## _cr1201

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---

### Preface, scope, mission and team
- Assessment based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF), using the AML/CFT Assessment Methodology 2004, as updated in June 2010.
- On-site mission dates: October 17-28, 2010.
- Produced by the IMF at the request of the Asia/Pacific Group on Money Laundering (APG) Secretariat and the authorities of the Maldives; presented and endorsed by APG during its 14th Annual Meeting on July 18-22, 2011 in Cochin, India.
- Assessment team: Ms. Nadine Schwarz (LEG, team leader and legal expert); Mr. Bert Feys (LEG, legal expert); Ms. Sisilia Eteuati (APG, legal expert); Mr. Ashish Kumar (SEBI, India, financial sector expert); Ms. Ke Chen (People’s Bank of China, financial sector expert).

### Executive summary — national risk and system foundations
- Financial sector: small, not very developed, but susceptible to money laundering and, to a lesser extent, terrorist financing.
- Authorities lack estimates of the size of the crime economy; anecdotal evidence indicates trafficking in illegal drugs and corruption produce significant illegal funds.
- Indications exist that resources have been raised in the country to fund terrorists and terrorist activities abroad.
- Recent foundational steps:
  - A financial intelligence unit (FIU) was set up (operational in 2006 within MMA but without statutory basis).
  - Laws criminalizing laundering of proceeds of drug-related offenses and basic AML/CFT preventive measures on banks were passed (Banking Act entered into force December 2010).
  - CMDA adopted AML Regulations in the securities sector (October 10, 2010; enforceable April 2011 for some licensees).

### Executive summary — system weaknesses and implementation
- AML/CFT framework: very recent; substantial improvements needed in substance and implementation.
- Key deficiencies:
  - Money laundering criminalized only for proceeds of drug offenses (Drugs Act Section 6).
  - Terrorist financing not criminalized separately and autonomously; Terrorism Act relies on aiding and abetting (Section 3).
  - No laws/procedures to freeze assets in line with UNSCRs 1267 and 1373; MMA sent non‑statutory “instructions” to freeze but no legal basis to require screening/freezing/reporting.
  - FIU lacks statutory basis, operational independence, explicit dissemination powers, guaranteed access to all relevant information, and authority to receive STRs from entities other than banks.
  - Preventive obligations apply only to banks and securities intermediaries; other financial institutions and DNFBPs are outside AML/CFT obligations.
  - Provisional measures and confiscation framework limited, conviction‑based, focused on tangible assets, and rarely used.

### Key national facts (selected)
- 2010 GDP (Current Prices, US$): 1.87 billion.
- Population: approximately 400,000; more than one third residing on or near Malé.
- Maldives archipelago: 1,192 islands; land mass roughly 298 square kilometers (115 square miles).
- Currency: Maldivian Rufiyaa (Rf); central parity Rf 12.85 for US$1.00 with a 20% band (allowed band between Rf 10.28 and Rf 15.42) as of April 11, 2011.
- 2010 banking sector total assets (as of March 2010): 1,953.13 (million US$).
- Other Financial Institutions (excluding securities sector and money remittance business) total assets (as of Dec 2009): 93.75 (million US$).
- Number of legal entities (authorities’ latest figures cited): 8,657 legal entities in the Maldives (most are companies); MED figures for 2009: Companies 7,539; Partnerships 3; Co-Operative Societies 7; Non-profit Organizations 1,108.
- Reported drug market estimates: US$157,000 a day (2008 NNCB estimate); US$57 million per year (news reports); equivalent to roughly 3% of 2010 GDP if estimates are correct.

---

### Criminalization of money laundering — findings and statistics
- Legal basis:
  - Only Section 6 of the Narcotic Drugs and Psychotropic Substances Act (Law No. 17/77) criminalizes money laundering, limited to offenses listed in the Drugs Act.
  - Section 6 text covers: (a) receiving, keeping in possession, or using property or money known or plausibly believed to be obtained through commission of an offense under the Act; (b) acting to confuse origin or change ownership with intention of concealing proceeds; (c) penalties (fine Rf 100,000/ - to 1,000,000/ - or remand in jail 10–15 years or identical fine with remand in jail or banishment 10–15 years); (d) company dissolution if offender is a company.
- Gaps versus Vienna/Palermo Conventions:
  - "Conversion" of criminal property not covered; “transfer” only partially covered; concealment/disguise elements not fully covered and Section 6(b) requires proof of intent (Conventions do not).
  - Authorities believe conviction for the predicate drug offense is necessary to secure money laundering conviction.
  - No coverage of proceeds from crimes other than drug offenses (e.g., corruption).
- Practice and statistics:
  - No money laundering prosecutions or convictions have been initiated.
  - Drug-related arrests and logged cases (selected tables):
    - Total Illicit Drug Cases Logged: 2007 = 1575; 2008 = 2513; 2009 = 1381.
    - Total No. of Persons Detained (2007–2009): 2706; 4528; 3432 respectively (Table 8).
    - Arrests in 2010 for predicate offenses: 1,153 for drug offenses; 773 for theft; 199 for robbery.
  - No values provided for value involved in logged drug cases; seized cash related to drug offenses (MPS, 2010): US$ 43,420; Rf 5,426,280; Total Seized (in US$) 467,348.

### Money laundering — recommendations and ratings
- Main recommendations (R.1 & R.2):
  - Criminalize money laundering in line with international standards (include conversion, transfer, concealment/disguise, acquisition/possession/use; permit inference of intent from objective facts; make ancillary offenses criminal).
  - Ensure predicate offenses cover all serious offenses, not only drug offenses.
  - Allow money laundering charges to be brought without a prior conviction for the predicate offense.
  - Extend criminal liability to legal persons beyond companies and ensure proportionate sanctions.
- FATF ratings:
  - R.1: NC
  - R.2: NC

---

### Criminalization of terrorist financing — findings, recommendations, ratings
- Legal basis and findings:
  - Terrorism Act (Act No. 10/1990) Section 3 criminalizes aiding and abetting “through finance or property,” but there is no separate, autonomous terrorist financing offense.
  - Numerous shortcomings: “collection” not clearly criminalized; requirement of link to a specific terrorist act appears necessary; lack of clarity on “finance and property” scope; attempt and ancillary offenses not clearly criminalized; terrorist financing not a predicate for money laundering.
  - No laws/procedures to freeze terrorist funds per UNSCRs; MMA sends non‑statutory instructions to freeze but no legal basis.
  - No prosecutions or sanctions under Section 3 have occurred.
- Recommendations (SR.II & SR.I):
  - Criminalize terrorist financing separately and autonomously in line with ICSFT and SR.II, including criminalization of collection and use in full or in part, financing of individuals and organizations, attempts, ancillary offenses, extraterritorial application, non-requirement to prove actual use, and make TF a predicate to ML.
  - Ensure sanctions for legal persons beyond deregistration (e.g., fines) and applicable to entities not registered in Maldives.
- FATF rating:
  - SR.II: NC
  - SR.I: NC

---

### Freezing, seizure and confiscation — findings, effectiveness and recommendations
- Legal provisions across multiple Acts allow confiscation/seizure (Drugs Act Section 10; Corruption Act Section 24; Penal Code Section 144; Gang Related Crimes Act Section 14; Export Import Act Section 14(a); Fisheries Act Sections 11–13).
- Key limitations and practice:
  - Most confiscation provisions are conviction based and limited to tangible, corporeal assets with a direct link to predicate offences.
  - No systematic ability to confiscate property of corresponding value or property derived indirectly from proceeds.
  - Provisional measures exist in certain Acts but ex parte statutory provisions for freezing/seizure not codified (in practice initial applications often made ex parte).
  - No cases in which authorities attempted to take action against bona fide third parties; statutory protection for bona fide third parties absent.
  - MPS/FIU do not sufficiently utilize tracing/identification powers; confiscation regime rarely used.
- Statistics:
  - Drugs confiscated by MPS (grams): 2008 Benzodiazepines 367.622; Opiates 22,786.6657; Cannabis 950.6405; Ketamine 0. 2009 Benzodiazepines 537.5853; Opiates 1,349.2906; Cannabis 3,711.8717; Ketamine 5,097.700. 2010 (January) Benzodiazepines 16.9795; Opiates 130.814; Cannabis 850.6783; Ketamine 0.
- Recommendations (R.3 & SR.III):
  - Expand confiscation provisions to all property types (corporeal and incorporeal), include property of corresponding value, allow confiscation of instrumentalities for all predicate offenses, permit confiscation against third parties with appropriate protections, enable ex parte initial freezing/seizure, and enact laws/procedures to implement SR.III (UNSCRs 1267/1373).
- FATF ratings:
  - R.3: NC
  - SR.III: NC

---

### Financial Intelligence Unit (FIU) — structure, powers, capacity, statistics, recommendations
- Legal status and remit:
  - No statute formally establishes the FIU; FIU operates within the Maldives Monetary Authority (MMA) by administrative decision (2004) and via a 2006 MMA AML/CFT Circular (non‑statutory).
  - 2010 Banking Act (Section 38(a)(4)) designates the FIU as recipient of STRs from banks and provides two working days for reporting suspicious transactions; Section 33 interpreted as enabling dissemination by MMA but does not expressly grant FIU autonomous dissemination powers.
- Operational capacity and practice:
  - FIU had two analysts at assessment; received four STRs in 2009 (two related to suspected drug proceeds, two to unusually large transactions). One STR disseminated to MPS.
  - FIU lacks statutory authority to receive STRs from non-bank entities, to access information statutorily, or to disseminate explicitly; information channels informal.
  - FIU information stored on MMA main server; no separate statutory protections; access controlled by Governor per MMA policies.
  - No public periodic FIU reports; Egmont membership consideration postponed until legal establishment.
- Statistics:
  - 2009 STRs received 4; STRs analyzed 4; STRs disseminated 1.
  - 2010 STRs received 0; analyzed 0; disseminated 0.
- Recommendations (R.26):
  - Establish FIU on a sound legal basis as national center for receipt, analysis and dissemination of STRs from all reporting entities.
  - Empower FIU with timely access to financial, administrative and law enforcement information; grant explicit analysis and dissemination powers; ensure operational independence (budgetary autonomy, staff selection autonomy, secure premises); require public periodic reporting and consider Egmont membership.
- FATF rating:
  - R.26: NC

---

### Preventive measures — banks, securities, other financial institutions, and DNFBPs
- Scope of obligations:
  - As of assessment, only banks and CMDA‑licensed securities intermediaries were subject to AML/CFT measures. Banking Act (December 2010) imposes CDD, record keeping, STR filing and internal control obligations on banks (implementing regulations pending). CMDA 2010 AML Regulations apply to licensees but are not primary/secondary legislation and have limitations.
  - Other sectors outside AML/CFT obligations: insurance companies and intermediaries, finance companies, money remitters, foreign exchange businesses, credit card companies, and DNFBPs (lawyers, accountants, dealers in precious metals/stones).
- Customer Due Diligence (CDD) — findings:
  - Banks: 2010 Banking Act requires identification of customers, beneficial owners and ultimate principals; implementing regulation not yet issued. Prior MMA AML Circular (2006) provided non‑mandatory “minimum acceptable” information lists.
  - Securities: CMDA 2010 AML Regulations require identification and other measures but do not require reporting of suspicious transactions to FIU and are not a substitute for law/regulation in other sectors.
  - Money changers and MVT operators: limited or non‑enforceable CDD requirements; MVT operators expected to obtain informal “license” and practiced identification for amounts above US$1,000 in agent’s description but no statutory AML/CFT obligations.
  - Beneficial ownership: guidance weak; banks and CMDA regulations lack clear definition and procedures for identifying beneficial owners; no common practice or enforceable requirement.
  - Politically Exposed Persons (PEPs): no legal requirement for financial institutions other than CMDA licensees; CMDA regulations require enhanced due diligence for PEPs but lack detail.
  - Correspondent banking and payable‑through accounts: no statutory obligations; in practice banks report internal measures but not mandated.
- Record keeping and wire transfer rules (R.10 & SR.VII):
  - Banking Act requires maintenance of identification and transaction records (Section 38(a)(3)) but implementing regulation pending; no explicit five‑year retention period in law for banks; securities regulations specify various retention periods (e.g., CMDA AML Regulations require CDD documents for no less than five years from the end of the relationship, but trigger point unclear).
  - No specific legal requirements for originator information on wire transfers; SR.VII not implemented.
- Monitoring, internal controls, compliance, audit (R.11, R.15, R.21):
  - Banks: internal program obligations broadly drafted; implementing regulation needed; Section 50 requires external auditor to opine on internal controls.
  - CMDA: Section 8 of CMDA 2010 AML Regulations requires internal systems, compliance officer and training; enforcement and sanctions limited.
  - No enforceable obligation across sectors to pay special attention to complex/unusual large transactions or to transact with persons in high‑risk jurisdictions (R.11 & R.21).
- Suspicious transaction reporting (STRs) and protections (R.13–14, SR.IV):
  - STR obligations under Banking Act apply only to banks; CMDA Regulations require reporting to CMDA (not FIU).
  - No STR obligations for non‑bank financial institutions or DNFBPs.
  - STR protections (safe harbor, tipping‑off prohibition) in Banking Act apply to banks only.
  - FIU capacity anticipated to be strained when transaction/currency and STR reporting expand.
- Ratings (selected):
  - R.4: PC
  - R.5: NC
  - R.6: NC
  - R.7: NC
  - R.8: NC
  - R.9: NC
  - R.10: NC
  - R.11: NC
  - R.12 (DNFBPs): NC
  - R.13: NC
  - R.14: PC
  - R.15: NC

---

### Money or Value Transfer Services (MVT) and non-bank financial institutions
- MVT operators not regulated by law at time of assessment but expected to obtain MMA license; MMA issued application form and conducts limited supervision in practice without clear legal basis.
- MVT practices (agent example): standardized sender/receiver forms; identify customers except when amount below US$1,000; no beneficial owner identification; no STRs filed by MVT operator in sample.
- CMDA 2010 AML Regulations: enforceable April 2011 for licensed securities intermediaries; CMDA sanctions relatively low (administrative fines up to Rf 10,000; criminal fines range Rf 25,000–100,000 where applicable).
- Supervisory capacity:
  - MMA total staff: 130; CBSS 10 staff; NBFIS 4 staff.
  - CMDA total staff: 23; LMRD 4 staff (2 inspectors).
  - NBFIS supervision unit has 4 staff with limited experience.
- Ratings:
  - SR.VI: NC
  - R.23: NC
  - R.29: NC
  - R.30: PC

---

### DNFBPs, legal persons, trusts and NPOs
- DNFBPs (lawyers, accountants, jewelers) not subject to AML/CFT obligations; no SROs or licensing regimes in place for many professions.
- Legal person transparency:
  - Registrar of Companies (MED) maintains manual records; as of 2009 MED records: Companies 7,539; Partnerships 3; Co-Operative Societies 7.
  - MED does not maintain comprehensive, up‑to‑date beneficial ownership/control information; records manual; no requirement to record whether shares held beneficially.
  - R.33 rating: NC
- Trusts/legal arrangements:
  - No Maldivian common law trust framework; draft Trust Law prepared in 2008 but not enacted. R.34: NC.
- Non-Profit Organizations (NPOs) (SR.VIII):
  - Approximately 1,108 NPOs registered; registration system exists but supervision, monitoring and reporting compliance weak.
  - MHA maintains registration/annual report information; Section 27 requires NPOs keep records for 5 years and conduct annual audits but compliance is inconsistent.
  - Authorities suspect some NPO misuse for terrorist financing abroad but no prosecutions or focused investigations have occurred.
  - SR.VIII rating: NC
- Recommendations:
  - Extend AML/CFT regime to DNFBPs; require CDD, record keeping, STRs, internal controls, training and supervision; ensure MED maintains beneficial ownership information and enforces updates; assess NPO sector vulnerability and strengthen oversight.

---

### Law enforcement, prosecutions, investigative powers, special techniques and resources
- Lead investigative agency: Maldives Police Service (MPS) (Section 6(6)–(7) Police Act).
- MPS structure and resources:
  - Approximately 700 officers; 50 police stations; one boat per atoll (20 boats).
  - Specialist units: Drug Enforcement Department (DED); Serious and Organized Crime Department (SOCD); Property and Commercial Crime Department (PCCD); Forensic Department; Intelligence Department; Major Crime Investigation Department.
- Prosecutor General’s Office (PGO):
  - Total staff: 81; prosecutors: 30.
  - Case backlog estimated ~2,000 cases; cases may be pending at PGO awaiting prosecution for one year; high turnover and resource constraints.
- Use of powers and practice:
  - No ML/TF investigations, prosecutions or convictions have been conducted.
  - MPS focuses on predicate offenses (not following proceeds); limited use of financial investigation tools.
  - Special investigative techniques (telephone intercepts, controlled delivery, undercover) lack clear statutory basis; controlled deliveries and interceptions used mainly for drug cases but legal basis uncertain.
  - Compelling production of documents: practice varies; MMA may provide limited information; court orders often required and difficult to obtain; evidentiary standards inconsistent.
- Cross‑border currency controls:
  - No cross‑border declaration/disclosure system in place; draft AML/CFT law Article 11 proposes declaration threshold Rf 150,000 (approximately US$11,000).
  - Customs Service (MCS) lacks legal authority to restrain currency; MCS staffing ~730; four patrol boats; airport staff ~100.
- International cooperation, MLA, extradition:
  - No comprehensive domestic MLA law; measures largely ad hoc or via MoUs; Maldives party to some conventions (Vienna, ICSFT accession date April 20, 2004; Palermo not a party at time of report but accession process underway).
  - No legal framework to identify/freeze/seize/confiscate assets at request of foreign authorities; no asset forfeiture fund; no mechanisms to avoid conflicts of jurisdiction.
  - Extradition: no domestic extradition statute; bilateral treaties with Sri Lanka and Pakistan exist; practical capacity uncertain.
- Recommendations (R.27–R.28, R.36–R.39, SR.V):
  - Build investigative and prosecutorial capacity for ML/TF; provide legal basis for special investigative techniques; enable MPS to postpone/waive arrest/seizure when necessary for investigations; enact comprehensive MLA and extradition frameworks; establish procedures to identify/freeze/seize/confiscate assets for foreign requests; ensure powers to compel documents include associates’ records.

### Ratings (selected)
- R.27: NC
- R.28: PC
- R.36: NC
- R.37: PC
- R.38: NC
- R.39: NC
- R.40: PC
- SR.V: NC

---

### National coordination, statistics, resources and overall conclusions
- National coordination:
  - AML/CFT Steering Committee established under FIU/MMA with representatives from ACC, AGO, DIE, MMA FIU, CMDA, MCS, MPS, MFT, PGO, DJA; meets monthly; has not delivered tangible policy outcomes.
  - No formal mechanism for private sector consultation.
- Resources and training:
  - Key agencies understaffed or lacking AML/CFT expertise: MMA (CBSS/NBFIS limited), CMDA (staffing constraints), PGO, judiciary, ACC, MPS units need further training; FIU better trained but understaffed.
- Statistics and review:
  - No comprehensive national statistics on ML/TF effectiveness; R.32: NC (no evidence authorities reviewing effectiveness or conducting national risk assessment).
- Overall assessment:
  - Major legislative and institutional gaps across criminalization, preventive measures coverage, FIU legal basis and powers, supervisory designation and capacity, confiscation/freezing, MLA/extradition, DNFBP and NPO oversight.
  - Recommended action plan (Table 2) prioritizes: comprehensive AML/CFT law; full criminalization of ML and TF (including predicate coverage); statutory FIU; enhanced confiscation/freezing frameworks (including UNSCR implementation); extension of preventive obligations to all financial institutions and DNFBPs; supervisory designation and resourcing; strengthened MLA/extradition frameworks; targeted capacity building and training; national risk assessment and adoption of a risk‑based approach.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr1201.pdf*

### Preface ................................................................................................................

### _cr1201 - Preface

### Scope and legal framework
- Assessment based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF).
- Prepared using the AML/CFT assessment Methodology 2004, as updated in June 2010.
- The report provides a summary of the AML/CFT measures in place in the Maldives at the time of the mission or shortly thereafter, describes and analyzes those measures, sets out the Maldives’ levels of compliance with the FATF 40+9 Recommendations (see Table 1) and provides recommendations on how certain aspects of the system could be strengthened (see Table 2).

### Mission timing, inputs, and consultations
- On-site mission dates: October 17-28, 2010.
- Assessment considered: all materials supplied by the authorities, information obtained on site during the mission, and other verifiable information subsequently provided by the authorities.
- During the mission the assessment team met with officials and representatives of all relevant government agencies and the private sector.
- A list of the bodies met is set out in Annex 1 to the detailed assessment report.

### Assessment team and expertise
- Assessment conducted by a team of assessors composed of staff of the International Monetary Fund (IMF) and three experts acting under the supervision of the IMF.
- Evaluation team members:
  - Ms. Nadine Schwarz (LEG, team leader and legal expert)
  - Mr. Bert Feys (LEG, legal expert)
  - Ms. Sisilia Eteuati (Asia/Pacific Group on Money Laundering, legal expert)
  - Mr. Ashish Kumar (SEBI, India, financial sector expert)
  - Ms. Ke Chen (People’s Bank of China, financial sector expert)
- Assessors reviewed: the institutional framework; relevant AML/CFT laws, regulations, guidelines and other requirements; and the regulatory and other systems in place to deter and punish money laundering and terrorist financing through financial institutions and Designated Non-Financial Businesses and Professions (DNFBP).
- Assessors examined the capacity, implementation, and effectiveness of all these systems.

### Outputs and endorsement
- The report sets out levels of compliance with the FATF 40+9 Recommendations (see Table 1) and a recommended action plan (see Table 2).
- Produced by the IMF at the request of the Asia/Pacific Group on Money Laundering (APG) Secretariat and the authorities of the Maldives.
- Presentation and endorsement: presented to the Asia/Pacific Group on Money Laundering (APG) and endorsed by this organization during its 14th Annual Meeting on July 18-22, 2011 in Cochin, India.

### Acknowledgments
- The assessors express gratitude to the Maldivian authorities for their kind support and cooperation throughout the assessment mission.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr1201.pdf*

### EXECUTIVE SUMMARY

### _cr1201 - EXECUTIVE SUMMARY

### Scope and purpose
- Assessment summarizes the anti-money laundering and counter-terrorist financing measures (AML/CFT) in place in the Republic of Maldives at the time of the on-site visit (October 17–28, 2010) and shortly thereafter.
- Describes and analyzes measures, offers recommendations to strengthen the AML/CFT system, and assesses Maldives’ level of compliance with the 40+9 Recommendations of the Financial Action Task Force (FATF).

### Key findings — national risk and system foundations
- The financial sector is small and not very developed but susceptible to money laundering and, to a lesser extent, terrorist financing.
- Authorities lack estimates of the size of the crime economy; anecdotal evidence indicates trafficking in illegal drugs and corruption produce significant illegal funds.
- Indications exist that resources have been raised in the country to fund terrorists and terrorist activities abroad.
- Over recent years the Maldives has taken foundational steps:
  - A financial intelligence unit (FIU) was set up.
  - Laws criminalizing laundering of proceeds of drug-related offenses and basic AML/CFT preventive measures on banks were passed.
  - Regulations adopted to address some AML/CFT aspects in the securities sector.

### System weaknesses — substance and implementation
- The AML/CFT framework is very recent and needs considerable improvements in substance and implementation.
- Domestic inter-agency interaction relies on informal arrangements rather than formal arrangements.
- Criminal legal framework is minimal; most private sector measures are issued as guidance rather than mandatory requirements.
- At the time of assessment no enforceable AML/CFT obligations were in place; shortly thereafter:
  - A new Banking Act requires banks to implement basic AML/CFT measures such as customer identification and reporting of suspicious transactions to the FIU.
  - Intermediaries in the securities sector were required to implement limited AML/CFT measures which became enforceable in April 2011.
- Financial institutions other than banks and securities intermediaries, as well as designated businesses and professions (DNFBPs), are not subject to AML/CFT requirements.
- Authorities are working on a draft AML/CFT law to impose more comprehensive measures, strengthen agencies (including the FIU), and enhance domestic cooperation.

### Legal systems and institutional measures — criminalization and powers
- Money laundering is criminalized only with respect to proceeds of offenses listed in the Drugs Act.
  - The money laundering offense covers some aspects of the standard but not conversion of criminal property or concealment/disguise of the location, disposition and movement of that property.
  - Authorities believe a conviction for the predicate offense is necessary to secure money laundering charges.
- Provisional measures and confiscation framework has major shortcomings and is rarely used:
  - Confiscation limited to tangible, corporeal assets with a direct link to the predicate offense.
  - No possibility to confiscate property of corresponding value.
- No investigation or charges for money laundering under the Drugs Act had been brought despite drug trafficking being a frequent asset-generating crime.
  - Anecdotal evidence suggests drug trafficking may generate up to US$157,000 a day, or US$57 million per year.
- Activities other than those listed in the Drugs Act (for example, corruption) do not constitute predicate offenses for money laundering, a major shortcoming.
- Terrorist financing is not criminalized in a separate and autonomous way:
  - Provision of “finance and property” for a terrorist act is treated as an ancillary offense (aiding and abetting) in broad and undefined terms.
  - Some aspects of the standard are covered, but scope is ambiguous; no charges have been brought.
- No laws or procedures to freeze terrorist funds or assets in line with UN Security Council Resolutions 1267 and 1373 (and successor resolutions), or those designated under other countries’ freezing mechanisms.
  - The Maldives Monetary Authority (MMA) sent the UNSCR Consolidated list to banks, credit card operators and money transfer businesses with an “instruction” to freeze accounts, but there is no legal basis to require client screening, freezing, or reporting.

### Enforcement capacity and criminal process
- Shortcomings in criminal legislative framework, particularly criminal procedure, and lack of resources limit effectiveness:
  - Criminal process is slow and legally uncertain due to paucity of criminal procedure rules.
  - Lack of capacity in Maldives Police Service (MPS), Prosecutor General’s Office (PGO), and judiciary.
- FIU established within the central bank based on a 2004 inter-ministerial agreement; became operational in 2006 when MMA issued an “AML/CFT” Circular to banks and money transfer businesses.
  - The 2006 Circular addresses AML but is not mandatory or enforceable.
  - Two banks and two money remitters filed suspicious transaction reports (STRs) with the FIU in 2009; all four were analyzed: two closed, one forwarded to MPS, one remained with FIU.
- FIU lacks operational independence and necessary powers:
  - FIU is national center for receipt and analysis of STRs from banks but does not have authority to disseminate financial intelligence; only the MMA has dissemination authority.
  - FIU lacks guaranteed access to all relevant information; requests have been complied with but without legal basis.
  - FIU cannot receive, analyze and disseminate STRs from entities other than banks.
  - FIU has created an informal network and spearheaded AML/CFT efforts.

### Preventive measures — financial institutions
- Banks and intermediaries in the securities sector are the only entities required to implement AML/CFT measures:
  - Mandatory measures for banks were introduced in December 2010 via the Banking Act (less than 8 weeks after end of assessment).
  - The Capital Market Development Authority (CMDA) 2010 Regulation on Anti-Money Laundering in Securities-Related Transactions requires CMDA licensees to apply AML/CFT measures but, as not primary or secondary legislation, does not fully conform with FATF standard.
- The 2010 Banking Act sets out CDD and record keeping obligations for banks and requires reporting of suspicious transactions to the FIU.
  - Prior to December 2010, the 2006 MMA Circular provided general AML guidance but was neither mandatory nor enforceable.
- Banking Act shortcomings needing enhancement to meet the standard:
  - Identification requirements need strengthening (notably beneficial owner identification and verification of identity of all customers).
  - Record keeping requirements should be more specific.
  - Internal control requirements are very broad and need elaboration in regulation.
  - Act is silent on: enhanced due diligence for politically-exposed persons; attention to complex, unusual large or unusual patterns of transactions; correspondent banking relationships and wire transfer rules in line with the standard.
- CMDA 2010 AML Regulations for securities intermediaries set basic customer identification requirements and special due diligence for extraordinary complex/large transactions but:
  - Do not require reporting of suspicious transactions to the FIU.
  - Record keeping and internal control requirements are too broad.
  - Legal basis (not primary/secondary legislation) is insufficient to meet many standard requirements.
- Monitoring and supervision of banks’ and securities intermediaries’ AML/CFT compliance had not formally begun:
  - MMA and CMDA have powers but had not started using them for AML/CFT purposes (Banking Act recent; CMDA allowed licensees until April 2011 to comply).
  - MMA conducted some monitoring of compliance with the 2006 AML Circular during prudential supervision.
- Other financial institutions outside AML/CFT obligations:
  - Insurance companies and intermediaries, finance companies, money remittance service providers, foreign exchange businesses and credit card companies operate outside the AML/CFT framework.
  - Authorities plan to include some or all in draft AML/CFT legislation.

### Preventive measures — DNFBPs
- Designated non-financial businesses and professions (DNFBPs) are not subject to AML/CFT obligations or supervision.
  - DNFBPs active in Maldives include lawyers, accountants and dealers in precious metals and stones.
  - Casinos are outlawed under the Constitution and Shari’ah.
  - Real estate transactions are conducted by seller and buyer or by lawyers who also act as notaries and provide company formation services.
  - Trusts cannot be established under current law; a draft Trust Law was prepared in 2008; authorities state no trust business in Maldives and no services to trusts formed in other jurisdictions (though some Malé law firm websites suggest otherwise).
- Draft AML/CFT legislation under preparation would impose AML/CFT obligations, including STR reporting, on DNFBPs active in Maldives.

### Legal persons, arrangements and non-profit organizations (NPOs)
- Transparency of legal persons and access to beneficial ownership/control information is insufficient:
  - Legal entities can be companies, partnerships, cooperative societies or non-profit associations.
  - Authorities’ latest figures: there 8,657 legal entities in the Maldives, most of which are companies.
  - Ministry of Economic Development holds some information but it is not comprehensive, consistently updated, or readily accessible (no electronic database).
- NPO registration system exists but registrar information is insufficient for transparency:
  - Registrar information limited to purposes/objectives and identity of executive committees.
  - No active or adequate system for supervision and monitoring of NPOs; no true understanding of terrorist financing risks in sector.
  - Authorities suspect NPOs have been misused to provide funding to terrorists abroad, but suspicions unsubstantiated and no charges were brought.
  - No coordinated national strategy to protect NPOs from abuse for terrorist financing.
  - Authorities conducting a “scoping exercise” within the NPO sector, resulting in a redrafting of the Association Act; scope regarding NPO vulnerability to terrorist financing risks is unclear.

