securities (including trading) that is misleading or deceptive or likely to mislead or deceive.

Exchange Control

The Solomon Islands has strict controls in place regarding the control of all financial transactions, and dealings in foreign currency and securities, between residents of Solomon Islands and other countries. The following regulations govern these activities:

  • The Exchange Control Act 1976
  • Exchange Control (Foreign Exchange) Regulations
  • Exchange Control Policy
  • Dealings in foreign currency are subject to approval by the CBSI or an Authorised Dealer.
  • No person can take or send out of the Solomon Islands any currency except with the authority of CBSI or an Authorised Dealer.
  • Similarly, no resident or person acting on behalf of a resident can deal outside Solomon Islands with foreign currency without the authority of CBSI.

Investment Restrictions

The Foreign Investment Board (FIB) requires prior approval for investment by non-residents in new businesses or existing enterprises in the Solomon Islands. The approval granted by FIB is further subject to exchange control approval in respect of transactions that have exchange control implications, such as:

  • Issue or allotment of shares/securities to a non-resident.

On the other hand, portfolio investment by permanent residents of Solomon Islands is not permitted.