### National and international cooperation
- A domestic cooperation mechanism exists:
  - Coordination Committee for Combating Money Laundering and Terrorist Financing created under the lead of the FIU, bringing together most relevant authorities (including prosecutors, police, MMA, CMDA).
  - Committee has not delivered tangible results apart from responses to the detailed assessment questionnaire.
- No legislative framework regulating mutual legal assistance and extradition:
  - Measures that Maldives may take on behalf of another State mainly defined in memorandums of understanding (copies not provided to assessment team).
  - Authorities report very few requests for assistance; informal assistance is more frequent.

### Other issues and recommendations (operational capacity and legislation)
- Staffing and training needs:
  - Staff of relevant authorities should be increased and provided AML/CFT training, particularly for investigations and supervision.
  - FIU has raised awareness but further training is needed.
- Important legislation to be passed:
  - Comprehensive AML/CFT legislation should be adopted.
  - Draft revised Penal Code should be adopted.
  - Criminal procedure rules should be set out in law to enable effective fight against money laundering and terrorist financing.

### General — country information (overview)
- Republic of Maldives geographic and demographic data:
  - Archipelago of 1,192 islands in the Indian Ocean, spread over roughly 9,000 square kilometers (3,400 square miles).
  - Distance of almost 1,000 kilometers (621 miles) from north to south.
  - Land mass roughly 298 square kilometers (115 square miles).
  - Administratively divided into 20 atolls.
  - More than one third of population of approximately 400,000 residing on or near Malé, the capital.
  - Closest neighbors: north — India’s Laccadive Islands; northeast — Indian subcontinent and Sri Lanka; south — British Indian Ocean Territory.
  - About 2,600 kilometers (1,600 miles) east is Malaysia; to the west the Horn of Africa is approximately 3,000 kilometers (1,800 miles) away.
- Political background:
  - Presidential republic; became independent on July 26, 1965 after about 78 years as a British protectorate.
  - Transitioned to a multi-party democracy in 2008 and is a young democracy building institutions.

*Source: _cr1201 - EXECUTIVE SUMMARY (IMF assessment of Maldives AML/CFT framework).*

### 30.      The Maldives is a lower middle-income country with a small market based economy. Its 2010

### _cr1201 - 30.      The Maldives is a lower middle-income country with a small market based economy. Its 2010

### Economy and main industries
- 2010 GDP (Current Prices, US$) was estimated at 1.87 billion.
- Major income generator: the tourism industry (main source of foreign currency).
- Second main industry: fishing.
- Other industries: fish processing, shipping, boat building, coconut processing, textiles and related products, and coral and sand mining.
- As of 2009, approximately 11% of the Maldivian population was employed by the civil service.

### Currency, exchange rate regime, and dollar availability
- Currency: Maldivian Rufiyaa (Rf).
- Peg: Rf pegged to the U.S. dollar.
- As of April 11, 2011 the exchange rate system sets a central parity of Rf 12.85 for US$1.00, with flotation in a band of 20% in each direction around this figure.
- Allowed band: between Rf 10.28 and Rf 15.42.
- The U.S. dollar is the most widely accepted foreign currency in the country.
- Dollars can trade for more than the official exchange rate on the black market.
- Because the majority of goods the Maldives needs are imported, and foreign exporters need to be paid in a foreign currency, dollars can be hard to come by.

### Economic performance and outlook (2008–2010)
- Real GDP contracted by 2.3% in 2009.
- Real output projected to recover in 2010 with growth forecast at 4.8% (tourism and construction sectors expected to rebound).
- Tourism: shrank by 5.2% (2009) and projected to turn positive to 14.0% in 2010.
- Construction: declined by 29.2% (2009) and projected to rebound to 2.6% in 2010.

### Fiscal position and public debt (as of 2009)
- Government expenditure increased from 64% to 66% of GDP.
- Of government expenditure, 81% was financed domestically.
- Total outstanding debt: Rf 5.2 billion (approximately US$406 million).
- A large part of this debt financed by the Maldives Monetary Authority (MMA) through special advances and cash grants against T-bills and T-bonds.
- The MMA converted the cash loans to T-bonds in August 2009.

### Governance, institutional framework, and transparency
- 2011 Index of Economic Freedom ranked the Maldives 154th out of 179 countries; cited weaknesses: “chronically high government spending, inefficiency of the outsized public sector, and widespread corruption.”
- Maldives acceded to the United Nations Convention against Corruption (the Merida Convention) in March 2007.
- Anti-Corruption Commission (ACC) established; Auditor General’s Office (AuGO) audits ministries and publicly owned companies.
- Transparency International’s 2010 Corruption Perceptions Index ranks the Maldives 143rd out of 178 countries.
- Most Ministries have websites with relatively adequate and up to date information.

### Political and legal structure
- 2008 Constitution separates executive, legislative, and judiciary.
- President elected for a term of five years; appoints cabinet (President, Vice President, and Ministers).
- Parliament (People’s Majlis): unicameral legislature of 77 members elected for a five year term.
- Judiciary: trial courts (Magistrate Courts, Civil and Criminal Courts, Juvenile Court, Family Court), the High Court and the Supreme Court.
- Judicial Services Commission (JSC) oversees administrative matters and advises on Supreme Court Chief Justice appointment.
- Source of law: written laws enacted by Parliament; Shari’ah principles considered by courts, especially in criminal and family matters.
- Constitution Article 5: “[a]ll legislative power in the Maldives is vested in the People’s Majlis.” Article 10(a): “[...] Islam shall be the one of the basis [sic] of all the laws of the Maldives.”

### AML/CFT framework and institutional readiness
- No overarching, comprehensive AML/CFT framework in the Maldives; overall awareness of AML/CFT measures is low.
- Existing AML/CFT elements apply to the banking and, to a certain extent, securities sectors and are at an early stage of implementation.
- Authorities plan to improve the AML/CFT legal framework, strengthen new agencies such as the FIU, and enhance cooperation and coordination between government agencies and with the private sector.
- There are currently no AML/CFT requirements for designated non-financial businesses and professions (DNFBPs).

### Anti-corruption legislation and enforcement
- Corruption criminalized by the Prevention and Prohibition of Corruption Act 2000 (Act No. 2/2000) of August 31, 2000.
- ACC (Articles 199-208 of the 2008 Constitution) is the main anti-corruption body.
- Sanctions for corruption: imprisonment, banishment, or house arrest.
- Corruption is not a predicate offense to money laundering.
- Authorities recognize corruption is a problem; limited statistics on cases pursued by the ACC were provided.

### Judiciary capacity, criminal law, and procedures
- Current Penal Code drafted in 1966; a new Penal Code has been pending before Parliament for some time.
- New Penal Code expected to introduce gradation of offenses (infraction, misdemeanor, felony) and better reflect Maldivian statutes, Shari’ah principles, and community values.
- Criminal procedure is not set out in statute; practice varies greatly and evidentiary standards are subjective.
- Draft Criminal Procedure Code and draft Evidence Act have been prepared and are pending in Parliament; no timeframe given for adoption.
- Parliamentary process is slow; draft laws awaiting approval include the Penal Code, Criminal Procedure Code, Civil Procedure Code, Evidence Act, Amendments to the Gang Violence Act, and the Crime Prevention Bill.
- Assessors and the International Commission of Jurists (ICJ) noted decisions are often given without written reasons, affecting legal consistency.

### Professional ethics, oversight, and qualifications
- Maldives Police Service (MPS) has a Police Code of Ethics and a Police Code of Conduct; Regulation on Imposing Administrative and Disciplinary Penalties (MPS-7/2009-1) provides for administrative and disciplinary penalties.
- Police Integrity Commission (PIC) created in 2009 to investigate police misconduct and minimize corruption and excessive force.
- Prosecutor General’s Office introduced a Code of Conduct for Prosecutors on October 4, 2010.
- Judges Act (Act No. 13/2010) passed in August 2010 introduced qualifications: judges must have either an LL.B. or a Shari’ah degree and two years of work experience (Section 15). Judges lacking qualifications have seven years to comply.
- Judicial Services Commission (JSC) endorsed the Code of Ethical Conduct for the Judges of the Courts of Maldives in December 2009.
- No authority or self-regulatory organization designated to oversee the legal profession.
- Accountants and auditors are not regulated and are not subject to codes of ethics.

### Crime trends, predicate offenses, and money laundering risks
- Main asset-generating crimes logged between 2008 and 2010 (by frequency): theft, drugs, and robbery, followed by bounced checks and embezzlement.
- Overall crime has risen steadily since 1992; registered offenses increased from 3,843 (1992) to over 6,417 (2001) and to 16,995 (2010).
- Top three most serious proceeds-generating offenses (2008–2010): theft, drugs, and robbery.
- Arrests in 2010 by type of proceeds-generating predicate offense: 1,153 arrests for drug offenses, 773 for theft, and 199 for robbery.
- Many assaults and drug offenses are committed by gangs.
- Other relevant crimes: corruption, human trafficking, piracy, and offenses committed by gangs.

### Drug market specifics and scale
- Increase in drug use since the late 1980s.
- National Narcotics Control Board (NNCB) in 2008 estimated number of addicts between 10,000 and 12,000.
- Some unofficial sources estimate as many as 30,000 addicts and that one in three young people are addicted to drugs.
- NNCB estimated the market for illegal drugs was worth US$157,000 a day in 2008.
- News reports value the drug trade in the Maldives at US$57 million per year.
- If estimates are correct, the size of the drug trade would be the equivalent of roughly 3% of the country’s 2010 GDP.
- Main illicit drugs: cannabis (hash oil) and heroin.
- A 2009 study showed 87% of drug cases involve heroin and cannabis; 13% involve alcohol, adhesives (e.g. glue), and cologne.
- No illicit drugs produced domestically; all supply is imported.
- Reported main air routes for incoming drugs: Pakistan-Qatar-Maldives, Pakistan-Dubai-Maldives, Pakistan-Qatar-Sri Lanka-Maldives, Sri Lanka-Maldives, Sri Lanka-Madras (India)-Maldives, and Thrivananthapuram (India)-Maldives.
- Drugs transported by passengers on person or in luggage; sea routes also used and offloaded on remote islands.

*Source: _cr1201 - 30.      The Maldives is a lower middle-income country with a small market based economy. Its 2010 (IMF PDF excerpt).*

### 62.      The authorities mentioned that in April 2006, some 1,700 plastic bags containing cannabis,

### _cr1201 - 62.      The authorities mentioned that in April 2006, some 1,700 plastic bags containing cannabis,

### Drugs and drug-related crime
- April 2006: some 1,700 plastic bags containing cannabis, weighing in at 1.6 tons total, discovered on the seabed of a lagoon near Alif Alif atoll — described as the country’s largest drugs haul to date.
- March 2008: 13.6 kilograms of heroin (brown sugar) were found in Malé.
- Most commonly encountered drugs: heroin and cannabis; additionally sometimes hashish, benzodiazepines, and once ketamine was intercepted.
- Benzodiazepines are often used to adulterate heroin prior to sale.
- Authorities and observers express concern that the country could become a transshipment point due to large seagoing traffic and inspection challenges; authorities suspect the ultimate destination of the 1.6 tons of cannabis found in 2006 was the Far East.
- Seized cash related to drug offenses (MPS):
  - 2010: US$ 43,420; Rf 5,426,280; Total Seized (in US$) 467,348

### Corruption
- Police statistics show few embezzlement/corruption cases, but press anecdotal evidence indicates they often involve significant sums.
- Authorities estimate that approximately 80% of corruption cases relate to procurement.
- Transparency International’s 2010 Corruption Perceptions Index:
  - Maldives ranks 143rd out of 178 countries
  - Score: 2.3 (scale 0 to 10)
  - Regional rank (Asia Pacific, 34 countries): 27th
- Lack of convictions for corruption is highlighted as a particular concern.

### Human trafficking and piracy
- SAARC and U.S. Department of State reports note serious concerns regarding human trafficking and exploitation of foreign workers in the Maldives.
- Department of Immigration and Emigration (DIE) notes human trafficking could generate significant criminal proceeds.
- At the time of reporting, trafficking of human beings is not an offense in the Maldives.
- Piracy is not criminalized in the Maldives despite growing concern; Somali pirates have on several occasions drifted into Maldivian waters. Maldives is seeking regional cooperation to address piracy.

### Criminal gangs and prison system
- Criminal gangs are a serious concern, especially in Malé; associated with substantial violence and involvement in the drug trade.
- 2009: MPS reported belief that as many as 16 gangs were active in the capital.
- Prison system weaknesses:
  - Instances of prisoners being “informally released” or escaping due to long-standing struggles to maintain a proper correctional facility.

### Money laundering
- Money laundering is criminalized only with respect to proceeds of drug-related offenses.
- MPS identifies common methods for integrating proceeds of crime into the economy:
  - cash smuggling, money orders and cashier’s checks, structured deposits, bureaux de change, wire transfers, false invoices/receipts, credit cards, front companies, purchases of high value goods, alternative remittance systems, real estate, offshore accounts, and trusts established in foreign countries.
- Financial institutions perceived as most vulnerable: banks, money remitters, credit card companies, stock brokers; insurance sector also faces potential risk.
- Cash-intensive businesses in a largely cash-based economy (shops, restaurants and cafes, motels, construction companies) likely to be used in money laundering stages.

### Terrorism and terrorist financing
- Terrorist incident: Sultan Park bombing on September 29, 2007. Following the bombing, arrests made; several suspects fled the country, some with help of a Maldivian immigration official later given a one-year prison sentence.
- Perpetrators believed to be Islamist extremists with possible links to Al-Qaeda and Lashkar-e-Taiba (LeT).
- Investigation indicated a LeT charity may have been used to raise funds; no indication Maldivian authorities specifically investigated funding of the attack.
- Some Maldivians reportedly travelled to countries in the region (notably Pakistan) and are suspected of engaging in acts of violence; a May 2009 suicide attack on the ISI Lahore HQ was committed by a Maldivian with alleged affiliation to Al-Qaeda.
- Terrorist financing activities linked to extremist ideologies largely involve:
  - support for individuals seeking radical Islamic education,
  - recruiting for Jihadist activities,
  - financing travel and supporting families of those traveling abroad to engage in insurgent activities.
- Fundraising mechanisms observed include donations from local textile salesmen and businessmen ostensibly for religious education, diversion of such funds to finance Jihad training and other illegal activities, and criminal activities such as theft and robbery to raise funds.

### Overview of the financial sector
- Financial sector is small and at an early stage of development; consists of banks (dominant), insurance companies, insurance intermediaries, finance companies, money remittance service providers, foreign exchange businesses, credit card companies and securities market intermediaries.

Banking sector
- Six commercial banks: one domestic bank (Bank of Maldives, established in 1982 and partly government owned) and branches of five foreign commercial banks.
- Banks account for about 96% of total financial sector assets.

Non-Bank Financial Institutions (NBFIs) and capital market
- NBFIs include general insurance market entities, a finance leasing company, a specialized housing finance institution and money transfer businesses.
- One locally incorporated composite company and several foreign insurance companies operate in the Maldives.
- General insurance is the main insurance service; covers transport, property, marine, motor, sea transport, accident and health services.
- Motor insurance not compulsory at time of reporting; authorities planned to make it mandatory in the course of 2011.
- Money value transfer (MVT) businesses: three local companies acting as agents of international money transfer companies, largely used by expatriates for outward remittances.
- Foreign exchange businesses are mostly small shops and tourist resorts buying foreign currency or accepting payments in foreign currency.
- Capital market is nascent:
  - Four companies listed on the stock exchange (out of which only three were found to have been traded very recently).
  - Total volume traded (August 2010): 1,007 shares
  - Number of trades (August 2010): 16
  - Trading value (August 2010): Rf 0.27 million (approximately US$21,000)
  - Total number of accounts at Maldives Securities Depository (August 2010): 407, holding around 777,547 shares.

Financial sector asset figures
- Banks: Total Assets 1,953.13 (million US$) (as of March 2010)
- Other Financial Institutions (excluding securities sector and money remittance business): 93.75 (million US$) (as of Dec 2009)
- Securities Sector: N/A (4 listed companies whose shares are traded by 4 dealing companies, with an annual trading turnover of less than one million US$).

Overview of financial institutions (number of institutions)
- Banks: 6
- Foreign Exchange Dealers (other than Banks): 188
- Insurance Companies: 4
- Insurance Brokers: 2
- Insurance Agents: 7
- Money Transmitters (other than Banks): 5
- Credit Card Operators (including Banks): 5
- Finance Companies: 2
- Stock Exchange: 1
- Securities Depository: 1
- Securities Dealers: 4
- Licensed Brokers (Dealers’ representatives): 7

Financial activities and institution types (selected entries)
- Acceptance of deposits and other repayable funds from the public: Banks (AML/CFT regulator & supervisor: MMA/FIU)
- Lending (including consumer credit; mortgage credit; factoring; finance of commercial transactions): Banks; Finance Companies (limited to housing finance) (AML/CFT: 1. MMA/FIU; 2. N/A)
- Financial leasing: Financial Leasing companies (AML/CFT: N/A)
- Transfer of money or value (including formal and informal sectors): Banks; Money and value transfer (MVT) services operators (Regulators: 1. MMA/FIU; 2. N/A)
- Issuing and managing means of payment (credit/debit cards, cheques, traveller's cheques, money orders, bankers' drafts, electronic money): Banks; Credit cards operators (Regulators: 1. MMA/FIU; 2. N/A)
- Trading in transferable securities (7(d)): Stock exchange, securities dealers (Regulator: CMDA)
- Participation in securities issues and related services: Banks; Securities dealers; Investment Advisors; Lawyers; Auditors (Regulators: 1. MMA/FIU; 2. CMDA; 3. CMDA; 4. N/A; 5. N/A)
- Safekeeping and administration of cash or liquid securities on behalf of other persons: Banks; Maldives Securities Depository (Regulators: 1. MMA/FIU; 2. CMDA)

Licensing, registration and supervision
- Supervision divided between the MMA and the CMDA; legal basis for supervision is in many instances lacking or temporary.
- Banks licensed, regulated and supervised by the MMA as prescribed by the MMA Act and the 2010 Banking Act. Fit and proper requirements introduced in 2010 and in process of implementation.
- Insurance companies and finance leasing companies licensed and supervised by the MMA on a temporary legal basis.
- MVT service operators, foreign exchange businesses and credit card operators are subject in practice to licensing/registration/supervision by the MMA, but MMA lacks legal basis to conduct these functions.
- Insurance industry governed by a regulation deriving temporary legal basis from the Law for the General Regulations; insurance intermediaries not required to be licensed. Licensing requirements for insurance companies issued in 2004 with transitional arrangements; at the time of the on-site visit all operating insurance companies except one had obtained a permanent license.
- Securities market intermediaries (MSE, MSD, registered dealers and brokers, investment advisors) are licensed and regulated by the CMDA under the Securities Act.

*Source: _cr1201 (excerpts provided).*

### 92.      MVT service operators are not regulated by law. They are nevertheless expected to obtain a

### _cr1201 - 92.      MVT service operators are not regulated by law. They are nevertheless expected to obtain a

### Supervision and licensing of payment and financial service providers
- MVT service operators are not regulated by law but are expected to obtain a license from the MMA; the MMA issued an application form for them to fill out (para. 92).
- In practice MVT services are subject to limited supervision by the MMA; however, in the absence of a clear legal basis the MMA conducts this supervision without authority (para. 92).
- Money changers must obtain a license from the MMA pursuant to the Regulation Outlining Arrangements for Money Changers; the regulation was issued without a clear legal basis (para. 93).
- There is only one operative finance leasing company; pursuant to the Regulation for Finance Leasing Companies and Finance Leasing Transactions this company is subject to MMA supervision (para. 93).
- Credit card operators are not subject to any law regulation but, according to an MMA Decision, may only operate once “authorized” by the MMA (para. 94).
- The 2010 Banking Act contains broad CDD measures but the implementing regulation is yet to be issued; CDD measures for the securities sector are laid down in the CMDA 2010 AML Regulations issued in October 2010 and became enforceable six months later (para. 95).

### Designated non-financial businesses and professions (DNFBPs)
- Only banks and intermediaries in the securities sector are subject to CDD measures; only banks are required to file STRs with the FIU (para. 95).
- Under Shari’ah law gambling is a criminal offense; it is illegal to operate casinos in the Maldives (para. 96).
- Individual lawyers (who may also act as notaries), accountants and auditors operate in the Maldives but are not supervised or regulated by any State institution; there are no self-regulatory organizations for these professionals (para. 97).
  - Approximately 450 persons are registered to practice law in the Maldives (para. 97).
  - No figures provided on the number of accountants and auditors (para. 97).
- Real estate agency is not a separate profession; real estate transactions are conducted either through lawyers or by the parties themselves (para. 98).
- Company formation and other company services are provided by lawyers; authorities state there are no services provided to trusts established under another jurisdiction’s legislation, though anecdotal evidence suggests lawyers do provide trust services (para. 99).
- A draft Trust Law prepared in 2008 would enable establishment of Maldivian trusts (para. 99, 102).
- None of the DNFBPs currently active in the Maldives are subject to AML/CFT requirements (para. 100, 135).

### Legal persons, registries, and NPOs
- Types of legal entities under Maldivian law: companies, partnerships, co-operative societies and non-profit associations (para. 101).
  - As of 2009, there were 7,539 Companies, 3 Partnerships, 7 Co-Operative Societies and 1,108 associations (para. 101).
- The MED maintains information on registered companies, partnerships and co-operations; information does not include adequate, accurate and current information on beneficial ownership and control (para. 101).
- MED maintains information manually; an electronic database is being developed (para. 101).
- Current Maldivian law does not allow establishment of common law trusts; draft legislation prepared in 2008 to enable Maldivian trusts (para. 102).
- There are some 1,100 NPOs registered as associations, mostly dedicated to community development in all (except two) inhabited islands (para. 103).
- Authorities are reviewing the legal framework for NPOs in a “scoping exercise”; it is not clear this includes an assessment of terrorist financing risk (para. 103).
- No system in place to promote effective supervision and monitoring of NPOs (para. 103).
- NPO registration requirements and documents required by the NPOs Regulation include:
  - Copies of the founding members wishing to register an NPO;
  - Specify the motto the association intends to use;
  - No objection statement from the person who owns the place where the office is intended to be located;
  - Details of logo and other marks the association intends to use;
  - Criminal history (in the manner specified by the Registrar) of the founding members;
  - Two copies of the governing rules of the association (para. 136).
- MHA is the regulatory body for NPOs; Section 2 makes it illegal to establish or operate an NPO without registration; Section 17 allows NPOs to collect contributions; NPOs may conduct business once approved and must provide statements of accounts; NPOs may collect foreign funds once approved and must notify the MHA of foreign aid details; Section 25 forbids use of NPOs as a facade for criminal activity with potential cancellation of registration under Sections 32 and 33 and possible personal liability (para. 137).
- As of July 2010, there are a little over 1,100 associations registered as NPOs (para. 137).

### Institutional framework for AML/CFT and supervisory authorities
- General AML/CFT preventive measures are few and, for the banking sector, very recent; authorities use various law enforcement provisions and supervision powers to combat money laundering and terrorist financing in a limited way (para. 104).
- The MMA Financial Intelligence Unit (FIU) acts as the leading national agency for AML/CFT issues, including drafting relevant laws and regulations; the FIU is operational but does not have a clear legal basis (para. 105, 109, 130).
- Since the late 1990s MMA has led efforts to establish an AML/CFT regime; in April 2002 government mandated MMA to coordinate establishment of an AML/CFT regime and an FIU within the MMA (para. 106).
- AML/CFT bill has been in drafting since 2004; the bill is being finalized by the AGO and the MMA for transmission to Parliament and is viewed as a high priority (para. 107).
- A national coordination mechanism—the AML/CFT Steering Committee—was established; member institutions are contemplating a formal MoU; FIU acts as the leading and coordinating agency (para. 108).
- Key institutional roles:
  - Ministry of Finance and Treasury (MFT): contributor via AML/CFT Steering Committee participation (para. 111).
  - Ministry of Home Affairs (MHA): responsible for regulation and supervision of the non-profit sector under the Law on Non-Profit Organizations 2003 (Law No. 1/2003) (para. 112).
  - Ministry of Foreign Affairs (MFA): main contact point for international cooperation and depository for conventions (para. 113).
  - Ministry of Economic Development (MED): responsible for laws relating to legal persons; Registrar of Companies and Co-Operative Societies is in MED (para. 114).
  - Ministry of Defence and National Security (MDNS)/MNDF: national security and CFT role focused on intelligence, support to investigations, information sharing and surveillance (para. 115-116).
  - Maldives Police Service (MPS): leading investigative and law enforcement agency under the Police Act 2008 (Law No. 5/2008) with investigative powers including access to information and records (para. 117).
  - Anti-Corruption Commission (ACC): investigates corruption under the Prohibition and Prevention of Corruption Act 2000; established by ACC Act 2008 (Law No. 13/2008) with investigative powers including access to information and records (para. 118).
  - Maldives Customs Service (MCS): administers the Export Import Act 1979 (para. 119).
  - Department of Immigration and Emigration (DIE): controls entry/exit of foreign nationals and issues passports (para. 120).
  - Prosecutor General’s Office (PGO): established 2008 under Prosecutor General Act 2008 (Law No. 9/2008); responsible for prosecuting and managing criminal cases (para. 121).
  - Attorney General’s Office (AGO): provides legal advice to the Government; bills drafted by State institutions are sent to AGO for comments and onward transmission to Parliament (para. 122).
  - Maldives Monetary Authority (MMA): central bank established 1981 by the MMA Act 1981; principal purposes include issuing currency, advisory services, supervising banking, and promoting stability of the Maldivian currency (Rf) (para. 123).
    - Since July 1, 1981 MMA operated as part of the Ministry of Finance; effective April 2007 separation of Finance Minister and Governor; MMA Board comprises seven members (three executive and four non-executive) with one non-executive representing the Ministry of Finance (para. 124).
    - The 2010 Banking Act enables the MMA to license and supervise banking business and issue regulations to banks; MMA granted temporary power by the Law for General Regulations over some NBFIs including insurance and finance leasing companies (para. 125).
    - MMA issues financial sector regulations on banking, insurance, finance leasing and money changing businesses; some regulations no longer rely on a sound legal basis (para. 126).
    - As part of supervision MMA conducts on-site and off-site supervision over various institutions though some are neither authorized nor licensed by MMA; Financial Sector Division (FSD) is responsible for regulation, supervision and monitoring of the financial sector (para. 127).
    - Credit and Bank Supervision Section (CBSS) supervises MMA licensed banks; since 2008 on-site inspection includes banks’ implementation of the MMA AML Circular; due to recent introduction of the 2010 Banking Act, no supervision had been conducted by end of 2010 on banks’ compliance with the Act (para. 128).
    - Non-Bank Financial Institution Supervision Section (NBFIS) supervises other NBFIs including insurance, credit card companies, MVT services and finance companies licensed by the MMA (para. 129).
  - Capital Market Development Authority (CMDA): established under the Maldives Securities Act 2006 to develop and regulate the capital market (para. 131).
    - Maldives Stock Exchange and Maldives Securities Depository established in 2008 as demutualized private institutions for scripless trading (para. 132).
    - CMDA governed by a seven-person Board appointed by the President; Licensing and Market Regulation Department issues licenses and monitors licensees; CMDA conducts on-site and off-site supervision and gives directions to the Stock Exchange Company (para. 133).
    - CMDA undertakes public awareness programs; became a member of IOSCO in June 2010 (para. 134).

### AML/CFT strategy, risk approach, and progress
- General preventive measures are few and banking measures are recent; the FIU leads AML/CFT drafting and coordination (para. 104-105).
- AML/CFT bill drafted since 2004 is a high priority for passage (para. 107).
- The Maldives has not adopted a risk-based approach to AML/CFT (para. 138).
- This is the Maldives’ first AML/CFT assessment (para. 139).

### Criminalization of money laundering
- The only provision criminalizing money laundering in Maldivian law is Section 6 of the Narcotic Drugs and Psychotropic Substances Act (Law No. 17/77) of 1977, limited to laundering of proceeds obtained through offenses listed in the Drugs Act (para. 140).
- Laundering of proceeds from other types of predicate offenses is not criminalized in the Maldives (para. 140).
- No charges have ever been laid based on Section 6 of the Drugs Act (para. 140).

*Source: IMF staff report excerpt provided in the input content.*

### 141.      A draft AML/CFT law has been initiated several years ago and is in the process of being

### _cr1201 - 141.      A draft AML/CFT law has been initiated several years ago and is in the process of being

### Criminalization of Money Laundering (c. 1.1—Physical and Material Elements of the Offense)
- A draft AML/CFT law has been initiated several years ago and is in the process of being finalized by the AGO and the MMA for transmission to Parliament. The draft law includes a money laundering offense applicable to a broader spectrum of predicate crimes.
- FATF Standard requires criminalization in line with Article 3(1)(b) and (c) of the 1988 Vienna Convention and Article 6(1) of the 2000 Palermo Convention, covering intentionally:
  - the conversion or transfer of proceeds;
  - the concealment or disguise of the true nature, source, location, disposition, movement or ownership of, or rights with respect to proceeds;
  - subject to constitutional principles, the acquisition, possession or use of criminal proceeds (Article 3(1)(b)(i)–(ii) of the Vienna Convention and Article 6(1)(a)(i)–(ii) of the Palermo Convention);
  - and participation in, association with or conspiracy to commit, attempts to commit, and aiding, abetting, facilitating and counseling the commission of the foregoing (Article 6(1)(b)(iii) of the Palermo Convention).
- Section 6 (Offense(s) appertaining to money and property acquired through the commission of an offense) of the Drugs Act:
  - (a) Offense to receive, keep in possession, or use property or money known or plausibly believed to be obtained through commission of an offense under the Act.
  - (b) Offense to carry out acts to confuse the origin of items or to assist in altering or changing ownership with intention of concealing proceeds or assisting an offender avoid penalty.
  - (c) Penalty for (a) and (b): fine between 100,000/ - Rufiyaa and 1,000,000/ - Rufiyaa or remand in jail for a term between 10 and 15 years, or identical fine with remand in jail or banishment for a term between 10 and 15 years.
  - (d) If offender is a Company: dissolution of the Company with imposition of the fine in (c).
- Analysis versus Conventions:
  - "Conversion" of criminal property is not covered.
  - "Transfer" may be partially covered by “altering [...] the ownership” or “changing the ownership,” but transfers that do not alter ownership may not be covered.
  - Property derived from “an act of participation in such offense or offenses” is not covered.
  - Section 6(b) requires proof of intent (“intention of concealing” and “intention of assisting”), whereas the Conventions do not require proof of intent for concealment/disguise.
  - Section 6 appears to cover “source” and “ownership” but not “true nature, location, disposition, movement, or rights with respect to proceeds.”
  - Section 6 does not require proof of knowledge for concealment/disguise elements, contrary to the Conventions.
  - Section 6(a)’s broad wording (“receive, keep in possession, or use such a property or money”) does not require knowledge or plausible reasons to believe property is criminal “at the time of receipt,” and could in theory be used to prosecute conversion/transfer or concealment/disguise if defendant physically possessed or used the property.

### The Laundered Property (c. 1.2) and Proving Property is the Proceeds of Crime (c. 1.2.1)
- Section 6 uses terms “property or money,” “material,” and “asset” which are not defined in the law nor clarified by case law.
- Authorities maintain Section 6 is very broad and applies to all types of assets, regardless of value.
- Section 6 applies to property “obtained through the commission of an offense, or received as a consequence of the commission of an offense,” implying both property “directly or indirectly” representing proceeds of crime is covered.
- Authorities indicate a conviction for the predicate offense under Section 2 or Section 4 of the Drugs Act would be necessary to obtain a conviction for money laundering under Section 6.
- The PGO indicated it has never prosecuted conduct under Section 6.

### Scope of Predicate Offenses (c. 1.3), Threshold Approach (c. 1.4), Extraterritoriality (c. 1.5), and Self-Laundering (c. 1.6)
- The only predicate offense for money laundering under Maldivian law is “trafficking in narcotic drugs and psychotropic substances” as criminalized in the Drugs Act.
- Islam and written law are sources of law; courts may consider Shari’ah when passing judgment. FATF-designated categories of offenses are covered either by written law or Shari’ah, though Shari’ah sometimes lacks specificity required by international conventions and standards; courts have limited experience with many offenses.
- Table 7 (Designated Categories of Offenses) indicates for each listed category whether criminalized and whether it is a money laundering predicate; many categories are criminalized but only “Illicit trafficking in narcotic drugs and psychotropic substances” is listed as a money laundering predicate (Yes, Section 6 Drugs Act).
- Threshold approach: Not applicable. The Maldives uses neither a threshold approach nor a combined approach including a threshold approach.
- Extraterritoriality: Section 17 of the Drugs Act states “[e]ven if the commission of an offense stated in this Law occurred outside the Maldives, this Law shall be enforced on a person who committed such an offense.” Section 17 does not require the offense to be criminalized abroad; drug offenses committed in a foreign country which are not criminalized in that foreign jurisdiction are punishable predicate offenses under Maldivian law.
- Self-laundering: Wording of Section 6 and fundamental principles do not prevent application to self-laundering; authorities confirm Section 6 criminalizes self-laundering. Authorities are unfamiliar with the concept and would prosecute the main offense rather than laundering activities. No money laundering charges have been brought; therefore no convictions for money laundering or self-laundering.

### Ancillary Offenses (c. 1.7) and Additional Extraterritorial Element (c. 1.8)
- Vienna and Palermo Conventions require ancillary offenses including participation, association or conspiracy, attempts, aiding, abetting, facilitating and counseling.
- Under Maldivian law, only “aiding and abetting” is covered in the Act through the words “assist(ing).”
- Association or conspiracy to commit, facilitating and counseling the money laundering offense are not criminalized.
- Unclear whether general provisions of the PC criminalizing ancillary activities (Sections 12, 13 and 14 PC) would apply to money laundering; interpretation untested in courts.
- As noted under c. 1.5, Section 17 allows laundering proceeds of drug-related offenses committed abroad to be punishable in the Maldives even if not criminalized abroad.

### Liability of Natural and Legal Persons (c. 2.1—2.4) and Mental Element (c. 2.2)
- Section 6 applies to any person who knowingly or negligently (“having plausible reasons to believe”) engages in money laundering.
- Section 28(d) PC: “[t]his definition shall also refer to clubs, companies, organizations and similar associations.”
- Mental element and evidentiary standards:
  - PGO states intent can only be inferred from objective factual circumstances under very limited circumstances.
  - Current practice reflects Shari’ah evidence standards: offense proven by (i) a confession before the judge; or (ii) a deposition by two eyewitnesses to the act. Confession to MPS is not sufficient for judges.
  - Testimony of one eyewitness can be corroborated with strong scientific or documentary evidence.
  - This evidentiary regime makes successful prosecutions difficult; in limited cases where judge accepts eyewitness testimony possibly corroborated by documentary evidence, inference of intent may be possible.
- Liability of legal persons:
  - Section 6 applies to a “person.” Section 6 provides sanctions for companies, suggesting natural persons and companies may be held criminally liable.
  - Criminal liability is not available for other forms of legal entity beyond companies.
  - Authorities view parallel civil or administrative proceedings as not precluded, but PGO indicated concurrence of criminal sanction and administrative fine for same facts could be problematic in practice.
  - Corporate veil may be pierced to hold directors severally and individually liable if they engage in criminal activity; this has never been tested in court.

### Sanctions for Money Laundering (c. 2.5)
- Penalties in Section 6(c) and (d):
  - For natural persons (see (c)): punishment is either a fine between Rf 100,000 and 1,000,000 (approximately between US$7,800 and 78,000) or a jail term between 10 and 15 years, or an identical fine in combination with either jail or banishment for a period between 10 and 15 years. Banishment means a person is sent to another island in the Maldives for a certain period of time.
  - For companies: the aforementioned fine and the dissolution of the company.
- Sanctions appear proportionate and dissuasive and in line with sanctions for comparable offenses (e.g., Section 131 PC for theft/misappropriation: imprisonment or banishment between six months and one year for first offense, two years for second, three years for third, etc.).
- In practice no penalties have been imposed for money laundering because no money laundering charges have been brought.
- Shortcoming: lack of available sanctions for legal persons beyond companies, whereas standard expects all legal persons be subject to criminal liability.
- No civil or administrative sanctions are available for Section 6 money laundering.

### Statistics (R.32)
- No money laundering prosecutions have been initiated and consequently no convictions were obtained.
- Tables (2007–2009) recorded drug cases by Maldives Police Service; summary figures:
  - Table 8 (Number of persons detained and cases logged for all drug offenses between 2007 and 2009):
    - 2007: Juveniles 75, Adults 1493, Foreign Nationals 7, Total Illicit Drug Cases Logged 1575, Total No. of Persons Detained 2706
    - 2008: Juveniles 123, Adults 2345, Foreign Nationals 45, Total Illicit Drug Cases Logged 2513, Total No. of Persons Detained 4528
    - 2009: Juveniles 96, Adults 1285, Foreign Nationals 18, Total Illicit Drug Cases Logged 1381, Total No. of Persons Detained 3432
  - Table 9 (Drug trafficking detainees and cases 2007–2009):
    - 2007: Maldivians 1, Foreign 0, Nationals 1, Total No. of Persons Detained for Trafficking 1, No. of Cases Logged for Trafficking 1
    - 2008: Maldivians 11, Foreign 20, Nationals 31, Total No. of Persons Detained for Trafficking 31, No. of Cases Logged for Trafficking 8
    - 2009: Maldivians 3, Foreign 3, Nationals 6, Total No. of Persons Detained for Trafficking 6, No. of Cases Logged for Trafficking 10
  - Table 10 (Drug distribution detainees and cases 2007–2009):
    - 2007: Juveniles 7, Adults 63, Foreign Nationals 0, Total No. of Persons Detained for Distribution 70, No. of Cases Logged for Drug Distribution 106
    - 2008: Juveniles 7, Adults 51, Foreign Nationals 1, Total No. of Persons Detained for Distribution 59, No. of Cases Logged for Drug Distribution 62
    - 2009: Juveniles 0, Adults 23, Foreign Nationals 4, Total No. of Persons Detained for Distribution 27, No. of Cases Logged for Drug Distribution 66
  - Table 11 (Drug possession detainees and cases 2007–2009):
    - 2007: Juveniles 17, Adults 514, Foreign Nationals 2, Total No. of Persons Detained for Possession 297, No. of Cases Logged for Possession 450
    - 2008: Juveniles 32, Adults 568, Foreign Nationals 7, Total No. of Persons Detained for Possession 607, No. of Cases Logged for Possession 1538
    - 2009: Juveniles 53, Adults 278, Foreign Nationals 6, Total No. of Persons Detained for Possession 573, No. of Cases Logged for Possession 1836
  - Table 12 (Drug use detainees and cases 2007–2009):
    - 2007: Juveniles 51, Adults 1151, Foreign Nationals 5, Total No. of Persons Detained for Use 1207, Illicit Drug Cases Logged for Use 2150
    - 2008: Juveniles 81, Adults 1707, Foreign Nationals 17, Total No. of Persons Detained for Use 1805, Illicit Drug Cases Logged for Use 2904
    - 2009: Juveniles 43, Adults 723, Foreign Nationals 3, Total No. of Persons Detained for Use 769, Illicit Drug Cases Logged for Use 1442
  - Table 13 (Percentage of cases logged for each drug offense between 2007 and 2009):
    - 2007: Drug use 79.5%, Drug possession 16.6%, Drug distribution 3.9%, Drug trafficking 0.03%
    - 2008: Drug use 64%, Drug possession 34%, Drug distribution 1.4%, Drug trafficking 0.2%
    - 2009: Drug use 42%, Drug possession 53.5%, Drug distribution 2%, Drug trafficking 0.3%
- The number of drug cases as a percentage of total logged offenses decreased between 2008 and 2010 from 14.05%, over 12.28%, to 9.52% (Maldives Police Service Annual Report 2010, p. 2).
- No information provided regarding the value involved in logged drug cases or the value of seized drugs.

### Effectiveness
- No money laundering prosecutions or convictions have occurred; practical effectiveness of the legal framework in preventing, detecting, prosecuting, and punishing money laundering has not been demonstrated in practice.

*Source: Extract from IMF country report content unit _cr1201 - 141.*

### 169.      In light of the number of arrests for drug offenses, the fact that money laundering has never

### _cr1201 - 169.      In light of the number of arrests for drug offenses, the fact that money laundering has never

### Money laundering: description and analysis
- Money laundering has never been investigated and no one was brought before the courts under money laundering charges; this is identified as a major shortcoming of the Maldivian framework.
- Factors explaining non-use of the money laundering offense:
  - Authorities’ exclusive focus on obtaining a conviction for the predicate offense.
  - Lack of clarity with respect to the amount of evidence that may lead to convictions (regardless of the type of crime prosecuted) and resulting difficulties to prove the offenses.
  - Lack of experience with financial crime among investigators, prosecutors, and judges.
- The money laundering provision currently exists in the Drugs Act (Section 6). Implementation could be improved by providing training to the MPS, the PGO, and the judiciary regarding the nature and application of Section 6.
- Absence of legislation criminalizing the laundering of proceeds of other types of crimes:
  - Authorities cannot investigate, prosecute and sanction laundering of proceeds of any other FATF-designated category of offenses committed in the Maldives.
  - Limits ability to cooperate with other jurisdictions when the offenses were committed abroad, particularly given lack of clarity with respect to dual criminality requirements.
  - Imperative to criminalize all categories of serious offenses other than drug-related offenses as predicates to the money laundering offense, requiring a broad-ranging money laundering offense in the draft AML/CFT law.
- Money laundering could be a useful tool to fight crime in the Maldives: drug-related crimes, theft, corruption, and fraud.
- Improvements needed in general criminal legislative framework (evidence, criminal procedure, general penal law) to ensure effective application of future money laundering legislation; without these, effectiveness and utility of AML/CFT framework will be severely reduced.
- Draft AML/CFT law provisions:
  - Defines “predicate offence” as “any offence, including an offence committed abroad.”
  - Defines “proceeds of crime” as “any funds or property derived from or obtained, directly or indirectly, within our outside Maldives, from any offence under the laws of Maldives. Proceeds of crime shall include substitute assets and investment yields.”
  - Would explicitly permit inference of intent from objective factual circumstances and self-laundering.
  - If enacted, this approach would be in line with the standard.

### Recommendations and comments (Recommendations addressing R.1)
- Ensure that the predicate offenses for money laundering cover all serious offenses and not only offenses under the Drugs Act.
- Comprehensively criminalize money laundering in keeping with the international standards.
  - Bring the money laundering offense of the Drugs Act in line with Vienna and Palermo by criminalizing the “conversion” of criminal property, and the concealment or disguise of the true nature, location, disposition, movement, or rights with respect to property.
  - Remove the requirement that intent be proven in relation to concealment or disguise.
- Ensure money laundering charges may also be brought in the absence of a conviction for the predicate offense.
- Ensure that in all instances the criminalization of the categories of offenses is in line with the relevant international conventions and standards.
- Ensure that ancillary offenses to money laundering, including conspiracy to commit and aiding and abetting, are criminalized.
- Show effective use of the money laundering provisions.

### Recommendations and comments (Recommendations addressing R.2)
- Allow for the intentional element of the offense of money laundering to be inferred from objective factual circumstances other than eyewitnesses, perhaps corroborated by strong documentary evidence.
- Extend criminal liability for money laundering offenses to legal persons other than companies.
- Ensure effective and proportionate sanctions are available for legal persons beyond companies.

### Compliance with Recommendations 1 and 2 (ratings and factors)
- R.1: NC
  - Money laundering is only criminalized in relation to offenses under the Drugs Act; none of the other designated categories of offenses are predicate offenses to money laundering.
  - Money laundering is not comprehensively criminalized in keeping with the international standards. The money laundering offense under the Drugs Act does not extend to “conversion” of criminal property, and the concealment or disguise of the true nature, location, disposition, movement, or rights with respect to property. The Maldives requires proof of intent in relation to concealment or disguise.
  - A money laundering conviction can only be obtained if there is a conviction for the predicate offense.
  - Ancillary offenses to money laundering have not all been criminalized.
  - Effectiveness of the money laundering offense is not established.
- R.2: NC
  - The intentional element of the offense of money laundering cannot be inferred from objective factual circumstances, apart from instances where there are eyewitnesses, perhaps corroborated with strong documentary evidence.
  - No criminal liability for legal persons other than companies.
  - No effective and proportionate sanctions for legal persons other than companies.

---

### Criminalization of Terrorist Financing (SR.II): description and analysis
- Legal framework:
  - Prevention of Terrorism Act (Act No. 10/1990; Terrorism Act) consists of six sections.
  - Section 3 criminalizes aiding and abetting: “The aid[ing] or abet[ting] of any form, through finance or property, or planning of any act as stipulated under Section 2 shall be construed as an act of terrorism itself” (emphasis added).
- ICSFT and SR.II context:
  - Article 2 of the ICSFT requires terrorist financing offence to extend to any person who willfully provides or collects funds by any means, directly or indirectly, with the unlawful intention that they should be used or in the knowledge that they are to be used, in full or in part to carry out a terrorist act(s).
  - Special Recommendation II requires criminalization also of provision and collection of funds with the intention that they are to be used by a terrorist organization or by an individual terrorist.
- Key findings:
  - No separate and autonomous offence of terrorist financing in the Maldives; reliance on Section 3 aiding and abetting provision.
  - Provisions of aiding and abetting through finance or property have never been applied; authorities could not provide much detail regarding meaning and scope of terms in Section 3.
  - “Provision and collection” are not specifically mentioned; wording appears broad enough to include “provision” but authorities could not conclusively establish this in absence of case law; “collection” probably not covered according to authorities’ view.
  - Authorities advise “of any form” better translated as “in any manner,” which aligns with “by any means.” “Directly or indirectly” would appear covered by “in any manner.”
  - Terrorism Act is mute on requirement of “unlawful intention.”
  - Section 3 does not clarify whether finance or property must be used “in full” or whether “in part” suffices.
  - Section 2 (Offence of Terrorism) criminalizes seven terrorist acts (a) through (g) as listed in the Act.
  - Maldives has ratified five of the nine anti-terrorism instruments but has not established that it has criminalized all relevant activities covered by these treaties.
  - Several specific limitations in Section 2 relative to international conventions: does not cover attempts or complicity in some conventions; scope of “political motive” is unclear; no reference to “international organization.”
  - Aiding and abetting of terrorist organizations and individual terrorists is not criminalized because Section 3 only refers to terrorist acts of Section 2.
  - “Finance and property” is broad according to authorities, but unclear whether elements of “funds” in the standard (e.g., “legal documents and instruments in any form, including electronic and digital”) are included.
  - Section 3 does not distinguish between legitimate or illegitimate source of finance and property.
  - Authorities believe a link must be established between the finance or property and a specific terrorist act for charges under Section 3 to succeed.
  - No provision explicitly criminalizes attempt to provide finance or property.
  - Ancillary offenses to Section 3 are not criminalized.
  - Terrorist financing is not a predicate offense for money laundering.
  - Jurisdictional reach of the Terrorism Act is unclear; reach of general provisions under the PC is uncertain.
  - Mental element: absent a confession, offense can only be proven with two eyewitnesses to same act or one eyewitness corroborated by strong documentary/scientific evidence; intentional element may not be inferred from other objective factual circumstances.
  - Liability of legal persons:
    - Section 4: sanction for legal persons (entities registered with the Government and operating in the country) is termination of registration.
    - Only entities registered in and operating in Maldives can be held liable; entities not registered and not operating in country are excluded.
    - Authorities willing to prosecute legal persons but have not done so in practice.
  - Sanctions for terrorist financing:
    - Section 6(a): persons guilty of abetting a lethal terrorist act will be sentenced to between 10 and 15 years imprisonment or banishment.
    - Section 6(b): those guilty of abetting a terrorist act without loss of life will be sentenced to between 3 and 7 years of imprisonment or banishment.
    - Judge may always sentence the person to imprisonment with hard labor regardless of terms under 6(a) or (b).
    - Entities registered with the Government and operating in the Maldives: registration will be terminated under Section 4.
    - Sanctions for aiding and abetting for natural persons are effective, proportionate, and dissuasive compared to other countries in the region.
    - Very limited sanctions for legal persons; only deregistration available; no fines, civil or administrative sanctions.
  - In practice no prosecutions or sanctions under Section 3 have been applied; no terrorist financing case has been before Maldivian courts.
  - Authorities aware of flow of money financing travel expenses and sustenance for families of those who travel abroad to engage in terrorist acts.
  - Statistics (R.32): To date, no charges have ever been brought.

### Recommendations and comments (SR.II)
- Criminalize the offense of terrorist financing separately and autonomously in keeping with SR.II, instead of relying on the ancillary offense of aiding and abetting; ensure the following elements:
  - Ensure that the collection of funds for terrorist purposes is criminalized.
  - Ensure that the use in full or in part of funds for terrorist financing purposes is criminalized.
  - Ensure that all acts in the nine anti-terrorism instruments are criminalized.
  - Ensure that the terrorist financing offense applies to terrorist acts meant to compel governments and international organizations to act, or to abstain from acting.
  - Criminalize financing of individual terrorists and terrorist organizations.
  - Ensure that “finance and property” includes all the elements of the definition of “funds” as used in the ICSFT.
  - Ensure that it is not necessary to have to prove an actual use of the funds or a link to a specific terrorist act.
  - Criminalize the attempt to commit a terrorist financing offense.
  - Make terrorist financing offenses predicate offenses for money laundering.
  - Make sure that the terrorist financing offense applies to persons abroad who finance terrorist acts in the Maldives.
  - Permit the inference of the intentional element of the offense from objective factual circumstances.
  - For legal entities, allow for sanctions other than deregistration, e.g. fines, ensuring that they are effective, proportionate and dissuasive, and make them applicable also to those entities not registered in the Maldives.

### Compliance with Special Recommendation II (rating and factors)
- SR.II: NC
  - No separate, autonomous terrorist financing offense; only partially criminalized by the aiding and abetting provision.
  - The collection of funds for terrorist purposes has not been criminalized.
  - No evidence that the use “in full or in part” is covered.
  - No evidence provided that all the acts in the nine anti-terrorism instruments have been criminalized.
  - No evidence provided showing the financing of terrorist acts meant to compel governments or international organizations is criminalized.
  - The financing of individual terrorists and of terrorist organizations is not criminalized.
  - The definition of “finance and property” is not clear enough to ascertain that all of the elements of the definition of “funds” in the ICSFT are included.
  - A link to a specific terrorist must be established in order to successfully bring charges under Section 3.
  - The attempt to commit the offense under Section 3 is not criminalized.
  - Terrorist financing offenses are not predicate offenses for money laundering.
  - It is not possible to prosecute persons abroad who are alleged to have engaged in terrorist financing for acts committed or intended to be committed in the Maldives.
  - It is not possible to infer the intentional element from objective factual circumstances.
  - Very limited sanctions for legal persons are only applicable to those registered with the Government and active in the Maldives.

*Source: IMF country report content unit _cr1201 - 169.*

### 215.      There are provisions in several different laws of Maldives that can be used for confiscation,

### _cr1201 - 215.      There are provisions in several different laws of Maldives that can be used for confiscation,

### Overview of legal provisions for confiscation, freezing and seizure
- The following statutory provisions can be used for confiscation, freezing and seizing of proceeds and instrumentalities:
  - Section 10 of the Drugs Act (for proceeds of drug related offenses)
  - Section 24 of the Prevention and Prohibition of Corruption Act 2000 (for proceeds of corruption related offenses)
  - Section 144, Chapter IV of the PC (for proceeds of theft, criminal breach of trust, cheating or extortion against the Government)
  - Section 14 of the Prevention of Gang Related Crimes Act (for proceeds obtained through gang related activities)
  - Section 14(a) of the Export Import Act 1979 (for proceeds of export/import fraud)
  - Sections 11, 12 and 13-1 of the Fisheries Act of Maldives 1987 (for illegal fishing offenses)
- There are no provisions that enable the authorities to seize, freeze or confiscate assets linked to other types of crime.

### Confiscation under the Drugs Act (Section 10)
- Text of Section 10(a): “(a) The psychotropic substances used in the commission of an offense stated in this Law, and utensils [used for the same], and the money, property and materials obtained by the action of [committing] the offense shall be impounded.”
- Prosecutor General interpretation (case law cited): the word ‘impounded’ should be interpreted to mean “to deprive permanently.”
- Section 10(a) is conviction based; in practice, confiscation was only sought post-conviction.
- Law covers proceeds (“money, property and materials obtained”) and instrumentalities actually used (“utensils [used for the same]”) but excludes instrumentalities “intended for use.”
- The Standard defines “property” as “assets of every kind, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible, and legal documents or instruments evidencing title to, or interest in such assets.”
- Practical limitations noted:
  - Prosecutor General likely would not pursue rent earned from a house into which criminal proceeds were funneled, indicating a narrow practical interpretation of “property.”
  - The Maldives does not allow for confiscation of property deriving indirectly from proceeds of crime.
  - Property held by third parties could in all likelihood not be taken.
  - No provision indicating Section 10 applies to the money laundering provision of Section 6; no money laundering charges have been brought to test this.

### Confiscation under the Prevention and Prohibition of Corruption Act 2000 (Section 24)
- Text of Section 24(a): “(a) Property and money received through the commission of an offence stated in this Act and property obtained through such whether with the person, with someone else, and where ever it is, whether sold or given to a person shall be confiscated.”
- Section 24(a) is conviction based and covers proceeds as it mentions “property and money received through the commission of an offence” and “obtained through such.”
- Instrumentalities used and intended to be used are not covered.
- Section 24(a) explicitly allows confiscation “whether with the person, with someone else, and where ever it is, whether sold or given to a person,” enabling confiscation of property held by third parties.
- No definition of property in the Act; PGO remarks on narrow practical interpretation apply here.
- No cases of restraint or confiscation pursuant to Section 24 have been reported; seizure orders have been made pursuant to Section 22(k) of the Anti-Corruption Commission (Act 13/2008).

### Confiscation under the Penal Code (Section 144, Chapter IV)
- Text summary of Section 144: property in possession of a person who commits theft, criminal breach of trust, cheating or extortion in respect of government property shall be forfeited where it is established that such person has built dwellings or obtained other property or created other property from money or property obtained through such theft, etc.; properties seized shall be sold and proceeds utilized to regain the property that was the subject matter.
- Section 144 PC is conviction based; confiscation of instrumentalities is not covered.
- “Obtained other property or created other property” appears to capture both direct and indirect property from proceeds.
- Confiscation will not be possible if the property is no longer in the possession of the person who commits the fraud, as it only applies to “property in the possession of a person who commits.” (emphasis added)
- Authorities did not show confiscation of proceeds under this Section.

### Confiscation under the Gang Related Crimes Act (Section 14)
- Text of Section 14(a): “(a) Upon conviction, property and money received and property obtained through operation of gang shall be confiscated to the Government.”
- Section 14(a) is conviction based; the article is silent regarding instrumentalities.
- Property derived directly or indirectly from proceeds of crime appears not to be subject to confiscation.
- Property held by third parties would generally not be subject to confiscation under this provision.

### Confiscation under the Export Import Act 1979 (Section 14(a))
- Text summary: where an offence against subsection (a) of Section 13 has been committed or attempted, goods in question shall be confiscated without compensation; if any food or money have been obtained by secretly importing or exporting goods, such good or money shall be confiscated.
- Section 14(a) is conviction based; it allows confiscation of proceeds but not instrumentalities.
- Property derived directly or indirectly from the proceeds is not covered; confiscation cannot reach property owned or held by third parties under the Act.

### Confiscation under the Fisheries Act of Maldives 1987 (Sections 11, 13-1, 13-2)
- Text summary: “[T]he Ministry [of Defence and National Security] shall have the right to apprehend such vessel and objects used in carrying out such offences as well as the proceeds obtained from it.” Sections 13-1 and 13-2: “[t]he articles used in the contravention together with any gains from such contravention shall be confiscated.”
- Section 11 requires a conviction for confiscation to occur.
- Fisheries Act allows confiscation of proceeds and instrumentalities; cited case used to sell the catch and confiscate the vessel.
- The Act limits itself to confiscation of the “articles used” and the “gains,” and does not appear to include property derived directly or indirectly from proceeds of crime.
- Presumably cannot be used against property held by third parties, as the law makes no mention of third-party property.

### Treatment of property held by third parties
- Whether property held by third parties can be subject to freezing, restraining and confiscation varies under each Act cited.
- In practice, there have been no cases where authorities attempted to take action against third parties.
- Even where statute enables action against third-party assets, the PGO stated it would be extremely difficult to establish that the third party had knowledge of the crime, and they would not proceed without positive evidence of the third party’s knowledge.

### Provisional measures to prevent dealing in property subject to confiscation
- Provisional measures are available in the Drugs Act, the Corruption Act, the Gang Related Crimes Act, and the Fisheries Act.
- Drugs Act — Section 10(b) and (c):
  - Section 10(b): judge may order money, property and materials suspected to have been obtained by committing the said offence be held [in custody] until the court arrives at a final conclusion, or to ensure that the same does not leave the custody of the said person, or not to engage the same in any transactions, or to keep the same under the custody of a certain party.
  - Section 10(c): the Ministry of Defence and National Security and the Ministry of Atolls Development may hold the money, property and materials that have been suspected of having been obtained by the committing the said offence, until the Qaal’ee makes a decision.
  - These permit provisional measures when a person is a suspect or charged with a drug offense; MDNS and MAD will hold the property pending trial outcome.
- Corruption Act — Section 24(b) and (c):
  - Section 24(b): judge reserves the right to order money and property suspected to have been obtained through commission of the offence to be confiscated, taken away from the person and kept with a specific party or order the accused not to transact with such or to ensure such does not leave the hands of the accused.
  - Section 24(c): pending a court order, the government agency investigating the case shall have the right to confiscate or order the confiscation of property and money suspected to have been obtained through commission of an offence.
  - Although Section 24(c) uses the word “confiscated,” contextual reading indicates this refers to holding/freezing pending court order.
- Gang Related Crimes Act — Section 14(b) and (c):
  - Mirror provisions to Corruption Act; MPS may freeze property pending court order. Context suggests “confiscate or order the confiscation” in 14(c) effectively means freezing pending court order.
- Fisheries Act — Section 12:
  - MDNS may hold vessel and objects while case is before the court and may auction perishable goods and hold proceeds: “Any vessel or article apprehended under the provisions of Article II of this Law shall be under the care of the MDNS until the completion of legal proceedings, and the Ministry shall have the right to sell by auction any perishable articles thus held and to hold the proceeds of such sale.”

### Ex parte applications for provisional measures
- There are no statutory provisions for seizing or freezing measures to be applied ex parte or without prior notice.
- It does not appear such provisions would be inconsistent with fundamental principles of Maldivian domestic law.
- According to authorities, in practice the initial application for provisional measures is made ex parte and without prior notice.

### Identification, tracing and enforcement practice
- Law enforcement agencies and the FIU do not sufficiently utilize their powers to identify and trace property.
- Law enforcement could focus more on confiscating cash in relation to drug offenses.

### Protection of bona fide third parties
- No measures in place that provide protection specific to bona fide third parties.
- PGO indicated they would not seek confiscation from a bona fide third party but no statutory provision exists to exclude bona fide third-party property.
- Section 24(a) of the Corruption Act allows confiscation when property is “with someone else, and where ever it is, whether sold or given to a person,” which the ACC indicated might pose third-party protection problems; the situation has not yet occurred.

### Power to void actions prejudicial to recovery
- Section 17(a) and (b) of the Law of Contract 1991 (Law No. 4/91) provides a contract is “void if it is illegal” when the “purpose of the contract is illegal or immoral,” allowing courts to void contracts concluded to prejudice authorities’ ability to recover property subject to confiscation.
- Section 17 has not been established as used for this purpose and applies only to contracts, not non-contractual actions.
- Authorities stated law enforcement agencies may also “apply for cancellation of such actions,” but the applicable legal provision is unclear and no instance has been brought before courts.

### Statistics and effectiveness
- No money laundering charges have been brought before the courts; therefore no confiscation measure has been ordered under the money laundering offense provided for in the Drugs Act.
- MPS maintains annual statistics on property seized and confiscated related to certain crimes they investigate, in particular drug offenses and theft, but not on money laundering and terrorist financing.
- Table of Drugs Confiscated by MPS (in grams):
  - Year — Benzodiazepines — Opiates — Cannabis — Ketamine
  - 2008 — 367.622 — 22,786.6657 — 950.6405 — 0
  - 2009 — 537.5853 — 1,349.2906 — 3,711.8717 — 5,097.700
  - 2010 (January) — 16.9795 — 130.814 — 850.6783 — 0

_Italic: _cr1201 - 215.      There are provisions in several different laws of Maldives that can be used for confiscation,_

### 260.      The division of responsibility among agencies for freezing, seizing and confiscating was not

### _cr1201 - 260.      The division of responsibility among agencies for freezing, seizing and confiscating was not

### Division of responsibility; current practice and legal clarity (Sections 260–264)
- 260: The division of responsibility among agencies for freezing, seizing and confiscating was not clear in the Maldives and there generally appeared to be a lack of understanding among all agencies about available powers to freeze, seize and confiscate and about how these powers are to be applied. The laws themselves are not entirely clear as to the exact meaning of the terms.
- 261: The MPS stated that they would only seek to seize assets that were found with the accused, or at the house of the accused at the time the offense was detected.
  - MPS practice aligns with evidence seizure under Section 8 of the Police Act 2008 (Law No. 05/2008).
  - Representatives of the MPS stated that the MMA may be asked to freeze money in bank accounts.
  - An investigating agency or a court can bar transactions through the MMA where it is suspected that the money in the person’s account was obtained through the commission of an offense under Section 26 of the Corruption Act.
  - The MMA does not appear to have any authority to freeze any other proceeds of crime in this way, but MMA representatives stated that information could be requested from banks and that banks could be requested to freeze money of a suspect.
- 262: The PGO stated that any freezing and seizing measures would be dealt with by the MPS prior to the brief being sent to the PGO. The PGO said they would generally litigate confiscation after they had first secured a conviction; the PGO viewed confiscation as included in or immediately following the sentencing process.
- 263: The Maldives has provisions relating to restraint, seizure and confiscation of the proceeds of certain types of crime, but these provisions are:
  - Not sufficiently comprehensive and detailed to be effective;
  - Broad and open to wide interpretation, resulting in uncertainty about applicability;
  - Leading to confusion about which agencies have policy and implementation responsibility for restraint, seizure and confiscation;
  - Resulting in only the most obvious proceeds, such as physical currency found with drugs, being seized and then only as evidence of the offense.
- 264: The Maldives does not have a system to confiscate property of organizations found to be primarily criminal in nature. All confiscations require are conviction based; civil forfeiture does not exist. Offenders do not have to demonstrate the lawful origin of their property.

### Recommendations and comments for Recommendation 3 (Section 265 and R.3 compliance)
- 265: In order to comply with Recommendation 3, the authorities are recommended to:
  - Ensure that the confiscation provisions can be applied to “property” as defined by the Standard: Assets of every kind, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible, and legal documents or instruments evidencing title to or interest in such assets, regardless of whether these assets are held or owned by the defendant or a third party.
  - Provide for the confiscation of instrumentalities for offenses other than those of the Drugs Act and the Fisheries Act.
  - Allow for the confiscation of property of corresponding value.
  - Allow for the confiscation of property derived directly or indirectly from the proceeds of crime.
  - Provide for confiscation even if the property is held by a third party.
  - Expand the use of freezing and seizing of property subject to confiscation to offenses other than those under the Drugs Act, the Corruption Act, the Gang Related Crimes Act, and the Fisheries Act.
  - Allow in laws or other measures for the initial application to freeze or seize to be made ex parte or without prior notice.
  - Authorities should utilize the confiscation provisions that do exist more often.
  - Provide protection for the rights of bona fide third parties, consistent with the Palermo Convention standards.
  - Ensure that it is possible to prevent or void any action aimed at prejudicing the ability of authorities to recover property subject to confiscation.
  - Make effective use of the confiscation framework by putting in place comprehensive legal provisions allowing the courts to confiscate proceeds and instrumentalities in the context of any money laundering, terrorist financing or other predicate offense.
- 2.3.3 Compliance with Recommendation 3 — Rating: R.3 NC
  - Summary of factors underlying rating:
    - Limitations on the kinds of property to which confiscation provisions can be applied. Currently, confiscation appears to be limited to tangible, corporeal assets with a very direct link to the predicate offense.
    - No possibility to confiscate instrumentalities for offenses other than those contained in the Drugs Act, the Corruption Act, and the Fisheries Act.
    - No possibility to confiscate property of corresponding value.
    - No possibility to confiscate all property derived directly or indirectly from the proceeds of the crime.
    - Confiscation when property is held by a third party is most often not possible. When it does exist, it has never been applied.
    - Laws limit the use of freezing and seizing of property to four Acts.
    - No laws or measures in place to allow the initial application to freeze or seize to be made ex parte or without prior notice.
    - Law enforcement agencies and the FIU do not sufficiently utilize their powers to identify and trace property.
    - No protection for the rights of bona fide third parties.
    - No ability for the authorities to prevent or void actions aimed at prejudicing their ability to recover property subject to confiscation, other than the voiding of contracts with an illegal purpose.
    - The effectiveness of the confiscation framework was not established because existing legal provisions do not always allow the courts to confiscate proceeds and instrumentalities in the context of a money laundering or terrorist financing offense, and for every predicate offense.

### Freezing of funds used for terrorist financing — Legal framework and practice (Sections 266–285)
- 266: There are no specific legal provisions or written policy on freezing of funds as called for under SR.III.
- Freezing Assets under S/RES/1267 (c. III.1):
  - 267: The Maldives does not have any laws in place to freeze terrorist funds or assets of persons designated under United Nations Security Council (UNSC) Resolution 1267 (S/RES/1267).
    - In practice, the updated Consolidated List is made available to the Ministry of Foreign Affairs (MFA) by the Maldives Mission to the United Nations (UN) in New York. The MFA then sends it to the Maldives Monetary Authority (MMA), the Ministry of Defense and National Security (MDNS), the Maldives National Defense Force (MNDF), the Maldives Customs Service (MCS), and the Department of Immigration and Emigration (DIE).
    - The MMA/FIU forwards instructions to banks, credit card operators and MSBs to freeze funds involving any of the designated persons. For banks these instructions are called circulars, for all other institutions they are contained in a letter.
  - 268: Although the “instructions” are drafted in mandatory terms, they are not supported by a legal basis for the MMA to impose mandatory obligations, and failure to comply with these instructions cannot be sanctioned.
    - It is unclear what follow-up actions would be if an institution were to identify and freeze assets pursuant to the MMA instructions.
    - It is unclear whether a financial institution would be able to declare assets as “frozen,” as the client could argue that, without an express legal provision or a court order, his property is inviolable pursuant to Section 40 of the 2008 Constitution.
  - 269: So far, there has never been a case in which funds of designated individuals, entities or groups under S/RES/1267 have been identified in the Maldives.
- Freezing Assets under S/RES/1373 (c. III.2) and freezing actions taken by other countries (c. III.3):
  - 270: The Maldives does not have any law or procedure in place that would allow for the freezing of funds under UNSC Resolution 1373 (S/RES/1373), nor does it have laws and procedures in place to allow for the examination and the execution, if appropriate, of actions initiated under the freezing mechanisms of other countries.
    - Authorities stated they have not received any request under this resolution or another country’s freezing mechanism; they would have to consult with the PGO and other relevant agencies to establish whether and how to give suit.
  - 271: This lack of procedures is problematic because any foreign request would require an ad hoc solution with potential significant delays; domestically, freezing mechanisms could not be applied to prevent terrorist acts in the future.
- Extension to funds or assets controlled by designated persons (c. III.4):
  - 272: The Maldives does not have procedures to freeze funds or other assets wholly or jointly owned or controlled, directly or indirectly, by designated persons, terrorists, those who finance terrorism or terrorist organizations.
- Communication to the financial sector (c. III.5) and guidance (c. III.6):
  - 273: The FIU issues instructions to financial institutions following designations by the UNSC 1267 Committee. The MMA sends instructions to managers and managing directors of banks and other financial institutions with the amended list of individuals added or removed from the Consolidated List.
    - Typical letter instructions: “(1) For those individuals deleted from the List, allow transactions; (2) Refuse transaction involving individuals whose information is amended and report to the Financial Intelligence Section of this Authority, as required by Anti-Money Laundering and Combating Terrorism Financing (AML/CFT) Circular dated 22nd February 2006; and (3) Update your own customer database accordingly and continue enhanced due diligence for ALL the individuals in the attached amended list.”
    - The list is communicated to institutions immediately upon receipt from the Maldives Mission to the United Nations.
    - There is no legal basis for the issuance of instructions.
  - 274: The Maldives does not provide formal guidance to financial institutions and other persons or entities that may hold targeted funds or other assets concerning their obligations under freezing mechanisms.
    - Authorities claim financial institutions are clear on what to do: allow transactions for deleted individuals, freeze funds for listed individuals, refuse transactions involving listed individuals, report to the FIU, update customer databases and continue enhanced due diligence for listed individuals.
  - 275: The above instructions only apply in the context of S/RES/1267, and not to S/RES/1373 or SR.III more broadly.
- De-listing, unfreezing, access, review, and other protections (c. III.7–c. III.13):
  - 276: There are no effective and publicly known procedures for considering de-listing requests and for unfreezing the funds or other assets of de-listed persons or entities in a timely manner, nor for unfreezing funds or assets of persons inadvertently affected by a freezing mechanism.
  - 277: There are no appropriate procedures for authorizing access to funds or other assets frozen pursuant to S/RES/1267(1999) for basic expenses, payment of certain fees, or extraordinary expenses.
  - 278: According to the authorities, the affected person can appeal freezing action based on Article 40(b) of the Constitution, pursuant to which funds and property can only be frozen once a court order has been issued. In the absence of a legislative framework for freezing actions, an applicant could be successful invoking Article 40(b) because the freeze is not “expressly prescribed by law.”
  - 279: There are no provisions in the Terrorism Act or elsewhere on freezing, seizing, and confiscation of terrorist funds or other assets in a criminal context.
  - 280: There are no laws or other measures which provide for the protection for the rights of bona fide third parties.
  - 281: Even if relevant legislation were in place, there are no appropriate measures to effectively monitor compliance and to impose civil, administrative, or criminal sanctions for failure to comply. Authorities admit the MMA cannot impose any sanction for non-compliance with its freezing instructions.
- Statistics and additional elements:
  - 282: No freezing measures have been taken.
  - 283: At the time of the on-site visit the FIU had not yet considered the FATF Best Practices paper for SR.III.
- 284–285 Effectiveness and practice:
  - 284: There are no laws and regulations to implement the obligations under SR.III. The MMA sends the 1267 list to financial institutions, money services businesses, and credit card operators with instructions, but there is no legal basis for these instructions. Authorities claim recipients follow the freezing instruction as if mandatory but admit they would be unable to sanction financial institutions in case of noncompliance.
  - 285: Authorities stated they have never found any assets or funds related to anybody on the 1267 list in the country. No Maldivian national is currently listed.

### Recommendations and comments for Special Recommendation III (Sections 286 and 2.4.3 compliance)
- 286: In order to comply with Special Recommendation III, the authorities are recommended to:
  - Enact laws and procedures to freeze terrorist funds or other assets of persons designated by the U.N. Al-Qaida and Taliban Sanction Committee in accordance with S/RES/1267.
  - Enact laws and procedures to freeze terrorist funds or other assets of persons under S/RES/1373(2001).
  - Enact laws and procedures to examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other jurisdictions.
  - Enact laws and procedures to apply freezing actions to funds or other assets wholly or jointly owned or controlled, directly or indirectly, by designated persons, terrorists, terrorist financiers, or terrorist organizations, as well as to funds or other assets derived or generated from funds or other assets owned or controlled by such persons.
  - Establish effective systems for communicating actions taken under S/RES/1373(2001), and actions initiated under the freezing mechanisms of other jurisdictions to financial institutions and other persons or entities that may hold targeted funds or assets.
  - Provide clear guidance to financial institutions and other persons or entities that may hold targeted funds or assets regarding their obligations in respect of freezing mechanisms.
  - Establish effective and publicly-known procedures for considering de-listing and for unfreezing funds or other assets of de-listed persons or entities.
  - Establish effective and publicly-known procedures for unfreezing, in a timely manner, funds or assets of persons or entities inadvertently affected by a freezing mechanism upon verification that they are not designated persons.
  - Establish appropriate procedures for authorizing access to funds or other assets frozen pursuant to S/RES/1267(1999), and in accordance with S/RES/1452(2002), necessary for basic expenses, payment of certain types of fees, expenses and service charges, or extraordinary expenses.
  - Enable the use of provisional measures/confiscation regarding freezing, seizing, and confiscation of terrorist-related funds in contexts other than United Nations Security Council Resolutions and freezing actions initiated in other countries.
  - Provide protection for the rights of bona fide third parties.
  - Establish appropriate measures to monitor effectively compliance with relevant legislation, rules or regulations.
  - Establish civil, administrative or criminal sanctions for failure to comply with such rules.
- 2.4.3 Compliance with Special Recommendation III — Rating: SR.III NC
  - Summary of factors underlying rating:
    - No laws and procedures in place to freeze terrorist funds or other assets of persons designated under S/RES/1267(1999).
    - No laws and procedures in place to freeze terrorist funds or other assets of persons under S/RES/1373(2001).
    - No laws and procedures to examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other jurisdictions.
    - No laws and procedures to apply freezing actions to funds or other assets wholly or jointly owned or controlled, directly or indirectly, by designated persons, terrorists, terrorist financiers, or terrorist organizations; idem for funds or other assets derived or generated from funds or other assets owned or controlled by such persons.
    - No effective systems for communicating actions taken under S/RES/1373(2001), and actions initiated under the freezing mechanisms of other jurisdictions to financial institutions and other persons or entities that may hold targeted funds or assets.
    - No clear guidance to financial institutions and other persons or entities that may hold targeted funds or assets regarding their obligations in respect of freezing mechanisms.
    - No effective and publicly-known procedures for considering de-listing and for unfreezing funds or other assets of de-listed persons or entities.
    - No effective and publicly-known procedures for unfreezing, in a timely manner, funds or assets of persons or entities inadvertently affected by a freezing mechanism upon verification that they are not designated persons.
    - No appropriate procedures for authorizing access to funds or other assets frozen pursuant to S/RES/1267(1999), and in accordance with S/RES/1452(2002), necessary for basic expenses, payment of certain types of fees, expenses and service charges, or extraordinary expenses.
    - No provisional measures/confiscation regarding freezing, seizing, and confiscation of terrorist-related funds in other contexts than that of the United Nations Security Council Resolutions and freezing actions initiated in other countries.
    - No protection for the rights of bona fide third parties.
    - No appropriate measures to effectively monitor compliance with relevant legislation, rules or regulations.
    - No possibility to impose civil, administrative or criminal sanctions for failure to comply with such rules.

*Source: _cr1201 - 260. The division of responsibility among agencies for freezing, seizing and confiscating was not (PDF chapter/section).*

### 287.      No statute formally establishes the FIU. The 2010 Banking Act makes reference in Section

### _cr1201 - 287.      No statute formally establishes the FIU. The 2010 Banking Act makes reference in Section

### Establishment and legal basis
- No statute formally establishes the FIU.
- The 2010 Banking Act makes reference in Section 38(a)(5) to the FIU being “established under the Law No. 6/81 (Maldives Monetary Authority Act)”, but Law No. 6/81 does not mention the FIU.
- The 2010 Banking Act designates the FIU as the recipient of suspicious transactions reports (STRs) from banks.
- Decision to create an FIU was taken in August 2004 by representatives from the MMA, MPS, MFA, MFT and the Law Commission of Maldives.
- In February 2006, the MMA issued an “AML/CFT” Circular informing that the FIU for Maldives “is currently established” within MMA; the Circular has no legal basis, is not enforceable, and does not address terrorist financing.

### Receipt of STRs and scope
- Section 38(a)(4) of the Banking Act provides that STRs must be sent to “the Financial Intelligence Unit of the MMA.”
- Banks must report to the FIU within two working days “where they suspect or have grounds to suspect that funds or property, regardless of the amounts, are the proceeds of crime, or are related or linked to the financing of terrorism” (Section 38).
- No other authority is designated for the receipt of STRs in law or guidance; the FIU appears as the national center for receiving STRs and other relevant money laundering or terrorist financing information from the banking sector.
- Due to recent enactment of the Banking Act, no bank had filed a report on the basis of the law at time of assessment.
- Prior to the Banking Act, four STRs were submitted under the MMA AML Circular (two related to suspected proceeds of drug trafficking; two related to unusually large transactions deemed legitimate).

### Analysis of STRs and FIU powers
- The FIU’s powers to analyze STRs are not set out in any legislation.
- Authorities state the FIU considers STR details and collects information from various sources before determining suspiciousness and forwarding to LEAs.
- At assessment, the FIU had two staff members who analyze STRs; no information provided on type of analysis conducted.
- FIU drafted standard operating procedures (SOPs) specifying operational and strategic analysis of STRs in anticipation of AML/CFT legislation and additional staff.

### Dissemination of STRs and legal constraints
- Section 33 of the 2010 Banking Act provides that the “MMA must notify the relevant authority concerning any need for additional action regarding this matter,” interpreted by authorities as a power for dissemination to law enforcement agencies.
- The Act is not explicit that the FIU itself may disseminate STRs; authorities understand the FIU has power to disseminate without recourse to other MMA instances, but the wording assigns notification power to the MMA rather than expressly to the FIU.
- Of four STRs received, the FIU disseminated one to the MPS for further action; this dissemination occurred prior to the entry into force of the 2010 Banking Act and without a legal basis.
- Authorities indicated potential dissemination to other agencies such as MCS or DIE if needed; this has not arisen.

### Guidance to reporting institutions (c. 26.2)
- The MMA AML Circular provides guidance to banks and money transfer institutions on detection of suspicious transactions and reporting form; Section 8 lists ten activities that may indicate money laundering (non-exhaustive).
- Section 9 of the Circular indicates institutions should report to the FIU within three business days, providing sufficient details so the FIU can “investigate and prosecute the activities.” Authorities clarified the FIU does not conduct investigations or prosecutions but transmits cases to the MPS.
- A STR form is attached to the MMA AML Circular.
- The new Banking Act provides that the MMA shall prescribe by regulation the manner and form by which “banks, other financial institutions and designated non-financial business and professions” shall comply with AML/CFT obligations; no regulations have been issued under this Act yet.
- No guidance has been provided to other financial institutions or DNFBPs.

### Access to information and information channels (c. 26.3–26.4)
- There are no statutory or regulatory provisions enabling the FIU to access financial, administrative and law enforcement information it requires.
- In practice, the FIU requests and receives information from the MPS (criminal background information on all four STRs was received in less than a day).
- The FIU indicated it could request information from reporting entities, banks (including when not author of the STR), MCS, DIE, the real estate registry (Housing Ministry), Ministry of Transportation, and the Company Registrar (but Company Registrar records are manual and unlikely to be timely).
- Section 38(a)(5) of the Banking Act is interpreted by authorities as enabling the FIU to request additional information from reporting banks, including information related to an STR filed by another bank; this provision merely sets out the reporting requirement and does not provide sufficient grounds to authorize obtaining information as required under the standard.
- Prior to December 2010, the FIU used the AML Circular to obtain additional information from reporting institutions despite lacking legal power; banks responded in practice but timing was not provided.
- Information channels are informal and lack legal basis; authorities could, for example on confidentiality grounds, refuse to provide information.

### Dissemination safeguards and tipping-off (c. 26.5)
- Section 11 of the Banking Act prohibits MMA staff from tipping off information except “for the purpose of the performance of [their] duties or when lawfully required [...] by a court”.
- Authorities interpret Sections 33 and 11 as giving the FIU power to forward relevant information to LEAs, but these provisions do not expressly authorize the FIU to disseminate financial information to LEAs for investigation; Section 33 grants notification power to the MMA, not the FIU.
- FIU draft SOPs state that once a STR is classified “selected for investigation” it will be disseminated to relevant law enforcement agencies; there is no legal basis for dissemination.
- In practice, one STR was disseminated to MPS for investigation without legal basis.

### Operational independence (c. 26.6)
- The FIU operates as a unit within the MMA under the management and operational structure of the MMA.
- It is managed under direct supervision of an Executive Director of the MMA in charge of Human Resources Division who reports to the Governor.
- Day-to-day management is left to the FIU manager; in practice FIU responsible for decisions regarding analysis and dissemination of STRs.
- Cases touching on “issues relating to the overall management of the MMA” (including hiring/firing and treatment of information requests from other agencies) are discussed with the Governor; FIU dependent on Governor’s decision in these instances.
- FIU does not have a separate budget; recruitment and retention depend on the MMA budget. FIU staff conduct recruitment process but overall budget determined by MMA.

### Protection and security of FIU information (c. 26.7)
- FIU information is held on the main MMA data server, not on a separate server; access granted by the Governor under MMA IT policies.
- Only FIU staff and IT administrators have access to FIU data on the main server; MMA backs up main data server and holds back-ups off-site.
- FIU office is physically located in MMA building (secure, pass-controlled entry). The two FIU officers do not have a secure separate office; physical records kept in a locked filing cabinet; other MMA staff have direct access to FIU premises.
- Plans exist to provide the FIU with a separate secure office; FIU draft SOPs address electronic and physical data security.

### Reporting, international cooperation, and Egmont (c. 26.8–26.10)
- The FIU does not publicly release periodic reports. The MMA annual report contains a general report on FIU activities but lacks money laundering and terrorist financing statistics or typologies.
- Decision to apply for Egmont membership has been considered but postponed until AML/CFT legislation is passed and the FIU is legally established.
- Section 54 of the Maldives Banking Act, 2010, authorizes the MMA to share information with foreign counterparts. A MoU was signed in December 2010 with the FIU of the United Arab Emirates to facilitate cooperation and exchange of information on banking supervision, technical assistance and training, as well as combating money laundering and terrorist financing.
- Authorities state both the law and the MoU provide basis for exchange of information related to STRs as well. Outside the banking sector, lack of legal framework for the FIU inhibits information sharing. Egmont Principles have not been tested or implemented.

### Adequacy of resources and systems (R.30)
- FIU staffing and training:
  - The FIU currently has two staff members and anticipates recruiting more staff in 2011.
  - May rely on two officers in the Legal Department for limited assistance at FIU request; these officers do not have access to FIU data on the MMA server.
  - Current head of the FIU has a law degree, has been with FIU since 2006, and has been well trained in AML/CFT; MMA contact officers have also received AML/CFT training.
- Resource sufficiency:
  - Prior to mandatory reporting, one officer was sufficient to analyze and disseminate the four STRs received.
  - Banking Act 2010 is anticipated to increase reporting and FIU workload; current resources may be too limited.
  - Additional staff needed for core FIU functions: guidance to reporting, periodic reports on activities/trends/typologies, and feedback to reporting entities.
- IT and database:
  - FIU does not have a database but is developing software and database system expected to run in the first half of 2011.
  - Electronic database not needed for the four STRs received to date, but anticipated necessity once draft AML/CFT legislation introduces cross-border currency reporting and cash transaction reporting in addition to STRs.
- Budget:
  - FIU prepares its own budget annually; submitted as part of MMA budget to Board of Directors; FIU budget is constrained by overall MMA budget and not independent.
  - According to FIU manager, current budget is adequate.

### Statistics (R.32)
- Four STRs have been filed so far; all related to suspicions of money laundering and were filed by one bank and one money remitter.
- There has been no STR related to terrorist financing.
- Reported numbers by year:
  - 2009: STRs received 4; STRs analyzed 4; STRs disseminated 1
  - 2010: STRs received 0; STRs analyzed 0; STRs disseminated 0

### Effectiveness assessment and main findings
- Overall lack of a legal framework undermines Maldives’ efforts to establish an effective FIU.
- Interim FIU within MMA has laid groundwork for an FIU with clear legal basis once appropriate laws are passed.
- FIU has spearheaded AML/CFT efforts and created useful, although informal, inter-agency contacts.
- FIU is the sole recipient of STRs filed by banks but is not authorized to receive STRs from other financial institutions or DNFBPs.
- Due to lack of defined legal powers for analysis and dissemination, and limited information on analysis performed, it is not possible to establish the efficiency and usefulness of FIU analysis to law enforcement agencies.
- The FIU not being expressly granted power to disseminate financial intelligence to LEAs could lead to potential filtering by MMA; this has not yet caused practical difficulties but should be remedied.
- Lack of operational independence is evident; many stakeholders view MMA and the FIU as a single entity.
- Staffing appropriate when reporting was non-mandatory, but will need to be increased following the 2010 Banking Act.
- Main functions and powers of the FIU need to be set out in law and clarified in line with Recommendation 26.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr1201.pdf*

### 324.      In order to comply with Recommendation 26, the authorities are recommended to:

### _cr1201 - 324.      In order to comply with Recommendation 26, the authorities are recommended to:

### Recommendations to comply with Recommendation 26
- Establish on a sound legal basis the FIU as the centre for receipt, analysis and dissemination of suspicious transactions reports from all reporting entities covered by the standard.  
- Empower the FIU to have access, directly or indirectly and on a timely basis, to financial, administrative and law enforcement information.  
- Enhance the overall quality and depth of analysis through better collection of information, improved analytical tools and further staff training.  
- Require the FIU to provide guidance to financial institutions and DNFBPs regarding the manner of reporting, including the specification of reporting forms and the procedures that should be followed when reporting.  
- Ensure that the information held by the FIU is securely protected and disseminated only in accordance with the law.  
- Grant the FIU sufficient operational independence and autonomy by:  
  - ensuring budgetary independence;  
  - ensuring that the management of the FIU has autonomy in staff selection and retention within the FIU;  
  - determining the conditions for the appointment and dismissal of the FIU head;  
  - securing premises that allow for the protection of the information; and  
  - allowing the FIU management to have an independent decision making process for the receipt, analysis and dissemination of STRs.  
- Require the FIU to publicly release periodic reports including statistics, typologies and trends as well as information regarding its activities.  
- Consider applying for Egmont membership once comprehensive AML/CFT legislation is passed and the FIU formally established.

### Compliance with Recommendation 26 — Rating and key factors
- Rating: R.26 NC
- Summary of factors relevant to s.2.5 underlying overall rating:  
  - The FIU has no clear legal authority to receive STRs related to money laundering or terrorist financing from non-bank financial institutions and DNFBPs.  
  - The FIU does not have specific authority to analyse and disseminate money laundering or terrorist financing related STRs.  
  - The FIU does not have sufficient and timely direct or indirect access to financial, administrative and law enforcement information.  
  - The FIU does not provide guidance to financial institutions and DNFBPs on the specifications of reporting forms or the procedures that should be followed when reporting.  
  - The FIU does not have sufficient operational independence and autonomy to ensure that it is free from undue influence or interference.  
  - The information held by the FIU is not securely protected.  
  - The FIU does not publicly release periodic reports.

### Legal framework and institutional responsibilities
- Relevant laws: the PC, the Police Act 2008 (Act No. 05/2008 of August 5, 2008), the Drugs Act, the Terrorism Act, Corruption Act, ACC Act, the Prosecutor General’s Act (Act No. 9/2008).  
- Investigation of predicate offenses: responsibility of the MPS under Section 6(6) and (7) of the Police Act.  
- MPS and ACC jurisdiction on corruption: MPS can investigate corruption; the ACC is mandated to investigate corruption but only when it involves the State (see Section 24 of the ACC Act). As of the time of writing, the ACC cannot investigate money laundering.  
- ACC authority (summary of Section 24 of the ACC Act): powers over all institutions and staffs of the State, companies owned in whole or in part by the Government, and bodies financed by or subsidized by the State; may use powers against foreign citizens with a connection to an investigated case.  
- Coordination between MPS and ACC: informal communication may occur, but no established mechanism; authorities intend to regulate via an MoU in the future.  
- Prosecution: all law enforcement agencies send cases needing prosecution to the Prosecutor General’s Office (PGO), established under the 2008 Constitution.

### Designation of authorities for ML/TF investigations
- The MPS is the sole investigative agency with the mandate to investigate ML/TF.  
- Section 6(6) and (7) of the Police Act designates the MPS as lead investigative agency for all criminal matters in the Maldives.  
- At the time of assessment there had not been any investigations, prosecutions, or convictions for money laundering or terrorist financing in the country. The MPS focuses on the predicate crime (i.e. drug-related offenses) rather than money laundering.

### MPS structure, capacities and resources
- MPS comprised of three major commands: Crime Management Command, Operations & Regional Policing Command, and Resource Management Command.  
- Specialist units in the Crime Management Command include:  
  - Drug Enforcement Department (DED) — narcotics and alcohol;  
  - Serious and Organized Crime Department (SOCD) — organized crimes such as gang violence and terrorism;  
  - Property and Commercial Crime Department (PCCD) — theft, robbery, forgery, counterfeit currency, and other financial crimes;  
  - Family and Child Protection Department (FCPS);  
  - Major Crime Investigation Department — major corruption and white collar crimes;  
  - Forensic Department (FSD);  
  - Intelligence Department (ID) — gathers intelligence on criminals, crime groups, and crime patterns, including extremism and terrorism.  
- Nationwide infrastructure and staff:  
  - There are a total of 50 police stations in the entire country, distributed based on population density.  
  - The total staff of the MPS numbers approximately 700 officers.  
  - The MPS disposes of one boat in each atoll, for a total of 20 boats.  
- Case backlog: Table 16 notes backlog evident in difference between Logged (recorded by the MPS) and Sent to PGO; because of backlog the MPS no longer forwards cases which only deal with the use of drugs to the PGO for prosecution.

### Cooperation with other agencies
- MCS: staff approximately 730 officers, 100 stationed at the airport; can search luggage and seize illegal goods which are then sent to the MPS; must cooperate with an MPS officer to detain or search persons; does not have power to conduct investigations and must send cases to MPS; a Customs Bill pending in Parliament could give MCS more powers.  
- DIE: approximately 224 employees; monitors entry and exit of foreigners; passes suspicious information to MCS or MPS; maintains a database and exchanges information with MPS and MNDF; planning to link up with MCS; does not have authority to detain persons; searches of premises require an MPS officer.

### Prosecutor General’s Office (PGO) — structure and issues
- PGO handles all criminal prosecutions in the Maldives per Section 15 of the Prosecutor General’s Act.  
- Staffing and workload: the Prosecutor General is nominated by the President and confirmed by Parliament; the office employs a total of 81 employees, of which 30 are prosecutors.  
- Prosecutor profile: prosecutors are mostly recent graduates; the office hopes to retain young prosecutors longer.  
- Case handling and constraints: cases are logged by MPS and ACC; when PGO deems a case ready it may send it back for further investigation; cases may be pending at the PGO awaiting prosecution for a period of one year. The PGO struggles with a high workload, high turnover, and an outdated case management system. One third of cases are in courts outside Malé requiring travel. The backlog was estimated to amount to 2,000 cases.  
- ML/TF prosecutions: there have never been prosecutions or convictions for the money laundering offense in the Drugs Act or for the limited terrorist financing offense in the Terrorism Act. The PGO never brought a charge under Section 6 of the Drugs Act and preferred charging for possession.

### Arrests, postponement/waiver of arrest and seizure (c. 27.2)
- In practice police sometimes postpone or waive an arrest in the interest of the investigation on authority of a senior officer; authorization must be at the level of the Deputy Commissioner of Police or higher with reasons submitted. There is no legal basis regulating this practice.  
- No explicit provision under Maldives law prohibits the investigating agency from seeking postponement or waiving arrest and/or seizure for purposes of identifying persons involved in money laundering.  
- This ability has not yet been tested in ML/TF investigations as no such investigations had been conducted at time of assessment.

### Use of special investigative techniques (c. 27.3–27.5)
- Intelligence collection methods include covert human intelligence sources (CHIS), and electronic and intrusive surveillance methods; authorities did not further explain the exact nature of intrusive surveillance methods.  
- Undercover operations: carried out under Section 8 of the Police Act; authorization given by the Deputy Commissioner of Police; Section 8 is very general and does not appear to constitute a sufficient legal basis.  
- Telephone intercepts: used primarily for narcotics investigations; assessors noted there does not appear to be any enabling legislation for telephone intercepts in criminal investigations; authorities expressed concern about constitutionality and prefer interception to be legislated.  
- Controlled delivery: both MPS and PGO stated controlled deliveries were used (almost exclusively for drug operations); no statistics were available; use of controlled delivery has no legal basis and may compromise investigations and endanger officers.  
- ML/TF investigative techniques: there have not been any ML/TF investigations; lack of legal basis for telephone intercepts and controlled delivery would seem to preclude their use in ML/TF cases.  
- Specialized investigation and international cooperation: financial crime identified as a priority in the MPS’s 2011-2013 strategic plan but authorities acknowledged lack of capacity and technical knowledge; no requests to or from other countries for cooperative investigations to date; FIU is very small and fulfills more of a coordinating role; MPS provides some specialized training including foreign assistance and a small unit of financial investigators; a few scholarships offered in 2011 in financial investigation such as fraud and forensic accounting.

### Review of ML/TF trends (c. 27.6)
- An AML/CFT Coordination Committee was formed in 2007 including representatives from AGO, Capital Markets Development Authority, DIE, MCS, MMA (including the FIU), MPS, Ministry of Finance and Treasury, Ministry of Foreign Affairs, and PGO.  
- Information exchange has occurred including on methods and trends of money laundering and terrorist financing, but there has been no formal review of methods and trends to date.

### Ability to compel production of documents and searches (c. 28.1)
- MPS powers per Section 8(b) of the Police Act: “the authority to stop and question persons, arrest persons on suspicion of a crime, conduct searches; obtain samples from suspects, uncover evidence, maintain and safeguard the same, investigate criminal acts, detain suspects held for investigation, and extend the period of detainment of suspects.”  
- Practical options for obtaining documents from financial institutions:  
  - Request banks directly — responses may take weeks or months.  
  - Compel documents through the MMA — MMA will only pass information that relates to the suspect only, his/her personal account, and will not require banks to provide information on the suspect’s associates.  
  - Obtain a court order — authorities state they must meet a very high threshold to prove probable cause to a court.  
- Evidence Act 1976 (Act No. 24/76), Section 6: courts may deem a fact established if satisfied that the necessary principles applicable have been fulfilled; if the court feels a fact has been established reasonably on a balance of probabilities it may deem such fact established subject to any procedure or principle established on the matter.  
- In practice courts do not follow a regular trend when assessing the level of evidence required for obtaining documents, and for searches of persons and premises; the level of evidence required varies considerably case-by-case, creating unpredictability for MPS access to information.  
- Differing legal interpretations: MPS interprets production of a suspect’s financial information to include records of the suspect’s associates; the MMA interprets it as limited to information pertaining to the actual suspect. These differing interpretations hinder investigations into suspects’ financial and economic ties.

*Source: _cr1201 - 324. In order to comply with Recommendation 26, the authorities are recommended to:*

### 360.      The MPS’s powers are not used in money laundering or terrorist financing investigations

### The MPS’s powers are not used in money laundering or terrorist financing investigations

### Use of MPS powers and mandate
- The MPS’s powers are not used in money laundering or terrorist financing investigations because there have never been any such investigations. (360)
- The ACC has two options when it seeks information from banks:
  - If information relates to the alleged offender the ACC sends its request through the MMA, as per Section 25 of the Corruption Act. (361)
  - If information concerns persons other than the alleged offender the ACC can request it directly from the banks under Section 22(e) of the ACC Act. (361)
- The ACC does currently not have the mandate to investigate money laundering or terrorist financing, only public sector corruption. (361)
- The MPS has the power to take witnesses’ statements for use in investigations and prosecutions of money laundering, terrorist financing or any other offense pursuant to Section 8 of the Police Act. (362)

### Statistics, backlog, and resources
- The difference between Logged and Sent to PGO is ascribed to a substantial backlog in the judicial system involving investigating, prosecuting, and judicial authorities. (363)

- Table 16: MPS criminal investigation statistics (Offenses Logged / Sent to PGO)
  - Weapons / Explosives: 2007 Logged 5, Sent to PGO 0; 2008 Logged 63, Sent to PGO 13; 2009 Logged 74, Sent to PGO 16; 2010 to date Logged 55, Sent to PGO 12. (Table 16)
  - Theft: 2007 Logged 3,966, Sent to PGO 301; 2008 Logged 3,927, Sent to PGO 500; 2009 Logged 4,007, Sent to PGO 663; 2010 to date Logged 2,323, Sent to PGO 243. (Table 16)
  - Robbery: 2007 Logged 414, Sent to PGO 41; 2008 Logged 600, Sent to PGO 102; 2009 Logged 589, Sent to PGO 137; 2010 to date Logged 314, Sent to PGO 52. (Table 16)
  - Currency Counterfeit: 2007 Logged 104, Sent to PGO 3; 2008 Logged 32, Sent to PGO 26; 2009 Logged 41, Sent to PGO 18; 2010 to date Logged 37, Sent to PGO 7. (Table 16)
  - Bribery: 2007 Logged 2, Sent to PGO 0; 2008 Logged 1, Sent to PGO 0; 2009 Logged 2, Sent to PGO 1; 2010 to date Logged 7, Sent to PGO 0. (Table 16)
  - Terrorism: 2007 Logged 2, Sent to PGO 2; 2008 Logged 0, Sent to PGO 0; 2009 Logged 1, Sent to PGO 1; 2010 to date Logged 0, Sent to PGO 0. (Table 16)
  - Drugs: 2007 Logged 1,495, Sent to PGO 384; 2008 Logged 2,497, Sent to PGO 1,068; 2009 Logged 2,366, Sent to PGO 982; 2010 to date Logged 928, Sent to PGO 487. (Table 16)
- “Logged” means registered or recorded. (Table 16 note) (363)
- Table 17: Corruption Investigation Statistics from 1991 until 2009
  - 1991-2007: Corruption cases reported 68; Cases investigated 779; Cases prosecuted No information available; Convictions 92; Acquittals 67; (Table 17 shows 25 as an additional figure—original layout identifies “25” under Acquittals but presentation in the source is fragmented.) (Table 17)
  - 2008: Corruption cases reported 140; Cases investigated 15; Cases prosecuted 10; Convictions N/A; Acquittals N/A. (Table 17)
  - 2009: Corruption cases reported 254; Cases investigated 153; Cases prosecuted 12; Convictions N/A; Acquittals N/A. (Table 17)
  - 2010: Corruption cases reported 917; Cases investigated 324; Cases prosecuted 17; Convictions N/A; Acquittals N/A. (Table 17)
- Table 18: Criminal prosecution statistics for 2008 and 2009 (provided by the PGO)
  - Cases Prosecuted in the Courts: 2008 = 1417; 2009 = 2129. (Table 18)
  - Cases returned for various reasons: 2008 = 607; 2009 = 1107. (Table 18)
  - Cases yet to be prosecuted in the courts: 2008 = 1451; 2009 = 596. (Table 18)
  - Convictions: 2008 = 230; 2009 = 1163. (Table 18)
  - Total Prosecutions: 2008 = 3475; 2009 = 3832. (Table 18)

- Resource and training constraints:
  - All agencies interviewed (MPS, PGO, ACC, MCS, DIE) raised concerns regarding a lack of resources, both technical resources and human resources. (365)
  - MPS concerns: limited level of training to address evolving crime and inability to effectively conduct money laundering and terrorist financing investigations; financial investigation training has been provided to a limited number of officers; further training required. (366)
  - PGO staffing and constraints: professional staff of approximately 30 lawyers; total of 81 employees as of the end of 2009; facing resource constraints related to heavy workload and retention of qualified staff; current backlog approximately 2,000 cases; no dedicated resources for money laundering or terrorist financing prosecutions. (367)

### Effectiveness and investigative practice
- As of the on-site mission there had been no money laundering or terrorist financing investigations by the MPS and, consequently, no money laundering or terrorist financing prosecutions. (368)
- The MPS focuses on the predicate offenses; limited money laundering and terrorist financing offenses that exist in the country, lack of resources, and insufficient specialized training severely limit capacity to conduct financial investigations. (369)
- The MPS does not sufficiently consider financial investigations as part of its overall investigation strategy; authorities admitted they focus on the predicate offenses and not on money laundering. (370)
- Due to the number of drug cases and the amounts of proceeds they generate, the risk of money laundering seems high in Maldives; following the money is important to identify higher-level criminals, recover funds, and deprive criminals of proceeds. (370)
- No specialist teams for the conduct of financial investigations have been established in the law enforcement agencies. (371)
- The MMA considers that the MPS can only obtain information regarding the suspect himself and not his associates, making it harder to identify accomplices; in theory MPS can seek a court order, but courts set a very high threshold for probable cause, and without voluntary cooperation from FIs the MMA’s assistance will be needed. (372)
- The current general criminal legal framework and the lack of interagency cooperation is not a good background against which to fight money laundering and terrorist financing. (373)

### Recommendations and comments (section 2.6.2)
- To comply with Recommendation 27, the authorities are recommended to:
  - Ensure that money laundering and terrorist financing offenses are investigated. (374)
  - Ensure that money laundering and terrorist financing offenses are prosecuted. (374)
  - Provide a legislative basis for the MPS to postpone or waive the arrest of suspected persons or the seizure of money. (374)
- Additional considerations (not directly required by the Recommendation):
  - Create a legal basis in order to use special investigative techniques. (375)
  - Apply special investigative techniques in money laundering and terrorist financing investigations. (375)
  - Create permanent groups to investigate proceeds of crime. Consideration could be given to cooperation with foreign authorities, including using special investigative techniques, given proper safeguards. (375)
- To comply with Recommendation 28, the authorities are recommended to:
  - Enable its investigative agency to compel production of documents and records that also pertain to associates, or to have a reasonable expectation of obtaining a court order. (376)
  - Effectively use the power to compel documents and take witness testimony in money laundering and terrorist financing investigations. (376)

### Compliance with Recommendations 27 & 28 (section 2.6.3)
- R.27: NC
  - No money laundering or terrorist financing investigations, prosecutions and convictions. (Compliance summary)
  - No clear legal basis for the MPS on which to postpone or waive arrest of persons or seizure of money. (Compliance summary)
  - Effectiveness was not established because the MPS has never used its powers for money laundering or terrorist financing investigations. (Compliance summary)
- R.28: PC
  - The MPS cannot always effectively compel documents. (Compliance summary)
  - Effectiveness has not been established because the MPS has never used its powers for money laundering or terrorist financing investigations. (Compliance summary)

---

### Cross-Border Declaration or Disclosure (SR.IX) — key findings
- Legal framework and declaration system:
  - There are currently no measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments. (377)
  - There is no Customs Act in Maldives; MCS derives its powers from a Customs Regulation of 2008 issued by Presidential Declaration and brought under the new constitutional framework by Law No. 6/2008. (378)
  - At the time of the on-site visit a Customs Bill was being debated in Parliament and expected to be passed in 2011; the draft AML/CFT law includes a declaration system for amounts greater than Rf 150,000 (approximately US$11,000) or its foreign equivalent. (379)
  - Maldives does not currently have a disclosure or declaration system in place. (380)
  - MCS is working with the FIU to establish a non-obligatory cross-border declaration system as a temporary measure pending legislation. (381)
  - Article 11(1) of the draft AML/CFT Act: any natural person entering or leaving Maldives transporting or arranging to transport cash, or bearer negotiable instruments in an amount equal to or above Maldivian Rf 150,000 (approximately US$11,000) or its equivalent in foreign currency shall be subject to the obligation to report the said amount to the customs authorities. (382)

- Powers to request information and restrain currency:
  - There are currently no requirements for Customs to request information on the origin and use of cash. (383)
  - The draft AML/CFT Act contains no specific power for the MCS to request information on the origin and use of cash; however, the draft law allows Customs to seize non-reported amounts if they suspect those amounts of being linked to money laundering or terrorist financing. (384)
  - Section 4 of the Customs Regulation gives MCS officers power to stop and search, demand production of relevant documents, open packages and examine goods, and, with cooperation of an MPS officer, search persons arriving in the Maldives. (385)
  - MCS general powers (as enforced under the parent act passed by Parliament in 2008) include:
    - Check whether imported items are not prohibited (includes items via post and courier) (Part 1, Section 6.1(a) and Section 7.1(a)). (386)
    - Check whether exported items are not prohibited (Part 2, Section 7.1(a)). (386)
    - Routinely check passenger baggage of incoming and outgoing passengers (Part 4, Section 1). (386)
    - Frisk passengers (Part 4, Section 3). (386)
    - Confiscate any items imported or exported contrary to the laws of Maldives (Part 4, Section 5). Note: there is no foreign exchange law or restriction on currency being imported into or exported out of the Maldives. (386)
    - Check or inspect passenger baggage for illegal items and items requiring Government permission (Part 4, Section 7). (386)
    - Give inward and outward clearance to ships and vessels (Part 9). (386)
  - There is no legal provision for the MCS to restrain currency. (387)
  - Customs representatives stated that their general powers do not allow them to search passengers and seize currency or other proceeds of crime; Customs Regulation provides power to investigate offenses under that Regulation (which does not include money laundering and terrorist financing). (388)

- Retention and access to information:
  - There is no legal authority to retain information regarding currency and identification and no system in place to retain such information. (389)
  - Customs may ask passengers about amount and origin of large amounts of cash and keep the information for intelligence purposes, sharing on an ad hoc basis with MPS; no statistics or figures were provided. (389)
  - In absence of legislation MCS plans a voluntary disclosure system; SOPs and policies for this system have yet to be developed. (390)
  - The FIU does not have direct access to information on currency that MCS collects on an ad hoc basis; MMA has received information only relating to currency suspected of being counterfeit. (391)

- Domestic cooperation:
  - Agencies involved in border control: MCS, DIE, MNDF and MPS. There is some domestic cooperation relating to AML/CFT through the AML/CFT Steering Committee. (392)
  - MNDF, MPS, DIE and MCS meet more frequently (at least fortnightly) for operational matters; MNDF has a coast guard assisting border control; under Article 41 of the Armed Forces Act 1/2008 the Captain at sea has powers of any Maldivian law enforcement agency. (393)
  - MNDF stated it had MoUs with MCS, Maldives Port Authority and Border Security but copies were not provided. (393)

- International cooperation:
  - Maldives is a member of the World Customs Organization (WCO) and shares information in accordance with WCO rules. (394)
  - Maldives has signed regional agreements including:
    - An MoU with the Centre for Customs & Excise Studies (CCES), signed on February 5, 2007. (394)
    - An MoU concerning the Customs Asia Pacific Enforcement Reporting System, signed on January 25, 2006. (394)
    - Obligations to share information under SAARC membership and SAARC Agreement on Mutual Administrative Assistance in Customs Matters signed on November 13, 2005. (394)
  - Bilateral agreements and MoUs with other countries’ Customs services noted (dates and partners provided in source), but copies of agreements were not provided to the assessment team. (395–396)
  - Customs services from other States (such as Sri Lanka and India) have informally conveyed concerns about transportation of currency across Maldives borders; MCS can only informally convey such information because there is no legal authority to monitor or require information relating to cross-border currency movement. (397)

*Source: _cr1201 - 360.      The MPS’s powers are not used in money laundering or terrorist financing investigations*

### 398.      There are currently no systems for cash declaration or disclosure at the border, and

### _cr1201 - 398.      There are currently no systems for cash declaration or disclosure at the border, and

### Cross-Border Currency Declaration and Sanctions (SR.IX)
- There are currently no systems for cash declaration or disclosure at the border, and subsequently there is no system of sanctions for making false declarations or disclosures. (para 398)
- Article 11(3) of the draft AML/CFT law provides that the customs authority shall have the power to impose administrative sanctions in cases of non-compliance. (para 399)
- There are currently no sanctions for cross-border physical transportation of currency for the purposes of money laundering or terrorist financing; money laundering and terrorist financing are not criminalized in line with the standard. (para 400)
- There is currently no confiscation provision that relates specifically to currency crossing the border. (para 401)
- MCS would contact the MPS if they found obvious criminal activity (for example, drugs and money being physically transported together), but MCS were not aware of restraint and confiscation provisions. (para 402)
- Draft AML/CFT law, Article 11: “the customs authority shall have the power to seize the whole amount of the non-reported cash or bearer negotiable instruments if there is suspicion of money laundering or financing of terrorism or when there has been a false declaration under this Article.” Non-reporting alone would not be sufficient for restraint or confiscation; non-reported amounts could be seized pending confiscation under relevant provisions. (para 403)
- There is currently no confiscation of currency pursuant to the UNSCRs; Immigration manually checks UNSCR lists against incoming passenger lists but no hits have arisen; DIE would notify MPS, MCS and MNDF if a person came up on the list. (para 404)

### Precious Metals and Stones / Notifications
- Smuggling is criminalized under Section 13 of the Export Import Act 1979; intelligence is shared with the MPS through the Customs Enforcement Network. There are no policies or procedures for notifying countries of origin or their competent authorities that precious gems and stones have been transported across borders, and it is unclear whether such notifications are carried out in practice. (para 405)
- Gold importation/exportation must be declared and smuggling of gold is in violation of the Export Import Act. (para 406)
- MCS have designed a currency declaration form and a voluntary disclosure form of currency exceeding US$15,000. (para 411)

### Cross-Border Reporting Systems, Training, and Safeguards
- There is currently no system for cross-border reporting and keeping the information; consequently there are no safeguards in place. (para 407)
- Maldives has yet to implement specific training, data collection, enforcement or targeting programs relating to cross-border currency as it lacks a border currency declaration system. Authorities are considering a voluntary system of cross-border currency declaration to prepare officers for a future mandatory system under AML/CFT legislation. (para 408)
- MCS provides in-house on-the-job training for officers on functions including investigative techniques, enforcement and data collection. (para 409)
- No supra-national approach applies to the Maldives; criterion not applicable. (para 410)

### MCS Investigations — Key Statistics (Table 19)
- Number of under invoicing cases investigated:
  - 2006: 96
  - 2007: 163
  - 2008: 232
  - 2009: 177
- Number of administrative sanctions imposed (e.g. fine):
  - 2006: 57
  - 2007: 97
  - 2008: 138
  - 2009: 88
- Number of Section 13 of the Export Import Act 1979 cases sent for investigation:
  - 2006: 12
  - 2007: 5
  - 2008: 15
  - 2009: 20
(para 411, Table 19)

### Border Arrivals Statistics (R.32) (Table 20)
- Total Number of Arrivals:
  - 2007: 739,650
  - 2008: 759,287
  - 2009: 719,040
  - 2010: 864,506
- Statistics identify number of passengers entering each port, but there are no statistics for outgoing passengers. (para 413, Table 20)

### Adequacy of Resources — Customs (R.30)
- MCS staffing and deployment:
  - MCS has approximately 730 officers, 100 of whom are dedicated to the Malé airport. (para 414)
  - Any time a plane arrives in Malé, MCS will station 16 to17 officers at the airport including a Duty executive officer, an officer in charge, a cashier, and a legal officer. If flights are considered high risk (for example, flights originating in India or Sri Lanka are currently considered high risk) two further officers will be stationed at the airport. (para 414)
  - MCS Officers have yet to be trained in AML or CFT or cross-border declaration but such training is anticipated to commence in the near future. (para 414)
- Recruitment standards include checking criminal records, academic achievement and work experience per Civil Service Commission rules. (para 415)
- Resource constraints for sea borders:
  - MCS have four patrol boats (two in Malé, one in the Northern area and one in the Southern area). (para 416)
  - MNDF Coast guard has four inshore vessels and three offshore vessels. (para 416)
- Effectiveness observations:
  - No disclosure or declaration system was in place at the time of the assessment; establishment of a declaration regime is dependent on passage of the draft AML/CFT law. (para 417)
  - Effective enforcement across approximately 288 inhabited Maldivian islands is not feasible. Cross-border currency transfers are identified as a money laundering and terrorist financing risk; neighboring countries represent a serious risk of proceeds of crime, money laundering, and terrorist financing. (para 418)

### Recommendations (to comply with Special Recommendation IX) (para 419)
- Introduce a compulsory cross-border currency declaration system or a disclosure system responding to the characteristics laid out in Special Recommendation IX and draft policies and procedures to support that system.
- Take legislative steps to ensure that a designated agency (such as the MCS) has authority to collect information from the carrier of currency or bearer negotiable instruments on the origin of the currency or bearer negotiable instruments and their intended use in cases of suspicion of money laundering or terrorist financing.
- Provide the designated agency with the authority to stop or restrain cash or bearer negotiable instruments for a reasonable time to ascertain whether evidence of money laundering or terrorist financing may be found, where there is suspicion of money laundering or terrorist financing; or where there is a false declaration.
- Establish in law effective, proportionate and dissuasive sanctions for false cross-border currency declarations/disclosure or failure to declare/disclose.
- Establish in law effective, proportionate and dissuasive sanctions for the physical transportation of currency or bearer negotiable instruments that are related to money laundering or terrorist financing.
- Ensure that the prescribed threshold for declaration should not exceed US$/EUR 15,000.
- Seek closer cooperation with neighboring countries, including mechanisms for regular information exchange on cash seizures and cross-border transportation reports.
- Ensure that the designated agency reports unusual movements of precious metals and stones to the countries of origination or destination.

### Compliance Rating
- SR.IX: NC — There is no declaration or disclosure system in place in the Maldives. (para 2.7.2)

### Preventive Measures — Financial Institutions (introductory points)
- Types of financial institutions active: banks, insurance companies, insurance intermediaries, finance companies, money remittance service providers, foreign exchange businesses and credit card companies. (para 420)
- Only banks and players in the securities market are subject to AML/CFT obligations; insurance companies, intermediaries, leasing companies are not subject to obligations of relevance for this Section. Money exchangers are required to comply with very limited identification measures and are not supervised for AML/CFT purposes. (para 421)
- Banks are supervised by the MMA; securities market intermediaries are regulated by the CMDA. (para 422)
- At the time of the on-site visit there were no AML/CFT obligations on the financial sector except for a few (not yet enforceable) requirements in the securities sector. A new 2010 Banking Act (Law No. 24/2010) was issued less than eight weeks after the on-site, imposing AML/CFT obligations on banks (Section 38(a) requires measures including identification of customers and beneficial owners, maintenance of identity and transaction records, submission of suspicious transaction reports to the FIU, monitoring and internal programs). The MMA will prescribe regulations to implement these measures; these regulations had not yet been issued. (para 426)
- Relevant existing texts:
  - CMDA Regulation on Anti-Money Laundering in Securities-Related transactions (CMDA 2010 AML Regulations), issued October 10, 2010, mandatory and enforceable under Section 59 of the Maldives Securities Act; licensees given up to six months to comply. (para 427)
  - MMA AML/CFT Circular to banks and institutions involved in money transfer activities issued February 22, 2006 (No. CN-CBS/200/05): addresses AML but is considered guidance and not enforceable; MMA considers it lacks sound legal basis and no sanctions are listed for non-compliance. Some banks treated it as mandatory in practice. (para 427)
- Constitutional/regulatory context: entry into force of the 2008 Constitution requires regulations to be issued under a parent Act; Law for the General Regulations (Law No. 6/2008) re-issued 83 existing regulations temporarily, including the MMA Insurance Industry Regulation and the MMA Regulation for Finance Leasing Companies and Finance Leasing Transactions. (para 428)

*Source: _cr1201 - 398.*

### 429.      In addition, the new Maldives Banking Act explicitly “authorizes” a number of MMA

### _cr1201 - 429. In addition, the new Maldives Banking Act explicitly “authorizes” a number of MMA

### Regulatory texts and enforceability
- MMA Regulation on Fit and Proper Requirements (noted as an MMA regulation).
- Other relevant texts issued:
  - MMA Regulations Outlining Arrangements for Money Changers dated March 1, 1987. One page document governing money changing business; outlines limited rules on foreign exchange dealings and customer identification; has no basis in the MMA Act or any other law and is not enforceable — considered mere guidance for this assessment.
  - MMA Electronic Funds Transfer Guidelines. Issued under Sections 4 and 36 of the MMA Act.
  - MMA Regulations for Banks and Financial Institutions of 1988. Issued under Section 36 of the MMA Act; in force at the time of the on-site visit but repealed with the December 2010 enactment of the Banking Act.
  - CMDA Securities (General) Regulations (2007, as amended in 2009).
  - Dealers and Representatives Licensing Regulation.
  - CMDA Regulation on the Conduct of Securities Business (Regulation No. 03/2006).
  - MMA Guidelines for the Administration of Insurance Agents (2010) issued under the Insurance Industry Regulations of 2004.
  - The Stock Exchange Company Licensing Regulation.
  - Regulation on Licensing and Conduct of Central Depository.
- Enforceability summary:
  - With the exception of the MMA Regulations Outlining Arrangements for Money Changers, the regulations listed above have been issued under a competent authority’s powers to regulate and are enforceable.
  - The MMA Regulations Outlining Arrangements for Money Changers and the two guidelines (MMA Electronic Funds Transfer Guidelines and MMA Guidelines for the Administration of Insurance Agents) are not enforceable and therefore constitute guidance only.

### 3.2 Risk of Money Laundering or Terrorist Financing
- Maldives does not apply a risk-based approach to AML/CFT.
- There has been no review or assessment of ML/TF threats, vulnerabilities and risks in different parts of the Maldivian financial sector to justify exclusions or distinctions in AML/CFT requirements across financial activities or institutions.

### 3.3 Customer Due Diligence (R.5 to 8) — Description and analysis
- Recommendation 5 context:
  - Only a few sector-specific texts are relevant from an AML/CFT perspective, mainly pertaining to banking and intermediaries sectors.
  - Money changers are subject to some limited CDD measures but not to other AML/CFT relevant measures.
  - Other financial institutions in Maldives have no relevant CDD, record keeping, or suspicious transaction reporting requirements.

- Prohibition of anonymous accounts (c. 5.1):
  - Banks:
    - No direct and explicit prohibition in law or regulation against opening or maintaining anonymous accounts or accounts in fictitious names.
    - No explicit requirements to deal with existing numbered accounts, nor specific identification requirements that would effectively prohibit such accounts.
    - The MMA AML Circular provides that a minimum set of information needs to be collected before a bank account can be opened or a transaction conducted, but it is non-mandatory.
    - Private sector and supervisory information: private sector representatives reported not opening or maintaining anonymous/fictitious or numbered accounts; authorities confirmed supervisory information indicates no accounts held in anonymous or fictitious names.
  - Securities sector:
    - Sections 10 and 11 of the Regulation on the Conduct of Securities Business require a written agreement between client and licensee before services are provided; agreement must set out details of licensee and client.
    - Authorities state these provisions and licensees’ internal manuals (approved by CMDA) obligate customer identification and thus prohibit anonymous/fictitious accounts.
    - CMDA 2010 AML Regulations contain more detailed identification requirements and an explicit prohibition on dealing “with anonymous persons or persons with fictitious names” (Section 4(3) of the Regulations).

- When is CDD required (c. 5.2):
  - Banks:
    - December 2010 Banking Act: banks are required to identify customers, beneficial owners, and ultimate principals and verify their identities; the law does not specify timing or circumstances for identification and the regulation called for under Section 38(a) to clarify AML/CFT obligations has not yet been issued.
    - MMA AML Circular: lists types of information to determine true identity for account opening or transactions including money transfers, to be gathered regardless of amounts involved. Circular does not guide banks/transfer services on steps when: (a) transactions involve suspicions of ML/TF; (b) doubts about veracity/adequacy of previously obtained identification data — except to note such instances may indicate suspicious activity and may justify a report to the FIU.
    - Private sector practice: representatives state information is obtained at account opening or transaction time irrespective of threshold.
  - Securities sector:
    - Sections 10 and 11 of CMDA Regulation require written agreements containing “details” of clients but not exact specification.
    - Section 4 of CMDA 2010 AML Regulations requires licensees not to open an account except after verifying identity, permanent address, national identity card number or passport for non-Maldivians, nature and place of work, present and permanent address and purpose of transaction along with any other information the licensee deems necessary.
    - Section 9.3 of CMDA 2010 AML Regulations requires information be updated regularly and continuously or whenever suspicion arises, without specifying which information must be updated.
    - CMDA regulations are not primary or secondary legislation and therefore fail to meet the standard.

- Identification measures and verification sources (c. 5.3):
  - Banks:
    - 2010 Banking Act requires banks to develop and implement measures for identification of customers, beneficial owners, ultimate principals and verification of identities, but does not specifically require verification using reliable, independent source documents/data, and implementing regulation is pending.
    - MMA AML Circular (Section 6) enumerates “minimum acceptable” information:
      - For Individual Personal Accounts and or Transactions:
        - Nationality, and date of birth evidenced by photo ID (national passport or national identity document or certified copy thereof);
        - Verified address of current residence;
        - Verified employment and/or source of income;
        - Where applicable, written confirmation from customer’s prior bank attesting to customer’s identity and history of account relationship.
      - For Corporate, Partnership, Trust, Associations and Other Entity Accounts and or Transactions:
        - Certified copy of Certificate of Incorporation, Partnership Agreement, Memorandum and Sections of Association or other similar documentation evidencing legal status;
        - Certified copy of board resolution stating authority to open accounts, transact business, borrow funds and designating persons having signatory authority thereof for the transactions through the financial institutions;
        - Verified identity and address of the Chairman of the Board of Directors, the Managing Director, and all Shareholders for a corporation (other than a publicly listed corporation), or the Managing Partner and at least one Partner for Partnerships, or the Principal owner for Sole Traders;
        - Where shareholders are not individuals, but entities such as Trusts, Partnerships etc, identification details of Directors of these entities must be obtained and verified;
        - Audited financial statements (last full year at minimum, last three years preferred) for corporation; for partnerships, and sole traders (unaudited statements may be substituted upon prior written approval of a senior management official of bank);
        - Where applicable, written confirmation from customer’s prior bank attesting to customer’s identity and history of account relationship.
      - For Minors:
        - Nationality and date of birth evidenced by photo ID (national passport or national identity document or certified copy thereof); or written confirmation thereof certified as true and correct by legal parent or guardian;
        - Verified address of current residence of minor and also of legal parent or guardian.
    - Assessment notes:
      - Despite unclear wording, authorities intended the Circular to impose identification requirements based on the listed documents/information.
      - In practice, banks reported having procedures exceeding the Circular.
      - The Circular is non-mandatory guidance and insufficient to meet the standard.
  - Securities sector:
    - Sections 10 and 11 of Regulation on the Conduct of Securities Business require written agreements; Section 4 of CMDA 2010 AML Regulations prescribes due diligence “prior to and during dealing with the customer,” including verifying identity and activities of the customer and/or original beneficiary.
    - Section 4 details verification procedures for different classes of customers:
      - For natural persons:
        - Verification of identity, permanent address, national identity card number or passport for non-Maldivians, nature and place of work, present and permanent address and purpose of transaction and any other information licensee deems necessary;
        - If dealing with an agent, a notarized power of attorney and verification of the agent’s identity;
        - If customer is of limited capacity or incompetent, information/documents of customer’s representative.
      - For legal persons:
        - Name, legal form, capital, address, tax number if any, nature of activity, names of authorized signatories, telephone numbers, date and number of incorporation and any other information licensee considers necessary;
        - Verification of existence and legal status through necessary documents such as certificates issued under laws of Maldives;
        - Acquire documents identifying natural persons authorized to deal in the name of the legal person and verify identity of the agent;
        - Acquire names and addresses of partners and shareholders whose shares amount to more than 5% of the company’s capital;
        - Acquire an official certificate issued by competent authorities duly notarized if the company is incorporated abroad;
        - Necessary safeguards to ensure validity and accuracy of information provided by customers.
    - Private sector representatives state they obtain these details in practice.
    - CMDA 2010 AML Regulations do not qualify as law or regulation and therefore do not meet the standard.

- Money changers:
  - No enforceable CDD requirements in place; some encouragement to identify clients in certain circumstances.
  - Section 5 of the Regulations outlining arrangements for money changers: money changers should give a receipt for exchange transactions containing inter alia customer’s name, passport number and nationality (required for purchase of traveler’s checks).
  - No requirements to obtain and verify identity in other currency exchange cases where traveler’s cheques are not involved.
  - Authorities do not hold information on frequency of traveler’s checks usage in Maldives.
  - No further CDD measures for money changers; thus money changers are not addressed under subsequent criteria.

### Identification of legal persons or other arrangements (c. 5.4)
- Banks:
  - Section 38(a) of the 2010 Banking Act requires banks to develop measures including identification of customers, beneficial owners and ultimate principals and the verification of their identities; exact obligations to be specified by regulation (pending).
  - MMA AML Circular guidance for corporate clients includes obtaining certified Certificate of Incorporation, Partnership Agreement, Memorandum and Articles/Sections of Association; verified identity and address of Chairman, Managing Director, and all shareholders (for non-publicly listed corporations), or managing partner and at least one partner for partnerships, or principal owner for sole traders.
  - Circular does not address identification/verification of persons purporting to act on behalf of a legal person nor does it encourage obtaining details of all directors.
- Securities sector:
  - CMDA 2010 AML Regulations (considered other enforceable means) require gathering documents identifying natural persons authorized to deal on behalf of legal persons and verification of agent identity (Section 4.2). Under the standard this should be in law or regulation rather than other enforceable means; framework not in line with standard on this point.
  - Section 4.2 elaborates procedures: gather name, address, verify existence/legal status via certificates issued by Ministry of Economic Development or relevant Authority; requirements do not mandate obtaining and verifying details of all directors of a legal person.

### Identification of beneficial owners (c. 5.5; 5.5.1 and 5.5.2)
- (Content ends at heading; further details not supplied in this unit.)

*Source: IMF country report text provided in the content unit.*

### 453.      Since the December 2010 entry into force of the Banking Act, banks are required to identify

### Since the December 2010 entry into force of the Banking Act, banks are required to identify

### Beneficial ownership and identification of principals
- Banks are required to identify their customers, the customers’ beneficial owners, the ultimate principals in transactions (paragraph 453).
- The regulation called for under Section 38(a) of the Act to clarify the details of such obligations has not yet been issued (paragraph 453).
- The MMA AML Circular:
  - Fails to provide adequate guidance as to the definition of beneficial owner or how banks should make efforts to identify the beneficial owner in case of multi-layered transactions or ownership structures by adopting a “drill-down approach” (paragraph 454).
  - Contains limited guidance prescribing minimum acceptable levels of information to be obtained for determining the true identity of customers opening accounts or making transactions whether directly or by “proxy,” but does not elaborate the term “proxy” (paragraph 454).
- There are no legally binding obligations for banks to proactively determine for all customers whether the customer is acting on behalf of another person and, if so, to take reasonable steps to obtain sufficient identification data to verify the identity of that other person (paragraph 455).
- No common practice or procedure prevails across the financial sector in the absence of specific and enforceable requirements with respect to beneficial ownership (paragraph 455).
- For customers that are legal persons or legal arrangements:
  - Banks are not legally under an obligation to take reasonable measures to understand the ownership and control structure of the customer, though some guidance is provided by the MMA AML Circular (paragraph 456).
  - No clarification exists on how banks should determine and identify the natural persons who ultimately control the customer, especially corporate clients (paragraph 456).
  - No guidance exists on any threshold limit of substantial shareholding (held individually or acting in concert) which banks should take into account while determining the beneficial owner (paragraph 456).
- Securities sector (CMDA 2010 AML Regulations):
  - Require identification of the customer and/or of the “original beneficiary” defined as “the natural person having the original intention or real interest in the relationship between the licensee and the customer” (Sections 4.1 and 3.3) (paragraph 457).
  - Allow licensees the option of taking due diligence measures with respect to either the customer, or the beneficial owner rather than both in all cases (paragraph 457).
  - Require notarized power of attorney and identity verification for agents who are natural persons; require names and addresses of partners and shareholders whose shares amount to more than 5 percent of the company’s capital (paragraph 457).
  - Do not require identification of the natural persons who comprise the mind and management of the company, nor proactive determination if a customer is acting on behalf of another and subsequent verification in all cases (paragraph 457).
  - Lack guidance on determining and verifying ownership and control in multi-layered corporate structures (paragraph 457).

### Information on purpose and nature of the business relationship (c. 5.6)
- Banks:
  - There are no legally binding obligations for banks to obtain information about the purpose and the intended nature of the business relationship (paragraph 458).
- Securities sector:
  - Section 4.1.1 of the CMDA 2010 AML Regulations requires licensees to obtain information from customers who are natural persons about the purpose of transactions (but not about the business relationship) (paragraph 459).
  - These requirements do not extend to legal persons/arrangements; no obligation exists to obtain information about the intended nature of the business relationship for any class of customers (paragraph 459).

### Ongoing due diligence on the business relationship (c. 5.7; 5.7.1; 5.7.2)
- Banks:
  - No explicit and legally binding obligations for banks to conduct ongoing due diligence on the business relationship (paragraph 460).
  - No requirements to ensure that documents, data or information collected under the CDD process are kept up-to-date and relevant by undertaking reviews of existing records, not even for higher risk categories (paragraph 460).
- Securities sector:
  - Section 4 of the CMDA 2010 AML Regulations requires due diligence “prior to and during dealing with the customer,” including verifying “the activities of the customer” (Section 4.1) and ensuring identification information is “updated regularly and continuously or whenever any suspicion regarding arises at any stage of dealing” (Section 9.3) (paragraph 461).
  - No additional guidance on what verifying the activities of the customer entails; no specific requirement to scrutinize transactions for consistency with the customer’s business and risk profile and, where necessary, source of funds (paragraph 461).

### Risk—Enhanced due diligence for higher-risk customers (c. 5.8)
- Banks:
  - No legally binding obligations for banks to perform enhanced due diligence for higher risk categories of customers, business relationships or transactions (paragraph 462).
  - No guidance provided by authorities as to which categories of customer may constitute higher risk (paragraph 462).
- Securities sector:
  - Section 5 of the CMDA 2010 AML Regulations requires enhanced due diligence for categories including PEPs, customers from countries without anti-money laundering legislation, customers dealing indirectly via modern technology (internet), charities and private organizations, and customers whose transactions represent a high risk of money laundering at the licensee’s discretion (paragraph 463).
  - The regulations do not specify what enhanced due diligence measures would involve (paragraph 463).

### Risk-based approach, simplified/reduced CDD measures (c. 5.9–5.12)
- The notion of an AML/CFT risk-based approach is not prevalent in Maldives; no risk assessment has been conducted (paragraph 464).
- Except limited enhanced due diligence under CMDA 2010 Regulations, no distinction in measures according to ML/TF risk (paragraph 464).
- No provisions allow for reduced or simplified CDD in any segments of the Maldivian financial sector; no guidelines to assist financial institutions (paragraph 464).
- Criteria 5.9 to 5.12 are therefore not applicable for this assessment (paragraph 464).

### Timing of verification of identity and exceptional circumstances (c. 5.13–5.14.1)
- Banks:
  - The 2010 Banking Act does not address timing of verification (paragraph 465).
  - MMA AML Circular provides types of information acceptable for identification of “customers wishing to open accounts and or make transactions” (Section 6); authorities consider this means verification should occur before establishing a business relationship or conducting transactions for customers including occasional transactions (paragraph 466).
  - Private sector representatives report customer identification procedures are conducted prior to opening accounts (paragraph 466).
- Securities sector:
  - CMDA 2010 AML Regulations require conducting CDD prior to dealing with the customer but contain no specific guidance relating to occasional transactions (paragraph 467).
  - Private sector representatives report identification of customers for all clients before establishing business relationships (paragraph 467).

### Failure to complete CDD before or after commencing the business relationship (c. 5.15–5.16)
- Banks:
  - The 2010 Banking Act does not indicate what banks should do if unable to complete CDD obligations (paragraph 468).
  - MMA AML Circular states customer reluctance to provide reasonable information and documentation when opening an account or in connection with a requested transaction would be considered suspicious and may be reported to the FIU (Section 8(2)) (paragraph 468).
  - No requirements or guidance for banks to consider terminating business relationships where doubts exist about veracity or adequacy of previously obtained information (paragraph 468).
  - Authorities and private sector indicate industry practice is to refuse to conduct a transaction or establish a business relationship if the customer fails to provide required CDD information in a timely manner (paragraph 469).
- Securities sector:
  - No provisions address situations where the licensee is unable to satisfactorily complete the CDD process (paragraph 470).
  - No requirements for securities licensees to consider terminating a business relationship when doubts exist about veracity or adequacy of previously obtained information (paragraph 470).

### Existing customers and anonymous accounts (c. 5.17–5.18)
- There are no obligations for banks, securities sector licensees or other financial institutions to apply CDD requirements to existing customers on the basis of materiality and risk and to conduct due diligence on such existing relationships at appropriate times, or to customers who hold anonymous or numbered accounts (paragraph 471).
- Securities sector:
  - CMDA 2010 AML Regulations are silent on existing customers (paragraph 472).
  - Authorities note identity is addressed in clauses 10 and 11 of the Regulation on the conduct of securities business (since 2006), which would prevent fictitious customer accounts as any account should be supported by a valid “national identity card” or a “company registration certificate” (paragraph 472).

### Recommendation 6 — Politically Exposed Persons (PEPs) (c. 6.1–6.5)
- General:
  - No requirement in law, regulation or other enforceable means for any financial institution other than intermediaries in the securities sector to establish whether a potential customer, customer or beneficial owner is a PEP, foreign or domestic, or to take measures listed in Recommendation 6 (paragraph 473).
- Securities sector:
  - CMDA 2010 AML Regulations require licensees to exercise enhanced due diligence to identify whether the customer is a PEP, defined to include persons occupying or having occupied prominent public positions “such as heads of states or governments, prominent politicians, judges, military officers, senior government officials or prominent political party officials. This shall include their second degree family members” (Sections 5 and 3.6) (paragraph 474).
  - Regulations do not specify how security dealers should establish PEP status, but require that when a customer is identified as a PEP, licensees must consider the compatibility of transactions with the nature of activities and consider degree of divergence and interrelationship among accounts (Section 5.1) (paragraph 475).
  - No requirement to put in place an effective risk management system to determine if the beneficial owner of a customer is a PEP (paragraph 475).
  - Sections 5.1 and 7.4 require CEO or highest executive authority authorization before establishing a business relationship with a PEP and if a customer subsequently becomes a PEP; no requirement to proactively determine if an existing client becomes a PEP and then seek senior management authorization (paragraph 475).
  - Obligations do not extend to cases where the beneficial owner of a customer subsequently becomes or is found to be a PEP (paragraph 475).
  - No requirement for licensees to establish source of wealth and funds of customers and beneficial owners identified as PEPs; CMDA directs enhanced due diligence but does not explain additional measures (paragraphs 476–477).
  - Definition of PEPs does not differentiate foreign from domestic PEPs; requirements apply regardless of nationality (paragraph 477).

### Recommendation 7 — Correspondent banking and payable-through accounts (c. 7.1–7.5)
- Current laws, regulations and procedures do not deal with cross-border correspondent banking and similar relationships; no obligations for banks to gather sufficient information about a respondent institution, assess respondent AML/CFT controls, obtain senior management approval before establishing correspondent relationships, or document respective AML/CFT responsibilities (paragraph 478).
- In practice, Maldivian banks reportedly carry out internal risk assessments, approval processes and obtain information about respondent institutions when establishing correspondent relationships (paragraph 479).
- Maldivian authorities and private sector state payable-through accounts are not used or likely to be used in the Maldivian financial system (paragraph 480).

### Recommendation 8 — Misuse of new technology and non face-to-face business relationships (c. 8.1–8.2.1)
- Banks:
  - No specific legal or regulatory requirements for banks to have policies addressing potential abuse of new technological developments for money laundering or terrorist financing (paragraph 481).
  - No legally binding obligations for banks to have policies and procedures to address risks associated with non face-to-face business relationships or transactions when establishing customer relationships and during ongoing due diligence (paragraph 483).
  - MMA Electronic Funds Transfer Guidelines assist customers and banks on money transfer issues and debit/credit card matters but do not cover internet banking and mainly deal with customer care rather than specific measures to manage ML/TF risks associated with technology and non face-to-face clients (paragraph 484).
- Securities sector:
  - Section 5.2 of the CMDA 2010 AML Regulations requires enhanced due diligence for customers dealing indirectly with licensees, particularly using modern technology such as internet trading, but provides no guidance on what enhanced due diligence involves (paragraphs 482 and 485).

### Coverage and overall effectiveness
- Only banks and licensees in the securities sector are subject to CDD obligations; other financial institutions dealing with other covered financial activities operate outside the AML/CFT regime (paragraph 486).
- The 2010 Banking Act requires banks to develop and implement measures to prevent money laundering and terrorist financing; it requires identification of customers, source and destination of funds and other measures, but relevant obligations are broadly drafted and implementing regulations are still to be issued (paragraph 487).
- In the absence of comprehensive legislation governing AML/CFT preventive measures, existing guidance in the MMA AML Circular is inadequate for an effective comprehensive CDD regime (paragraph 487).
- Banking sector representatives state they have implemented some CDD measures in practice even prior to the new law or MMA AML Circular, but practical implementation of the new requirements remains to be seen (paragraph 487).

*Source: Excerpt from the provided IMF assessment text (paragraphs 453–487).*

### 488.      The CMDA 2010 AML Regulations address some of the essential criteria of the standard, but

### _cr1201 - 488.      The CMDA 2010 AML Regulations address some of the essential criteria of the standard, but

### Key findings and analysis
- 488. The CMDA 2010 AML Regulations address some of the essential criteria of the standard, but considering that they came into existence only recently (October 10, 2010) and that licensees have been given a timeframe of up to six months to start complying with the requirements, it is too early to judge the effectiveness of their implementation.
- 489. Maldives is yet to lay down appropriate measures to deal with correspondent banking relationships, technological developments and their impact on the risk of money laundering and terrorist financing, and non face-to-face relationships (with the partial exception of the securities sector which has addressed issues of technological developments and customers indirectly when dealing with securities dealers). In the absence of legal provisions in this regard, the existing implementation is not uniform across sectors and institutions, which raises concerns about the effectiveness of the regime.
- 490. There are no comprehensive provisions in law, regulation or elsewhere to suitably address the issue of beneficial ownership across the financial sector.
  - The 2010 Banking Act now requires banks to identify their customers, the customers’ beneficial owners and the ultimate principals in transactions, but no implementing regulation or guidance has been issued to further clarify the issue.
  - The provisions applicable in securities sector are more detailed but fail to provide a clear definition of the beneficial ownership and shortcomings remain with respect to customers that are legal persons or legal arrangements.
  - Securities sector regulations have come into force recently, making it too early to judge effectiveness of implementation.
  - No requirements or guidelines exist for other sectors.
- 491. The Maldives is yet to prescribe comprehensive provisions to deal with the issue of PEPs (with the partial exception of the securities sector) and the effectiveness of the current implementation regime is difficult to assess due to the lack of legal provisions applicable to PEPs.
  - A few banks, insurance companies and other money transfer businesses have put in place their own risk management procedures to address the risk of dealing with PEPs.
  - There is a need to prescribe comprehensive requirements across the entire range of financial sector and, if considered appropriate, to extend the requirements to deal with domestic PEPs.

### Recommendations and comments (overview)
- 492. Considering the early stage of implementation of the AML/CFT regime in Maldives, authorities may wish to consider adopting a risk-based approach while developing and implementing the AML/CFT preventive measures regime.
  - A blanket approach may overburden financial institutions and enforcement authorities and could prove detrimental to effectiveness.
  - A risk-based approach would enable targeted allocation of resources based on ML/TF risk and requires a comprehensive assessment of risks in the Maldives to establish threats, vulnerabilities and risks by sector, customer and product.
- 493. To comply with Recommendations 5, 6, 7 and 8, authorities are recommended to:
  - Bring all financial institutions within the scope of the AML/CFT regime.
  - Issue implementing regulations associated with CDD requirements under the 2010 Banking Act.
  - Prohibit financial institutions from opening or maintaining anonymous or fictitious accounts by providing for an explicit prohibition or by laying down clear positive identification requirements for all clients.
  - Require in law or regulation all financial institutions to:
    - undertake CDD measures when establishing business relationships or when there are doubts about the veracity or adequacy of previously obtained customer identification data and to identify and verify their customers using reliable, independent source documents, data or information;
    - verify that any person acting on behalf of the customer is so authorized and identify and verify the identity of that person;
    - identify and verify the beneficial owner;
    - determine whether the customer is acting on behalf of another person and then to take reasonable steps to obtain sufficient identification data to verify the identity of that other person;
    - conduct ongoing due diligence on the business relationship and transactions.
  - Require in law or regulation or other enforceable means financial institutions to:
    - verify the legal status of legal persons or legal arrangements by obtaining details of all directors;
    - understand the ownership and control structure of legal persons;
    - obtain information on the purpose and intended nature of the business relationship;
    - consider filing an STR and terminating the business relationship when a financial institution can no longer be satisfied that it knows the true identity of a customer;
    - undertake enhanced due diligence measures for higher risk categories of customers and provide guidance as to what these measures constitute;
    - verify the identity of the customer and beneficial owner before or during the course of establishing business relationships;
    - not to open accounts, commence business relations or perform the transactions on failure to conduct CDD and consider making a suspicious transaction report. If the relationship has already commenced, failure to conduct CDD should result in termination of the business relationship and consideration of making a suspicious transaction report.
  - Financial institutions should be obligated to apply CDD requirements to existing customers on the basis of materiality and risk and to conduct due diligence on such existing relationships at appropriate times.
  - Provide comprehensive guidance to all financial institutions on procedures required to identify the ultimate natural person who owns or controls the customer.
  - Put in place and implement comprehensive preventative measures in keeping with Recommendation 6 on PEPs, including appropriate and ongoing risk management procedures for identifying (and applying enhanced CDD to) PEPs, customers who are close relatives of PEPs, and accounts of which a PEP is the ultimate beneficial owner.
  - Implement comprehensive preventative measures with respect to cross border correspondent banking and other similar relationships, including:
    - gathering sufficient information about the respondent institution to understand fully the nature of respondent’s business and to determine its reputation and quality of supervision;
    - assessing the respondent institution’s AML and CFT controls;
    - obtaining approvals from senior management before establishing correspondent relationships;
    - documenting the respective obligations of each institution.
  - Implement comprehensive preventative measures in keeping with Recommendation 8 on technological developments and non face-to-face transactions.

### Compliance assessments and ratings (Recommendations 5–8)
- R.5 NC — Summary of factors underlying rating:
  - Only banks and securities sector licensees are required to undertake CDD measures. Other sectors are outside the purview of requirements. Norms for securities sector are specified only in other enforceable means and not in law or regulation.
  - No measures in law or regulation to prevent opening of accounts under fictitious names.
  - No requirement in law or regulation for financial institutions as to the timing when CDD is required to be conducted.
  - No requirement in law or regulation for financial institutions to identify and verify the identity of their customers using reliable, independent source documents, data or information. Broad requirements stated in the 2010 Banking Act yet to be implemented by issuing the implementing regulation.
  - No requirement in law or regulation for financial institutions to verify that any person acting on behalf of a customer is so authorized and identify and verify the identity of that person.
  - No requirement for financial institutions to understand the ownership and control structure of legal persons.
  - No requirement in law, regulation or other enforceable means for financial institutions other than those in securities sector to verify the legal status of the legal person or legal arrangement. No requirement to obtain details of all directors in case of securities sector.
  - No requirements in law or regulations for financial institutions other than banks (no definition of the term “beneficial owner” applicable to banks) to identify the beneficial owner. No guidance on detailed procedures to be adopted to identify beneficial owner.
  - No obligations for financial institutions to proactively determine for all customers whether the customer is acting on behalf of another person, and then to take reasonable steps to obtain sufficient identification data to verify the identity of that other person.
  - No obligation for financial institutions to obtain information on the purpose of the business relationship. Obligation to obtain information only from customers who are natural persons on the purpose of transaction (and not of business relationship) exists in the securities sector. No obligation for financial institutions to obtain information on intended nature of such relationship.
  - No obligation in law or regulations for financial institutions to conduct ongoing due diligence on the business relationship and transactions.
  - No requirement for financial institutions (other than those in the securities sector) to perform enhanced due diligence of higher risk categories of customers/relationships/transactions. No guidance to financial institutions on enhanced due diligence.
  - No requirement that a financial institution should consider filing a STR and terminate the business relationship when an institution can no longer be satisfied that it knows the true identity of a customer.
  - No requirement for financial institutions (other than those in the securities sector) as to the timing of verification of the identity of customer and beneficial owner.
  - No requirement for financial institutions to apply CDD requirements to existing customers on the basis of materiality and risk.
- R.6 NC — Summary of factors underlying rating:
  - There are no obligations for financial institutions to put in place appropriate risk management systems to determine whether a potential customer, a customer or the beneficial owner is a PEP.
  - No obligation to obtain senior management approval for establishing and continuing business relationships with a PEP or where the beneficial owner is a PEP.
  - No obligation to take reasonable measures to establish the source of wealth and the source of funds of customers and beneficial owners identified as PEPs.
  - No requirements for banks, other money transfer businesses and institutions licensed by the MMA to conduct enhanced ongoing monitoring on PEPs.
- R.7 NC — Summary of factors underlying rating:
  - There are no obligations on banks in the Maldives to govern the establishment and operation of correspondent banking relationships.
- R.8 NC — Summary of factors underlying rating:
  - There are no obligations for financial institutions to have policies in place or take such measures as may be needed to prevent the misuse of technological developments in money laundering or terrorist financing schemes.
  - There are no obligations for financial institutions to have policies and procedures in place to address any specific risks associated with non face-to-face business relationships or transactions.
  - There are no obligations to implement measures for managing the risks including specific and effective CDD procedures that apply to non face-to-face customers.

### Third parties and introduced business (R.9)
- 494. The current Maldivian framework does not regulate the reliance on third parties to perform elements of the CDD process or to introduce business.
  - Authorities and private sector representatives indicated reliance on third parties is not prevalent, but reliance is not prohibited and may occur in practice without compliance with standard measures.
- 495. To comply with Recommendation 9, authorities are recommended to:
  - Regulate reliance on third parties to perform elements of the CDD process and introduce business to financial institutions, notably by ensuring that:
    - The elements that may be performed by third parties are those listed under Criteria 5.3 to 5.6 of the Methodology;
    - The information collected by the third parties may be immediately available to financial institutions;
    - Financial institutions are required to satisfy themselves that the third parties are regulated and supervised;
    - The ultimate responsibility for customer identification and verification remains with the financial institutions relying on the third party.
- R.9 NC — Summary of factors underlying rating:
  - No provisions to deal with reliance on third parties to perform elements of the CDD process or introduce business.

### Financial institution secrecy or confidentiality (R.4)
- 496. Article 24 of the Constitution of the Maldives contains provisions relating to the right to privacy of every person. Additional confidentiality requirements only exist for banks (since December 2010) and players in the securities markets (since 2006). In all other cases, confidentiality requirements are based on contract.
- 497. Section 42 of the 2010 Banking Act establishes a legal obligation for banks to maintain confidentiality regarding all accounts, deposits, trusts and safe deposit boxes of customers, and a clear prohibition to provide any information on the aforesaid. The bank’s obligation may be lifted with the customer’s written consent, a written request from a law enforcement agency or the public prosecutor.
  - Section 39: banking secrecy and professional privilege must not be invoked as a ground for non compliance with Section 38 (measures relating to prevention of money laundering, corruption and terrorist financing) and any regulation issued there-under, whenever information is requested, the production of a related document is required or ordered in accordance with Section 38 of the Act and related regulations.
  - Section 44: exception to banking confidentiality where “[a]ctions have been taken in good faith in the course of the implementation of measures dealing with prevention of corruption and countering money laundering and terrorist financing pursuant to laws or regulations dealing with such matters.”
  - Section 53: provides for timely access to bank examiner of all necessary books, accounts and records.
- 498. Since the Act has come into force very recently, it is too early to assess the effectiveness of implementation. Previous regulations (Regulations for Banks and Financial Institutions, repealed with the 2010 Banking Act) also ensured authorities’ access to information otherwise covered by contractual confidentiality. Authorities did not indicate frequency of use of powers to request access to banking information.
- 499. Section 39 of the Securities Act 2006 requires licensees to keep clients’ information confidential, as per the code of conduct of business; information from books should not be disclosed except for law enforcement purposes.
- 500. Section 25 of the Prevention and Prohibition of Corruption Act allows investigative agencies such as the ACC to obtain, through the MMA, account details and details of transactions carried out through banks including money received, money transmitted through banks of persons under suspicion of having committed offenses stated in this Act and also copies of documents which are required for investigation or to send the case to court.
- 501. In corruption investigations, the ACC resorts to this Section to obtain information related to bank accounts of suspects and their associates and related entities. The MPS must request a court order to gain access to information and records if the MMA does not require a bank to pass on information pertaining to associates of the suspect. Obtaining court orders is generally cumbersome and often leads to delays.
- 502. Private sector representatives stated that unless there is a clear instruction from the MMA, they generally insist on seeing a court order before sharing client level information with authorities such as the MPS. The ACC can access information through MMA but only in respect of suspects and their associates; in other cases the ACC is also required to obtain a court order. The MMA and CMDA stated that, unless in possession of a court order, it is up to the financial institutions to decide whether they share information with other authorities (such as the MPS) or not.

*Source: IMF assessment text excerpt.*

### 503.      Provisions relating to right to privacy contained in Article 24 of the Constitution are often

### _cr1201 - 503.      Provisions relating to right to privacy contained in Article 24 of the Constitution are often

### Privacy, access to information, and Recommendation 4
- Provisions in Article 24 of the Constitution are often interpreted by financial institutions to deny access to information to competent authorities unless there is a court order.
- Authorities conceded obtaining a court order is often difficult and leads to delay in investigations.
- Prior to the 2010 Banking Act:
  - Banking regulations provided access to information to bank examiners but did not override banking secrecy/confidentiality to facilitate sharing with other competent authorities, except for the ACC under Section 25 of the Prevention and Prohibition of Corruption Act (via the MMA).
  - For non-corruption investigations, discretion rested with financial institutions to share information in the absence of a court order.
- Concern: ability of law enforcement authorities to have timely access to information in performance of their functions.
- 2010 Banking Act:
  - Section 39: banking secrecy and professional privilege including banking confidentiality clauses shall not be invoked when information is requested or production of the related document is required or ordered in accordance with Section 38 and related regulations.
  - Implementation: Act recently in force and implementing regulation is yet to be issued; effectiveness cannot yet be assessed.
- Recommendation to comply fully with Recommendation 4:
  - Ensure that the law enforcement authorities have timely and effective access to information in the course of money laundering and terrorist financing investigations.
- Compliance with Recommendation 4
  - Rating: R.4 PC
  - Underlying factor: Strict interpretation of existing privacy provisions prevents law enforcement authorities from accessing information in the course of investigations.

### Record-keeping and Wire Transfer Rules (R.10 & SR.VII) — legal framework and findings
- Legal provisions:
  - Section 38(a)(3) of the 2010 Banking Act: contains provisions relating to keeping and maintaining identification and transaction records for AML/CFT, but details not yet prescribed.
  - Companies Act:
    - Section 64(b): private limited companies required to keep all records for three years.
    - Section 64(c): public companies required to keep all records for six years.
    - Records include day to day sums of money received and expended and record of assets, liabilities and obligations.
- Banks:
  - 2010 Banking Act requires banks to “keep and maintain records relating to the identity of their customers and the transactions carried out by them” (Section 38(a)(3)).
  - Companies Act retention: 3 years for private limited banks, 6 years for public company banks (Section 64(b) and (c)).
  - Starting point for retention time is unclear; 2010 Banking Act requirement is general and may not ensure records useful to reconstruct transactions.
  - Section 53(d) of the 2010 Banking Act requires banks and their officers/agents to provide examiners access to books/accounts/documents/records and to furnish requested information in a timely manner during examination—but no explicit obligations to ensure all customer and transaction records are made available timely to domestic competent authorities.
  - No explicit requirements for banks to obtain and maintain originator name, account number and address for cross-border transfers; MMA AML Circular (KYC and record maintenance) stated to apply to wire transfers but no prescribed SR.VII correspondent relationship requirements by MMA.
- Other money transfer businesses: no wire transfer rules.
- Securities sector:
  - Section 49 of the Securities Act, 2006: dealers required to maintain accounting records that will correctly explain transactions; Section 49(b)(3) requires records in sufficient detail to show particulars of every transaction. Act does not specify retention period.
  - Section 9 of CMDA 2010 AML Regulations: require licensees to keep special files of suspicious transactions containing copies of reports, data and documents related thereto.
  - Section 22 of the Regulation on Conduct of Securities Business: requires reasonable steps and procedures to ensure sufficient information recorded and retained; provides for maintenance of records for a period of not less than six years for inspection by authorized persons.
  - CMDA 2010 AML Regulations: CDD documents to be kept for a period of no less than five years from the end of the relationship with the client or from the date of the last transaction conducted by the client.
  - The CMDA timeframe does not describe the trigger point for start of retention period; Recommendation 10 requires retention five years following termination of account or business relationship (not from date of last transaction).
  - No specific regulatory requirements for maintaining account files and business correspondence.
- Effectiveness concerns:
  - Record keeping requirements in 2010 Banking Act and Companies Act are not sufficiently specific/comprehensive to reconstruct transactions; implementing regulation under 2010 Banking Act yet to be issued.
  - MMA AML Circular provides KYC guidance but does not specify retention periods.
  - No mandatory requirements in law/regulation/circular to maintain account files and business correspondence for at least five years after relationship end, nor to make identification data and transaction records available timely to domestic competent authorities.
  - Securities sector: retention period not specified in Act; only in Regulation on the Conduct of Securities Business, which does not meet standard requiring specification in law or regulation; neither Securities Act nor Regulations contain specific requirements to maintain customer identification data, account files and business correspondence for five years from termination of business relationship as required by the standard.
  - CMDA 2010 AML Regulations issued on October 10, 2010; licensees given six months to comply; implementation yet to come into force so effectiveness cannot be assessed.
  - Authorities view MMA AML Circular as indirectly leading to necessary SR.VII records for money transfer activities, but absence of legal provisions leaves uncertainty about ongoing due diligence and monitoring of suspicious transfers lacking complete originator information.
  - During on-site visit, regulators and private sector reported a common practice of retaining essentially all business records for an indefinite period voluntarily; regulatory authorities reported issuing verbal administrative direction requesting clarification on retention period.
- Overall assessment of effectiveness: concerns due to absence of legally binding, specific requirements and implementing regulations.

### Recommendations to comply with Recommendation 10 and SR.VII
- To comply fully with Recommendation 10:
  - Impose record keeping requirements on all financial institutions.
  - Specify in law or regulation that it is mandatory for financial institutions to maintain all necessary records on transactions for at least five years or longer following the completion of transaction.
  - Require in law or regulation the maintenance of transaction records in such a way as to allow reconstruction of individual transactions.
  - Require in law or regulation that records of identification data, account files and business correspondence to be maintained for at least five years following the termination of an account or business relationship.
  - Require in law or regulation that financial institutions make customer and identification data available on a timely basis to domestic competent authorities.
- To comply fully with Special Recommendation VII:
  - Require financial institutions conducting wire transfers to include accurate originator information (name, address and account number) on funds transfers and related messages, as well as to conduct enhanced scrutiny of and monitor for suspicious fund transfers which do not contain complete originator information and comply with obligations with regard to their wire transfer obligations.

### Compliance ratings and key factors
- Recommendation 10
  - Rating: NC
  - Factors underlying rating:
    - Only banks and securities sector licensees are subject to record keeping requirements; other sectors outside purview.
    - Record keeping requirements for the banking sector are too general.
    - No law/regulation requiring maintenance of all necessary transaction records for at least five years following completion of the transaction.
    - No law/regulation obliging institutions (other than securities sector licensees) to keep transaction records to allow reconstruction of individual transactions for prosecution.
    - No law/regulation to require maintenance of identification data, account files and business correspondence for at least five years following termination of account/business relationship.
    - No explicit law/regulation requiring timely availability of customer and identification data to domestic competent authorities.
- Special Recommendation VII
  - Rating: NC
  - Factor underlying rating:
    - No requirements for financial institutions to implement provisions relating to wire transfers.

### Monitoring of Transactions and Relationships (R.11 and R.21) — summary findings
- Recommendation 11 (special attention to complex, unusual large transactions)
  - Banks:
    - No explicit legal obligation to pay special attention to complex, unusually large or unusual patterns of transactions.
    - MMA AML Circular provides guidance to identify large, frequent or unusual transactions and report them to the FIU, but guidance limited to obtaining written statement from customers confirming nature of business and does not require examination of background and purpose.
    - Circular includes illustrative list of activities potentially indicating suspicious transactions (large, frequent or unusual deposits/withdrawals/payments/exchanges of cash, foreign currency or negotiable instruments not consistent with customer’s normal business or financial standing).
  - Securities sector:
    - Section 5.3 of CMDA 2010 AML Regulations requires special due diligence regarding extraordinary complex and large transactions lacking clear investment purpose, appearing suspicious, or representing unusual investment policy.
    - Regulations do not specify what special due diligence measures should be implemented; no explicit requirement to examine background and purpose, set findings in writing, and keep findings available for competent authorities/auditors for at least five years.
  - Effectiveness:
    - Banks and money/value transfer businesses reported having devised their own systems and procedures to monitor complex and unusual large transactions; private sector in securities market expressed similar practice.
    - Voluntary private-sector procedures are insufficient to substitute for the absence of legally enforceable norms.

- Recommendation 21 (transactions with persons from or in countries not applying FATF Recommendations)
  - Banks:
    - No express requirements for banks to give special attention to business relationships and transactions with persons from or in countries that do not or insufficiently apply the FATF Recommendations.
    - No systems to advise banks of concerns about weaknesses in other countries' AML/CFT systems.
    - No requirement to examine background and purpose and produce written findings for transactions with no apparent economic or lawful purpose from such countries.
    - No provisions for applying a range of counter-measures with regard to countries not applying or insufficiently applying FATF Recommendations.

*Source: IMF assessment text (excerpts as provided).*

### 529.      While Section 5.2 of the CMDA 2010 AML Regulation requires licensees to exercise

### _cr1201 - 529.      While Section 5.2 of the CMDA 2010 AML Regulation requires licensees to exercise

### Enhanced due diligence, cross-border concerns, and effectiveness (Recommendations 11 & 21)
- Section 5.2 of the CMDA 2010 AML Regulation requires licensees to exercise enhanced due diligence regarding customers from countries that do not have anti-money laundering legislation, but:
  - No further obligation or guidance has been provided to licensees on this requirement.
  - No clarification exists of the term “enhanced due diligence.”
  - No system exists to advise securities market licensees of concerns about weaknesses of AML/CFT systems in other countries.
- There is no requirement for licensees to implement a system ensuring that transactions with no apparent economic or visible lawful purpose have their background and purpose examined and written findings made available to assist competent authorities (supervisors, law enforcement agencies and the FIU) and auditors.
- No provisions exist for applying counter-measures in case of countries not applying or insufficiently applying FATF recommendations.
- Effectiveness concerns:
  - Maldivian authorities have not issued binding obligations for banks to give special attention to business relationships and transactions with persons from or in countries that do not or insufficiently apply the FATF Recommendations.
  - No guidance is provided to make financial institutions aware of weaknesses in other countries’ AML/CFT regimes.
  - No requirement to examine background and purpose of transactions without apparent lawful purpose or to make written findings available.
  - Lack of effective counter-measures raises concerns about misuse of the Maldives financial system for money laundering or terrorist financing and about authorities’ ability to restrict business relationships or prescribe measures toward non‑compliant countries.

### Recommendations to comply with Recommendation 11
- Require all financial institutions to pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose.  
- Require all financial institutions to examine as far as possible the background and purpose of such transactions, set forth their findings in writing and to keep such findings available for competent authorities and auditors for at least five years.

### Recommendations to comply with Recommendation 21
- Require all financial institutions to give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries which do not or insufficiently apply the FATF Recommendations.  
- Require all financial institutions that in case of such transactions having no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible, be examined, and written findings should be kept.  
- Develop adequate legal authorities to enable Maldives to apply a range of appropriate counter-measures across all financial sectors where a country continues not to apply or insufficiently applies the FATF Recommendations.

### Compliance with Recommendations 11 & 21 — Ratings and underlying factors
- R.11 NC
  - No obligations for financial institutions to pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose.  
  - No obligations for financial institutions to examine as far as possible the background and purpose of such transactions and to set forth their findings in writing.  
  - No obligations for financial institutions to keep such findings available for competent authorities and auditors for at least five years.
- R.21 NC
  - No enforceable obligations for financial institutions to give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries which do not or insufficiently apply the FATF Recommendations.  
  - No obligations for financial institutions that in case of transactions with no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible, be examined, and written findings kept.  
  - No effective measures in place to ensure that financial institutions are advised of concerns about weaknesses in the AML/CFT system of other countries.  
  - No clear legal authority to enable the Maldives to apply a range of appropriate counter-measures across all financial sectors where a country continues not to apply or insufficiently applies the FATF Recommendations.

### Suspicious Transaction Reports and other reporting (R.13-14, 19, 25 and SR.IV) — Legal framework and current practice
- Under the current legal framework, only banks are required to file STRs: The 2010 Banking Act requires reporting of suspicions of both proceeds of crime and funds related to terrorist financing.
- Banks:
  - Section 33 of the 2010 Banking Act: if a bank or any of its administrators, officers or employees becomes suspicious that the execution of any banking transaction or the receipt or a payment of any sum pertains or may pertain to any crime and illegal act, the bank shall immediately notify the MMA to this effect.
  - Section 38(a)(4): banks shall develop and implement measures to prevent money laundering and the financing of terrorism including where they suspect or have grounds to suspect that funds or property, regardless of the amounts, are the proceeds of crime, or are related or linked to the financing of terrorism, they shall submit a report setting forth their suspicions to the Financial Intelligence Unit of the MMA promptly after forming a suspicion or receiving the information, but not more than 2 (two) working days later.
  - Terms “funds” and “property” are not further defined under the 2010 Banking Act or other statutes.
  - Due to the recent enactment of the 2010 Banking Act, no STRs have been submitted so far under it.
  - The MMA AML Circular (until December 2010 the only AML text) called on financial institutions to report suspicions to the FIU but was not enforceable; four STRs were filed on this basis by banks and money transfer businesses prior to the Banking Act.
    - Two STRs filed on suspicions of drug related activities (one forwarded by the FIU to the MPS for further investigation, the other not forwarded).
    - Two STRs pertained to unusually large transactions and, according to the FIU, were not suspicions and did not warrant further investigation.
- Other financial institutions:
  - CMDA 2010 AML Regulations impose obligations on dealers, custodians, investment advisors, asset managers, mutual funds, and other entities licensed by the CMDA.
  - Sections 5.3 and 11 require licensees to “promptly report any suspicious transactions to the CMDA.”
  - “Suspicious transactions” defined as any transaction believed, for justified reasons, to involve the proceeds of any of the crimes stipulated under relevant laws of Maldives (Section 3, para. 3.5).
  - Regulation does not require reporting of such suspicions to the FIU; reporting to CMDA intended to enable CMDA to initiate investigations into criminal activity listed in CMDA Act (insider trading). CMDA would inform the FIU on a voluntary basis if investigations reveal suspicions of ML/TF. No such case had arisen at time of assessment.
  - There are no reporting requirements for other financial institutions.

### STRs related to terrorism and other reporting specifics
- Under the 2010 Banking Act, banks are required to report to the FIU where they suspect or have grounds to suspect that funds or property are related or linked to terrorist financing. However, the terrorist financing offense has shortcomings, narrowing the scope of the reporting requirement.
- The FIU has not received any STR in relation to terrorism and its financing.
- No reporting threshold for STRs exists. Neither the 2010 Banking Act, the MMA AML Circular, nor the CMDA AML Regulation contain requirements in relation to attempted transactions or guidance on how to deal with attempted transactions.
- No rule restricts reporting of matters which could involve tax matters.
- Additional element—reporting of all criminal acts: banks are required to report when they suspect or have reasonable grounds to suspect that funds are the “proceeds of crime, or are related or linked to the financing of terrorism” (Section 38(a)(4) 2010 Banking Act).
- Protection for making STRs: Section 41 of the 2010 Banking Act grants immunity from criminal, civil or other proceedings for breach of banking confidentiality, professional secrecy or breach of contract for banks or their directors, officers or employees who in good faith submit reports or provide information in accordance with the Act.
- Prohibition against tipping off: Section 40 of the 2010 Banking Act prohibits disclosure that information is being or will be provided to the FIU or that a report or investigation is being or will be submitted or carried out.
- Administrative sanctions: Section 56 provides administrative sanctions the MMA could take if provisions including Section 40 are violated.
- Confidentiality of reporting staff: no legal provision ensures names and personal details of staff of FIs that make a STR are kept confidential by the FIU. Authorities state the FIU keeps persons and institutions that report suspicions confidential; FIU information held on main MMA server accessible only by FIU staff, one member of MMA management and IT staff.

### Currency transaction reporting and FIU capacity
- Authorities are establishing a reporting requirement for currency transactions above a certain threshold:
  - A new transaction reporting regulation and a template for a weekly cash reporting form have been prepared; copies provided to assessment team.
  - Authorities are considering instructing reporting entities to submit forms electronically on a weekly basis.
  - Exact threshold under ongoing consideration by the Board of the MMA; exchange rate fluctuations considered.
  - Instructions planned once threshold met and financial transaction reporting regulation published in the Government Gazette.
  - Anticipated recipient of reports: the FIU.
- Reception and analysis of these reports will severely impact the FIU’s limited resources.
  - FIU is developing a mechanism to store the data for analysis and dissemination less cumbersomely than manual treatment.
- No computerized database currently in place for currency transactions above a threshold; FIU is developing such a database. It is too early to establish safeguards for proper use of reported information.

### Guidance, feedback, and statistics (R.25, R.32)
- MMA AML Circular Section 8 lists ten activities that may indicate money laundering; does not list activities indicating terrorist financing.
- Circular sets out some KYC measures for banks and money transfer businesses; adequate guidance limited by absence of a legal framework that criminalizes money laundering.
- No relevant guidance in other sectors.
- FIU has given feedback to banks on the four STRs it received pursuant to the MMA AML Circular, including whether to allow transactions to be executed and how the STRs were dealt with (e.g., STR found to support suspicion relating to drug offenses was disseminated to the MPS).
- FIU maintains statistics on STRs received:
  - STR statistics 2007 - July 2010:
    - 2007: STRs received 0, STRs analyzed 0, STRs disseminated 0
    - 2008: STRs received 0, STRs analyzed 0, STRs disseminated 0
    - 2009: STRs received 4, STRs analyzed 4, STRs disseminated 1
    - 2010: STRs received 0, STRs analyzed 0, STRs disseminated 0

### Effectiveness observations on reporting
- For banking sector, reporting requirement is relatively broad and in line with the standard, except it does not apply to attempted suspicious transactions.
- Major shortcoming: reporting requirement applies only to banks.
- Level of reporting is low; prior to 2010 Banking Act there was no obligation to report to FIU, though some banks filed STRs under MMA AML Circular assuming it was mandatory.
- Among banks, awareness of AML/CFT issues and FIU’s role found to be relatively low.

### Recommendations and comments on STRs and related measures
- To comply fully with Recommendation 13:
  - Require in law or regulation all financial institutions (not only banks) and alternative remitters (or money or value transfer service providers) in the Maldives to report suspicious transactions in keeping with R.13; this notably entails criminalizing money laundering and terrorist financing in line with Recommendations 1 and 2 and Special Recommendation II.  
  - Undertake comprehensive education and awareness-raising with reporting parties to encourage greater quantity and quality of suspicious transaction reporting across all sectors.  
  - Require in law or regulation all reporting parties to report attempts of suspicious transactions.  
  - Specifically include a provision in law or regulation that provides that suspicious transactions should apply regardless of whether or not they involve tax matters.
- To comply fully with Special Recommendation IV:
  - Require in law or regulation all financial institutions (not only banks) and alternative remitters (or money or value transfer service providers) to report transactions when they suspect or have reasonable grounds to suspect that funds are linked or related to, or to be used for terrorism, terrorist acts or by terrorist organizations or those who finance terrorism; this notably entails criminalizing terrorist financing in line with Special Recommendation II.  
  - Undertake comprehensive education and awareness-raising with reporting parties related to STRs on terrorist financing.
- To comply fully with Recommendation 14:
  - Extend safe harbor provisions and prohibition from tipping off to all financial institutions beyond banks.
- To comply fully with Recommendation 25:
  - Issue STR guidelines for financial institutions, including guidance in identifying suspicious transactions.  
  - Issue guidelines to money changers and money remitters to include all aspects of CDD, STR reporting, and other preventative measures.  
  - Require the FIU to regularly provide feedback relating to STRs to financial institutions.

### Compliance with Recommendations 13, 14, 19 and 25, and Special Recommendation IV — Ratings and factors
- R.13 NC
  - No suspicious transaction reporting requirements applicable to non-bank financial institutions.  
  - Reporting requirement only applies in the case of suspicions of laundering the proceeds of offenses listed under the Drugs Act; none of the other FATF-designated categories of offenses are predicates to money laundering, which considerably narrows the scope of the reporting requirement. Attempted transactions are not subject to reporting.  
  - It is not clear that banks are required to report suspicious transactions that may involve tax matters.  
  - Extremely low number of STRs with doubts about the quality of reports (evidenced by the lack of dissemination to law enforcement agencies).
- R.14 PC
  - Relevant protection for STR and prohibition against tipping off legal regime only applies to banks (under the 2010 Banking Act) and does not apply to other financial institutions.
- R.19 C
  - This recommendation is fully met.
- R.25 PC
  - No STR guidelines for financial institutions or DNFBPs either relating to terrorist financing or money laundering.  
  - Limited guidance provided by the MMA with respect to the reporting of suspected money laundering activities, but no guidance with respect to terrorist financing.  
  - Feedback has been given on the four STRs reported so far on an ad hoc basis – there is no policy relating to feedback and its possible implementation, such as the use of acknowledgement letters.
- SR.IV NC
  - No reporting requirements for financial institutions other than banks.

*Source: IMF assessment text in content unit _cr1201 - 529.*

### 563.      Prior to the enactment of the 2010 Banking Act, there were no legally binding obligations

### Prior to the enactment of the 2010 Banking Act, there were no legally binding obligations

### Internal controls, compliance officers, and audit obligations
- Section 38(a) of the 2010 Banking Act requires banks to develop and implement measures to prevent money laundering and terrorist financing, including "the development and implementation of internal programs for the prevention of money laundering and the financing of terrorism" as provided under Section 38(a)(6).
- Section 50 of the 2010 Banking Act provides that banks shall appoint an external auditor who will be qualified and experienced in the audit of banks and who will prepare an audit report stating whether the bank maintains inter alia internal controls designed to provide reasonable assurance regarding the reliability of the systems for prevention of money laundering and terrorist financing.
- The Act’s provisions dealing with internal procedures, policies and controls are broad; "exact requirements are yet to be spelt out in regulation."
- Section 5 of the MMA AML Circular:
  - "Provides for reporting institutions to establish and maintain internal procedures and policies for AML and CFT," but "is silent on what needs to be included in such policies and procedures."
  - On-site inspections indicated policies generally contain measures related to customer acceptance policy, know your customer requirements, record retention procedures and reporting of suspicious transactions.
  - Section 5 also "provides for the appointment of a compliance officer responsible for checking the compliance of the Circular;" the level of such officer is not specified.
  - On-site inspections revealed compliance officers are generally senior staff (at management level) with access to customer identification information data and other CDD information, transaction records and any relevant information, but "there is no requirement to explicitly provide the compliance officer and other appropriate staff with access to relevant information."

### Securities sector—internal systems, reporting officer, and training
- Section 8 of the CMDA 2010 AML Regulations requires licensees to create adequate internal systems that include policies, procedures and internal safeguard to prevent money laundering.
- Required elements under CMDA 2010 AML Regulations include:
  - "An anti-money laundering policy adopted by the board of directors or management as the case may be;"
  - "Detailed written anti-money laundering procedures that accurately define duties and responsibilities that are compliant with the adopted policy and relevant regulations as issued by the CMDA;"
  - "An adequate mechanism for verifying compliance with AML regulations, policies and procedures;"
  - "Training programs needed by staff at different levels and a commitment to attend training courses organized by the CMDA or any other relevant organization;"
  - "Obligations to provide the reporting officer with means to perform his duties in an independent manner to ensure the confidentiality of the information coming to him and the measures taken by him. To achieve this objective, the reporting officer must have the right to access records and data needed to investigate and review AML systems and measures. The reporting officer may also propose additional steps to redress any shortcoming or the need for updating or development to raise effectiveness and efficiency."
- CMDA 2010 AML Regulations do not contain any requirements relating to an adequately resourced and independent audit function.

### Independent audit, training, and employee screening across sectors
- Banks:
  - Section 50 of the 2010 Banking Act requires banks to appoint a qualified and experienced external auditor (though not an internal auditor) to submit an audit report on internal controls for AML/CFT; "exact obligations for banks are yet to be specified in the regulation" and "there is no obligation to maintain an adequately resourced audit function."
  - Section 5(2) of the MMA AML Circular calls for "adequate training of the staff for effective prevention, detection and control of possible money laundering or terrorist financing."
  - "There are no requirements for banks to put in place screening procedures in order to ensure high standards when hiring employees."
  - On-site inspections indicate compliance officers can act independently once measures are approved by senior management or the board and can directly report to senior management, though such obligations are not explicitly specified.
- Securities sector:
  - CMDA regulations provide for training programs and commitment to attend training courses.
  - "There are no provisions relating to screening procedures in order to ensure high standards before hiring new staff other than reporting officer."
  - Reporting officer should be a member of senior management but "the regulations do not contain specific provisions relating to his independence or his reporting to the board of directors."

### Application to foreign branches and subsidiaries (Recommendation 22)
- Current facts:
  - "The Maldives has six commercial banks. Five of them are branches of foreign banks and one is a local commercial bank (Bank of Maldives Plc.). One more bank was recently given a license but has not yet begun its operations."
  - "The local bank does not have any branches or subsidiaries abroad. Similarly, there are no foreign branches or subsidiaries of the licensees in securities market."
  - Authorities state reporting entities "do not have any foreign branches," therefore requirements relating to application of AML/CFT requirements to foreign branches and subsidiaries located abroad "are not applicable in Maldives."
- Effectiveness:
  - "The 2010 Banking Act addresses the requirements relating to the internal programs in a broad and general way and the exact obligations for banks are yet to be specified by a regulation, as provided under Section 38(b) of the Act."
  - Since the Act "has come into force recently, it is too early to assess the effectiveness of its implementation."
  - CMDA AML Regulations' requirements are "quite new" and "licensees have up to six months to comply with them;" effectiveness of implementation is yet to be established and verified.
  - "There are no further provisions relating to adequately resourced and independent audit processes for the entire financial sector," creating gaps that are "cause for concern about the effectiveness of the measures across sectors and institutions."

### Recommendations and comments (to comply with Recommendations 15 and 22)
- To comply fully with Recommendation 15, authorities are recommended to:
  - "Require financial institutions to have adequately resourced and independent audits to test compliance with AML/CFT procedures."
  - "Lay down provisions relating to the overall role of compliance officer in financial institutions (other than in the securities sector) and his access to relevant data and records so as to enable him to effectively perform his functions."
  - "Require financial institutions to establish employee screening procedures when hiring new employees."
  - "Require financial institutions other than those active in the securities sector to provide training to their staff tailored to their specific job profile and the risk of money laundering and terrorist financing faced by the financial institution or the products it offers."
  - "Support effective implementation of internal controls through comprehensive AML/CFT supervision of all relevant sectors."
- To comply fully with Recommendation 22, authorities are recommended to:
  - "Extend the requirements of the essential criteria of Recommendation 22 to foreign branches and subsidiaries of financial institutions."

### Compliance ratings and underlying factors
- R.15 NC
  - No obligations on financial institutions other than banks and securities sector licensees.
  - Banks and securities sector have some recent requirements on internal controls; effectiveness of implementation is considered limited.
  - No legally binding requirements for financial institutions for adequately resourced and independent audits to test compliance with AML/CFT procedures.
  - No explicit provisions relating to the overall role of compliance officer in financial institutions.
  - No provisions allowing the compliance/reporting officer to access relevant data and records so as to enable effective performance.
  - No effective provisions requiring financial institutions to establish employee screening procedures when hiring new employees.
- R.22 N/A
  - "No Maldivian financial institutions have overseas branches or subsidiaries."

### Shell banks (R.18) — description, gaps, and recommendations
- Legal framework and findings:
  - "The Maldivian law does not prohibit shell banks explicitly."
  - 2010 Banking Act licensing conditions mitigate but do not eliminate shell bank risk.
  - Licensing requirements include:
    - Applicant must provide MMA with information on premises and address, names, places of permanent residence, business and biographical and financial background of each proposed major shareholder and administrator (Section 5(3) of the 2010 Banking Act).
    - Applicant must "at all times during the license period, maintain a physical presence and have an office in the Maldives at which all of its business activities are conducted with at least two full-time employees (Section 8(8) of the 2010 Banking Act)."
    - None of these provisions constitute a requirement for physical presence in terms of "meaningful mind and management" as defined by the FATF.
    - A foreign applicant must provide the MMA with a statement from its home country supervisory authority that it has no objection to establishment and that it will exercise consolidated supervision (Section 5(7) of the 2010 Banking Act).
  - Authorities stated all banks were either domestic banks with physical presence or branches affiliated with foreign banks, but current law is "insufficient to ensure physical presence of meaningful mind and management" for future applicants.
  - There is no prohibition to enter into or maintain correspondent relationships with shell banks, and no requirement for financial institutions to satisfy themselves that respondent financial institutions abroad do not permit their accounts to be used by shell banks.
- Recommendations to comply with R.18:
  - "Explicitly prohibit the establishment of shell banks, or explicitly require locally incorporated banks to have physical presence (i.e. meaningful mind and management) in the Maldives, and foreign branches to be affiliated with foreign banks or financial groups."
  - "Prohibit financial institutions from engaging in or maintaining correspondent relationships with foreign shell banks."
  - "Oblige financial institutions to satisfy themselves that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks."
- R.18 NC — summary factors:
  - Current legislation does not prohibit shell banks comprehensively.
  - No prohibition to engage in or maintain correspondent relationships with shell banks.
  - No requirement obliging financial institutions to satisfy themselves respondent financial institutions abroad do not permit their accounts to be used by shell banks.

### Supervisory and oversight system—competent authorities and SROs (R.23, 29, 17 and 25)
- Legal framework and institutional setup:
  - Three main Acts govern the financial sector: the MMA Act, the 2010 Banking Act and the Securities Act.
  - Two supervisors: the Maldives Monetary Authority (MMA) and the Capital Market Development Authority (CMDA).
  - Introduction of the new Constitution in 2008 removed Presidential Decrees as sources of law; Law for the General Regulations 2008 (Law No. 6/2008) was passed temporarily to give legal powers to some regulations while parent acts are drafted. New laws are being developed, "notably an Insurance Law."
- MMA (Maldives Monetary Authority):
  - MMA is the competent authority for licensing and regulation/supervision of banks and conducts supervision over some other sectors although "it does not have the legal basis to do so."
  - The Banking Act was issued on December 18, 2010, and designates MMA as competent authority to implement and enforce the Act; it "explicitly imposes fundamental AML/CFT obligations on the banking industry."
  - Banking Act authorizes MMA to prescribe in regulation detailed AML/CFT provisions and penalties applicable not only to banks but also to "other financial institutions" and "DNFBPs" (Section 38) even though the Act does not define "financial institution," creating ambiguity.
  - MMA is not authorized by the MMA Act or any other Act to license and regulate financial institutions other than banks; thus doubt exists whether MMA could issue and enforce regulation governing industries it is not authorized to regulate and supervise.
  - Section 38 could create overlap of MMA and CMDA AML/CFT supervisory powers in the securities industry, especially given the CMDA AML Regulation.
  - Within MMA, the Financial Sector Division (FSD) is responsible for regulation, supervision and monitoring; two sections dedicated to supervision: Credit and Bank Supervision Section (CBSS) for banks, and Non-Bank Financial Institution Supervision Section (NBFIS) which "licenses" and "supervises" other financial sectors including MVT service operators, insurance companies and intermediaries, finance leasing companies and credit card operators (other than banks).
  - MMA AML Circular (2006) provides AML measures for banks and "other institutions engaged in deposit taking and money transfers;" MMA has been reviewing implementation though "the provisions of the Circular are not mandatory."
- CMDA (Capital Market Development Authority):
  - Pursuant to the Securities Act, CMDA is the competent authority for licensing, regulation and supervision of capital market players.
  - CMDA internal structure was established by an official letter from the President’s office; mandate of each Department was established by a resolution of the Board of Directors.
  - Licensing and Market Regulation Department (LMRD) is one of five departments and is responsible for issuing licenses under Securities Act and monitoring and regulating the licensees.

*Source: _cr1201 - 563. Prior to the enactment of the 2010 Banking Act, there were no legally binding obligations; IMF PDF (canonical URL: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr1201.pdf).*

### 592.      In October 2010, the CMDA issued a Regulation on Anti-Money Laundering in Securities

### _cr1201 - 592. In October 2010, the CMDA issued a Regulation on Anti-Money Laundering in Securities

### Designation of competent authorities and supervisory scope
- The CMDA issued the CMDA 2010 AML Regulations in October 2010.
- Designation and supervisory powers discussed: Designation of Competent Authority (c. 23.2); Power for Supervisors to Monitor AML/CFT Requirement (c. 29.1); Authority to conduct AML/CFT Inspections by Supervisors (c. 29.2); Power for Supervisors to Compel Production of Records (c. 29.3 and 29.3.1); Adequacy of Resources—Supervisory Authorities (R.30).

### Maldives Monetary Authority (MMA) — designation, scope and limitations
- MMA is the designated authority authorized to license, supervise and regulate “banking” (Section 4 of the MMA Act) and the “banking activities” (Section 1(a) and 3(d) of the 2010 Banking Act) in the Maldives.
- Amendment of the MMA Act in 2007 extends the definition of “financial institutions” subject to the Act to cover insurance, investment advice, finance leasing, asset management or other similar businesses which the MMA deems necessary to regulate and supervise (Section 2, as amended in 2007).
- Neither the MMA Act nor the 2010 Banking Act authorizes the MMA to license and regulate financial activities other than “banking business.”
- “Banking business” defined as “the business of receiving deposits of money or other repayable funds from the public for the purpose of making credits or investments for its own account” (Section 115 of the 2010 Banking Act).
- “Bank” defined as “a person holding a license or permit under [the] Act to engage in the banking business, all or one or part of” the overall twelve types of financial activities including money transfer and currency exchange (Section 115 read in conjunction with Section 25 of the 2010 Banking Act).
- Some financial activities (e.g., MVT service operators) could in theory be regarded as types of “banking activities” but are not captured by the definition of “banking business” and are not required under the 2010 Banking Act to “hold a license or permit.”
- Section 2 of the 2010 Banking Act states one primary objective: “reduce financial crime, including fraud, money laundering and the financing of terrorism.”
- Section 38 of the 2010 Banking Act imposes fundamental AML/CFT obligations on “banks” and authorizes the MMA to prescribe by regulation the manner and form by which “banks, other financial institutions and DNFBP” must comply, and to sanction non-compliance.
- The Act does not define “financial institution,” leaving unclear which types of FIs are covered by Section 38.
- Neither the 2010 Banking Act nor other legislation grant the MMA power to carry out inspections, compel production of records or information and impose penalties to implement and enforce AML/CFT provisions on financial industries other than banks.
- Conclusion: MMA is designated as supervisor for banks, but Maldivian legislation does not designate a licensing authority nor an AML/CFT supervisor or regulator for insurance, finance leasing, MVT service operators and money changing industries.
- The MMA still carries out some supervision over insurance, finance leasing companies and money changers under authorization of other texts, but not for AML/CFT purposes.

### MMA — supervisory powers over banks
- MMA powers under the MMA Act and the 2010 Banking Act include:
  - Regulate and supervise “banking” (Section 4 of the MMA Act) and “banking business” (Section 1 of the 2010 Banking Act).
  - Supervise banks on a consolidated basis, including conducting on-site examination on all banks at any time at its discretion and at intervals not exceeding 18 months, and requesting additional information, documents, clarifications or proof as necessary (Section 53 of the 2010 Banking Act).
  - Require information of any type at its discretion from banks in the form and details and at the intervals specified by the MMA (Section 47(a) of the 2010 Banking Act).
  - Require corrective measures and impose administrative penalties on banks that violate the 2010 Banking Act or any regulation, condition of licensing, instruction or order issued by the MMA, or engage in unsafe or unsound banking operation (Section 56 of the 2010 Banking Act).
  - Revoke a license (Section 56 of the 2010 Banking Act).
- All MMA powers can be exercised to ensure compliance by banks with AML/CFT obligations under Section 38 of the 2010 Banking Act.
- MMA empowered to develop regulations to specify the manner and form by which banks shall comply with obligations, and a range of sanctions for violations (Section 38 and Section 65(c)(3)), but no such regulation had been developed as of end-2010.
- MMA can issue Circulars (generally applicable) and rulings and orders (applicable to particular financial institutions) (Section 65(a)).

### Capital Market Development Authority (CMDA) — duties, powers and AML instrument
- Section 9 of the Securities Act grants CMDA duties including:
  - Maintain surveillance over the securities market and the Stock Exchange and ensure orderly, open, fair and equitable dealings in securities.
  - Take measures to suppress improper practices and violations of the law in relation to dealings in securities.
  - Regulate dealers, dealer’s representatives, investment advisers and any other persons holding a license under this Act to maintain acceptable professional standards.
  - Give directions to the Stock Exchange Company on matters relating to the operation of the securities market.
- Securities Act authorizes CMDA and the MFT to make regulations for the proper execution of the Act (Sections 9 and 60).
- Regulations issued include:
  - The Securities (General) Regulations (issued in 2007 and amended in 2009 by the MFT under Section 60(c) of the Securities Act).
  - The Regulation on Conduct of Securities Business (issued by the CMDA in 2006).
  - The Dealers and Dealers’ Representatives Licensing Regulation (issued by the CMDA in 2006).

### CMDA supervisory powers and practice
- The Securities (General) Regulations and the Regulation on Conduct of Securities Business specify CMDA powers:
  - Carry out investigations under certain circumstances (Section 12 of the Securities (General) Regulations).
  - Revoke a license where licensed person/entity fails to comply with any provision of the Securities Act or regulations (Section 34(b) of the Securities Act).
  - Impose an administrative fine on securities dealers, dealer’s representatives or investment advisors for non-compliance (Section 16 of the Securities (General) Regulations).
  - Compel production and searches of books and records (Sections 3,4 and 5 of the Securities (General) Regulations, and Sections 36 and 37 of the Regulations on Conduct of Securities Business).
  - Issue directions to Stock Exchange companies where in the public interest (Section 26 of the Securities Act).
- No provision explicitly provides for CMDA’s power to conduct inspections; CMDA relies on Section 4(d) objective to “take measures to prevent unconscionable conduct in relation to dealings in securities and loss of confidence in the securities market” as a basis to carry out inspections.
- CMDA conducts on-site inspections on all dealing companies every quarter; their power to inspect has never been challenged by dealing companies.
- Many CMDA powers have not been tested given the early stage of market development.

### Adequacy of resources — MMA
- MMA has an independent budget generated from its own business such as dealing of gold, foreign exchange and other financial instruments (Sections 22 and 26 of the MMA Act).
- MMA staffing and allocation:
  - Total staff: 130.
  - CBSS (responsible for supervision of banks and credit institutions): 10 staff.
  - NBFIS (responsible for supervision of non-bank financial institutions): 4 staff.
- Staff appointment and integrity:
  - All MMA staff appointed by the Governor and required to have good educational background in banking, accounting, business or law with working experience; criminal records checked.
  - Staff prohibited from disclosing information relating to MMA’s affairs except for legal purposes; violation subject to criminal sanctions (Section 11 of the MMA Act).
- AML/CFT training:
  - MMA itself has not provided AML/CFT training to staff, but most staff of CBSS and the NBFIS received AML/CFT training provided by the APG and other foreign donors.
  - MMA plans to organize in-house AML/CFT training program in the near future.
- Capacity constraints: CBSS and NBFIS staff are relatively new to supervisory work and currently lack experience and expertise in the area.

### Adequacy of resources — CMDA
- CMDA budget proposed by its Board of Directors and approved by the Minister of Finance and Treasury; proposed budget usually approved.
- CMDA staffing:
  - Total staff: 23.
  - LMRD (responsible for licensing and supervision): 4 staff, 2 of which are inspectors.
  - Staff from other sections provide support during inspections as needed.
- Staff appointment and integrity:
  - Staff appointed by the President on advice of its Board (Section 13 of the Securities Act).
  - Recruitment policy targets persons of high professional standard and integrity; employees required to complete a criminal records clearance form and submit for endorsement to the MPS, AGO, and various courts.
  - Staff prohibited from disclosing unpublicized information relating to CMDA’s affairs except for legal purposes; contravention subject to criminal sanctions (Section 15 of the Securities Act).
- AML/CFT training:
  - AML/CFT training provided by the APG to CMDA several years ago.
  - CMDA plans to provide joint training with the MMA in the future.
- Staffing challenge: difficulty recruiting and maintaining staff due to attractiveness of the private sector.

### Sanctions — banks
- The 2010 Banking Act (Section 56) authorizes MMA to impose the following administrative sanctions on banks:
  - send a written warning;
  - enter into an informal agreement with the bank regarding corrective measures with a timetable;
  - give orders to the bank to cease and desist from particular actions, or require affirmative action to correct violations;
  - require that the bank submit a detailed description of remedial measures it intends to take or has taken;
  - require that the bank cease some operations;
  - bar the bank from declaring or paying any cash dividends or distributing profits;
  - impose any restriction or prescribe conditions on the granting of credit;
  - attend the Board of Directors meeting and require that the chairman convene the board to review and examine violations;
  - require the bank to hire an advisor that has authority to disapprove proposed actions;
  - require that the bank remove the chairman or any of the members of the bank’s board of directors or executive officer or manager;
  - dissolve the bank’s board of directors and appoint a conservator to assume responsibility for managing the bank;
  - impose on the bank an administrative penalty with a sum of up to five percent of the bank’s paid-up capital;
  - impose on one or more administrators of the bank an administrative penalty if such administrators are determined responsible for violations; and
  - revoke the bank’s license.
- Conditions triggering measures (Section 56):
  - violation of any provisions of the 2010 Banking Act or any regulation, condition of licensing, instruction or order issued by the MMA;
  - engaging in unsafe or unsound banking operations.
- All listed sanctions can be imposed for non-compliance with AML/CFT requirements under Section 38(a) of the 2010 Banking Act including:
  - identifying and verifying customers and beneficial owners;
  - identifying the source of funds;
  - keeping and maintaining records of customers and transactions;
  - reporting suspicious transactions; and
  - developing and implementing AML/CFT internal control programs.
- MMA authorized to develop regulations to implement AML/CFT provisions (Sections 38 and 65); no such regulations had been developed as of end-2010.
- These powers are new; prior to December 2010 entry into force of the 2010 Banking Act, only very limited criminal and administrative sanctions were applicable to banks.
- As of end-2010 no sanction had been imposed for violation of AML/CFT requirements under the new Act.
- No sanction has been issued for non-compliance with the Circular because it is deemed unenforceable; MMA has recommended improvements instead.

### Sanctions — securities industry (CMDA)
- Criminal sanctions under the Securities Act available for violations including market manipulation, making false statements and transactions, and providing misleading information.
- General sanctions (Section 59):
  - “Person with any breach of provisions of the Act without specific penalty provided in the Act is upon conviction subject to a fine between 25,000 and 100,000 Rufiyaa or imprisonment for a term between 3 months and 1 year with a fine of 75,000 Rufiyaa”;
  - “Unless the Regulation specifies a penalty, person who fails to comply with Regulations made under this Act shall commit an offense and punishable on conviction by a fine not exceeding 15,000 Rufiyaa;”
  - “Person who, without reasonable cause, fails to comply with any directions given by the CMDA under the Act is upon conviction subject to a fine less than 15,000 Rufiyaa”.
- Licensing requirements:
  - Licensee must be a company registered in accordance with the Companies Act (Section 28).
  - Licensee’s representative must be a natural person (Section 29).
  - A licensed dealer cannot operate in practice unless a licensed representative acts on its behalf.
- Enforcement practice:
  - CMDA investigates suspected violations and may forward cases to the PGO for prosecution; only one case had been forwarded to the PGO so far and judgment had not yet been pronounced.
  - Section 34 authorizes CMDA to revoke or suspend a license.
- Fines and administrative sanctions:
  - Securities (General) Regulations provide for fines of up to Rf 150,000 (approximately US$11,000) upon conviction for failure to comply with requirements concerning production of books and searches of premises (Sections 3-5 and 7).
  - Regulations authorize CMDA to impose administrative fines not exceeding Rf 10,000 (approximately US$700) on any person who fails to comply with the Act or other relevant regulations or rules (Section 16).
  - Rationale: administrative fines are relatively low because under general principles of Maldivian law administrative fines should not be higher than criminal monetary sanctions (which, under the Act, are of Rf 10,000 (approximately US$700) at a minimum).
  - Administrative sanctions can be imposed in parallel with criminal sanctions prescribed in Section 59 (b) and (c).
- Recent enforcement actions:
  - In the last four years, CMDA suspended the license of one dealing company for having manipulated its accounting records.
  - CMDA imposed administrative fines of Rf 10,000 (approximately US$700) on two dealing companies for failure to comply with the Regulations on Conduct of Securities Business.

*Source: Extract from IMF country report text.*

### 628.      As mentioned above, although mandatory, the CMDA 2010 AML Regulations, with a limited

### _cr1201 - 628.

### Enforcement of CMDA 2010 AML Regulations and sanctions
- CMDA 2010 AML Regulations (with a limited exemption) will not be enforceable until April 2011.
- After enforcement, non-compliance punishable by either criminal or administrative sanctions.
- As the Regulations do not provide any specific penalty, non-compliance is only subject to:
  - a fine not exceeding Rf 15,000 (approximately US$1,000) on conviction (Section 59(b) of the Securities Act); or
  - an administrative fine up to Rf 10,000 (approximately US$700) (Section 16 of the Securities (General) Regulations).

### Criminal sanctions applicable to financial institutions
- Financial institutions registered as companies may also be subject to criminal sanctions (e.g., for money laundering under the Drugs Act).
- These criminal sanctions have never been imposed.

### Fit and proper criteria — banks (c. 23.3 & 23.3.1)
- Licensing condition (Section 8(9) of the 2010 Banking Act): “each person who will be a major shareholder or administrator of the licensee will at all times be fit and proper for the intended position.”
- “Fit and proper” defined by reference to honesty, trustworthiness, professional qualification, background and experience, financial position or business interest (Section 115 of the Banking Act and Section III-2 of Regulation on Fit and Proper Requirements).
- Persons may not qualify as fit and proper if they:
  - Have been convicted by a criminal court of an offense that could have resulted in imprisonment, unless such conviction was motivated by his/her political views or activities (acts of terrorism or terrorist financing will not be exempted on the basis of political motivation);
  - Have been declared bankrupt by a court of law within the previous two years;
  - Have been disqualified or suspended by a competent authority from practicing a profession on grounds of personal misconduct unrelated to political views or activities;
  - Have been declared unfit to manage a company (Section 115 of the 2010 Banking Act); or
  - Have been or are now subject to an investigation in the Maldives or elsewhere by or at the investigation of any governmental department or agency, professional association, or other regulatory body (Section III-2 of the Regulation on Fit and Proper Requirements).
- “Major shareholder” defined as a person who directly or indirectly holds 10% or more of the capital or the voting rights of a legal entity, or who through other means, in the opinion of the MMA, is able to control the legal entity (Section 115).
- “Control” deemed to exist if a person:
  - (a) directly or indirectly, or acting through one or more persons, owns, controls, or holds with the power to vote 25% or more of the voting share of the company;
  - (b) has the power to elect more than 50% of the directors of the company; or
  - (c) exercises a controlling influence over the company, as defined by the MMA (Section 115).
- Identified inconsistency: unclear whether “major shareholder” covers natural persons only or both natural and legal persons (Act defines “person” as covering both, Section 115); Regulation on Fit and Proper Requirements provides specific requirements on corporate major shareholders and requires information on its own “major shareholders,” who are not required to be fit and proper.
- “Administrator” defined as a director, executive officer, or member of the audit committee of a bank, including, for a foreign bank, a designated branch manager (Section 115).
- Banking license application must contain an affidavit for each major shareholder and administrator stating convictions (if any), or no conviction past or present, and insolvency/bankruptcy history (Section 5(b)(5)); false statements may result in rejection or revocation (Section 6(b) and Section 8(c)). No standard affidavit form published by the MMA.
- Persons proposing to become major shareholders must file the same affidavit and obtain MMA approval prior to acquiring shares (Section 20).
- Banks must give written notice at least 30 days prior to appointment or election of a new administrator, with supporting information that the person is fit and proper; MMA will assess and determine approval (Section 17).
- For applications by a bank holding company or bank to organize a domestic bank, MMA obtains detailed financial and operational information, including major shareholders and administrators (Section 5(c)).
- Legislative shortfall: current legislation is insufficiently precise to prohibit effectively criminals from holding significant or controlling interests of a bank (i.e., from being the beneficial owner as defined by the FATF).
- MMA practice: incoming administrators after the 2009 Regulation were checked against Regulation criteria; MMA expected banks to have assessed existing administrators and major shareholders but has not conducted checks to ensure existing major shareholders and administrators meet the “at all times” fit and proper requirement (Section 8(a)(9)). MMA rejected one application in 2009.

### Insurance companies (c. 23.7)
- Insurance Industry Regulations (2002) under temporary legal power set out licensing requirements.
- Insurance undertaking must obtain a license before operation (Section 9(1)); license application must contain scheme of operations, major shareholders, and proposed management team (Section 10).
- Not clear whether “major shareholder” covers natural persons of significant or controlling interest (beneficial owners as defined by the FATF).
- MMA must reject an application if any board member is not fit or proper (Section 13(1)). “Fit and proper” defined as a person of good standing, without a criminal record, with certain technical, professional qualifications and experience, as determined by the MMA.
- Provision does not apply to major shareholders who are not board members or senior management; current legislation insufficient to prohibit criminals from being beneficial owners or holding significant or controlling interest of an insurance undertaking.
- Licensed insurance undertakings must inform MMA within seven days of any changes to shareholding structure and must obtain MMA approval prior to changes to directors and senior management (Section 16).
- Transitional licensing: at issuance (2004) existing companies given up to one year to comply; transitional period extended several times and further extended until licensing arrangements finalized. Evaluation process for permanent license does not entail a check of criminal records of proposed management and shareholders, though self-declaration of criminal record is requested.
- At time of assessment: one local insurance company operating, three other insurance undertakings were branches of foreign companies; of these four, one was still in the process of being licensed.
- For foreign insurers seeking branches, MMA contacts foreign counterparts to obtain information.

### Insurance intermediaries
- Two types: insurance agents (act on behalf of insurer) and insurance brokers (act on behalf of insured).
- Insurance Industry Regulations apply to intermediaries, but licensing provisions address insurance undertakings only. MMA developed Guidelines for the Administration of Insurance Agents to set licensing criteria and procedures; Guidelines are not legally mandatory.
- Under Guidelines, insurance agent and its “Responsible Officer” must obtain “authorization” from MMA (Sections 6 and 7). Each agent must be linked to only one insurance undertaking (Section 23); each Responsible Officer must act for one agent exclusively (Section 11).
- Applicants (directors and major shareholders of an agent) should comply with fit and proper criteria in Appendix A, none of which are mandatory.
- Applicants must submit fit and proper information; insurance undertakings are responsible for ensuring their agents and responsible officers are fit and proper (Sections 35 and 45).
- Undertaking must notify MMA within seven days of changes to agent particulars or when agent ceases to represent it (Section 28). Agent must notify MMA within seven days of changes to responsible officer particulars or termination (Section 29).
- Since Guidelines were introduced recently, no “authorization” granted so far.
- Insurance brokers are not subject to any licensing requirement or guideline.

### Securities dealers, dealer’s representatives and investment advisers
- All securities dealers, dealer’s representatives, investment advisers and underwriters must obtain a license from the CMDA before doing business (Sections 28, 29, 30 and 36).
- A license or renewal must be rejected if the applicant or a director of the applicant has been convicted in the last 10 years (Section 31(2)).
- CMDA Dealer’s/Dealer’s Representative License Regulation requires directors/secretary of a dealer applicant and applicants for dealer’s representative license to declare whether they have, within the past 10 years, been convicted of any offense other than a traffic offense in the Maldives or elsewhere, or whether proceedings pending may lead to such a conviction (Forms 1 and 3). For biennial renewal, same declaration for the last 2 years (Forms 2 and 4).
- Applicants required to complete a criminal records clearance form and submit it for endorsement to the MPS, AGO, and various courts.
- License-holders must give written notice to the CMDA when:
  - changes of the management staff and the directors of the company occur;
  - director(s) have been convicted of theft or fraud or any other crime involving misappropriation of property belonging to another; and
  - a court order for dissolution has been issued, or a receivership arrangement has been entered into (Section 12(ii) of the Regulation).
- Provisions do not apply to natural persons who are not directors or secretaries but have a significant or controlling interest or hold a management function.
- CMDA Stock Exchange Company Licensing Regulation (Section 6) and Regulation on Licensing and Conduct of Central Depository (Section 7) prohibit persons who do not meet fit and proper criteria from acting as director of the Stock Exchange or the Central Depository.

### Licensing or registration of value transfer/exchange services (c. 23.5) and other financial institutions (c. 23.7)
- MVT service operators:
  - Not subject to any registration or licensing requirement at time of assessment.
  - MMA drafting a regulation; MMA provided a draft standardized form for applicants.
  - Despite absence of legal basis, entities wishing to become MVT service operators are supposed to obtain a “license” from the MMA; MMA developed an informal procedure and draft application form.
  - Draft application requires general information, Memorandum, Certificate of Incorporation, audit reports for the last 2 years and business plan, and documents (usually a declaration signed by the MPS) proving directors and substantial shareholders have not been convicted of offenses involving fraud or dishonesty or convictions involving findings of fraudulent or dishonest conduct.
  - MMA provided a sample response letter stating “licensing” conditions and circumstances for revocation.
  - Applications are rare: three applications over the past three years, two licenses issued and one application pending. So far no applicant found to have a criminal record.
- Money changers:
  - Regulations Outlining Arrangements for Money Changers require a license issued by the MMA before doing business (Section 1), but the Regulations lack a sound legal basis and are therefore not enforceable.
  - In practice, applicants are generally granted licenses and no application has been rejected so far.
  - Almost all licensed money changers are hotels and small shops, exchanging only small sums.

*Source: _cr1201 - 628.*

### 660.      Under the temporary legal power granted by the Law for the General Regulations, the

### _cr1201 - 660.      Under the temporary legal power granted by the Law for the General Regulations, the

### Licensing and legal framework for finance leasing companies
- Regulations for Finance Leasing Companies and Finance Leasing Transactions require that any person engaged in finance leasing business has to obtain a license issued by the MMA (Section 10).
- An application must contain: a founding agreement or shareholder agreement, the Memorandum of Association and Articles of Association of the company or the Partnership Agreement, and the names and addresses of directors and administrators.
- As indicated by the MMA, no application has been made in addition to the only operating finance leasing company.

### Ongoing supervision framework (high-level)
- Relevant supervisory and AML/CFT domains referenced: Regulation and Supervision of Financial Institutions (c. 23.1); Application of Prudential Regulations to AML/CFT (c. 23.4); Monitoring and Supervision of Value Transfer/Exchange Services (c. 23.6); AML/CFT Supervision of other Financial Institutions (c. 23.7); Guidelines for Financial Institutions (c. 25.1).

### Banks — inspections and supervisory practice
- Until December 2010, there were no AML/CFT requirements in place in Maldives; nevertheless the MMA, when it inspected banks (and MVTs), monitored implementation of its AML Circular.
- Monitoring was conducted by the FIU staff which assisted the CBSS and NBFIS staff for AML/CFT purposes; the expectation is that the FIU will continue to do so in the future.
- With respect to on-site inspections of banks for prudential purposes conducted by the CBSS:
  - Apart from one bank that commenced operations in May 2008, all other banks have been inspected at least once over the past 5 years.
  - In the past 3 years, one bank was examined every year.
  - Expectation: on-site inspections of banks will be conducted more frequently in the following year to meet the requirement of the 2010 Banking Act.
- For the last 2 years, the NBFIS conducted annual inspections of each MVT service.

### On-site inspection counts (as provided)
- Table 22: General overview of on-site inspection of banks conducted by CBSS for prudential purposes — Year / Number of On-site Inspections Conducted:
  - 2005 4
  - 2006 0
  - 2007 1
  - 2008 1
  - 2009 1
  - 2010 1 (ongoing as of August 2010)
- Table 23: General overview of on-site inspections conducted by the NBFIS — Year / Type of Financial Institution / Number of On-site Inspections Conducted:
  - 2006 - 0
  - 2007 - 0
  - 2008 MVT service operators 3
  - 2009 MVT service operators 3
- Table 24: MMA on-site inspections of financial institutions on implementation of the MMA AML Circular:
  - 2006 Banks 0; MVT service operators 0
  - 2007 Banks 0; MVT service operators 0
  - 2008 Banks 0; MVT service operators 3
  - 2009 Banks 1; MVT service operators 3

### AML/CFT on-site inspection methodology and follow-up
- Since 2008, AML/CFT elements have been part of the overall inspection scheme performed by the MMA.
- FIU staff are invited to join inspection teams and are exclusively responsible for checking AML/CFT aspects.
- For each inspection, the AML/CFT inspector checks implementation of all elements set out in the MMA AML Circular and conducts sample testing where necessary.
- “AML/CFT On-site Inspection Guidelines” have been developed by the FIU to structure the AML/CFT part of inspections.
- At the end of an inspection two reports are produced:
  - One for the inspected institution (identifies deficiencies and recommends specific measures).
  - One for the FIU inspector (basis for FIU follow-up and shared with prudential supervisors CBSS and NBFIS).
- Because the MMA AML Circular is neither mandatory nor enforceable, no sanction has been imposed on banks or MVT service operators for failure to comply with the MMA AML Circular.
- Inspected institutions are given instructions on corrective measures; MVT service operators generally follow instructions, banks less so. FIU follow-up is sometimes informal (phone calls).

### Off-site surveillance
- There has been little off-site surveillance other than follow-up of on-site inspections.
- The FIU has started developing off-site tools such as a self-assessment questionnaire that might be introduced in the future.

### Effectiveness assessment (summary)
- The AML/CFT measures in the 2010 Banking Act and the CMDA 2010 AML Regulations are recent; their effectiveness could not be established.
- In the securities sector, relatively light sanctions for non-compliance, and lack of sanctions applicable to directors and senior management of dealing companies, might inhibit future effectiveness of CMDA supervision.
- Both the MMA and CMDA face significant shortages of expertise and experienced staff, holding back supervisors, notably in the insurance sector.
- Licensing and fit and proper requirements for banks and insurance undertakings are still to be implemented on existing operators that started before the requirements were established.
- Fit and proper requirements in banking and securities sectors are not sufficiently precise to fully prohibit criminals and their associates from holding significant or controlling interests or management functions.
- Supervision interactions between MMA and private sector tend to be informal; informality is insufficient to ensure compliance, including AML/CFT requirements.

### Recommendations (to comply with Recommendations 17, 23, 25 and 29)
- Recommendation 17:
  - Introduce a wide range of effective, proportionate and dissuasive criminal and administrative sanctions, including on their directors and senior management, for non-compliance with AML/CFT requirements when such requirements are established in sectors other than banks and securities.
  - Introduce more effective and dissuasive criminal and administrative sanctions that generally applied to violation of Regulations in the securities sector.
  - Introduce effective, proportionate and dissuasive criminal and administrative sanctions specifically applicable to directors and senior management of the securities dealing companies.
- Recommendation 23:
  - Designate by law the competent authority for AML/CFT regulation and supervision of the insurance industry, finance leasing companies and money changers.
  - Designate by law the competent authority for licensing/registration and AML/CFT regulation/supervision of MVT service operators.
  - Require insurance intermediaries to be licensed and designate by law the competent licensing authority.
  - Ensure that beneficial owners of financial institutions are “fit and proper.”
  - Implement the market entry and “fit and proper” requirements to existing banks and insurance companies.
  - Conduct AML/CFT supervision of banks and the securities sector.
- Recommendation 29:
  - Grant competent authorities designated for supervision of insurance undertakings and intermediaries, MVT service operators, finance leasing companies and money changers with adequate powers by law or regulation to inspect, compel production of, or get access to all records and books, sanction institutions and their directors and senior management, including for AML/CFT purposes and exercise these powers effectively.
- Recommendation 25:
  - Provide adequate guidance to all types of financial institutions, including information on current money laundering and terrorist financing trends and techniques.

### Compliance ratings and underlying factors (R.17, R.23, R.25, R.29)
- R.17 NC:
  - Banks: Effectiveness of sanctions applicable to AML/CFT non-compliance has not been established.
  - Securities sector: No sanction available for non-compliance with the CMDA 2010 AML Regulations until April 2011.
  - Criminal and administrative sanctions for violations (including CMDA 2010 AML Regulations after April 2011) are not effective, proportionate and dissuasive.
  - No sanction for directors or senior management of securities dealing companies.
  - Financial sectors other than banking and securities: No sanctions for non-compliance with AML/CFT requirements since there are no such requirements in place.
- R.23 NC:
  - With the exception of banks, none of the financial institutions active in the Maldives are subject to AML/CFT supervision and monitoring, since there are no enforceable AML/CFT requirements.
  - No AML/CFT supervision conducted over banks due to the very recent introduction of AML/CFT obligations: effectiveness of supervision therefore could not be established.
  - No legal framework for licensing/registration and regulation/supervision of insurance intermediaries and money changers.
  - Insufficient fit and proper requirements for beneficial owners of financial institutions.
  - No requirement for MVT service operators to be licensed or registered.
  - No legal framework for the supervision of MVT service operators.
  - Effectiveness was not established: market entry and “fit and proper” requirements on banks and insurance undertakings have not been implemented sufficiently on existing operators; lack of experience and expertise of the MMA and the CMDA staff undermines effectiveness of their supervision.
- R.25 NC:
  - No guidelines provided to financial institutions other than banks and MVT service operators.
  - Guidelines provided to banks and MVT service operators do not include current money laundering and terrorist financing trends and techniques and are not sufficient.
- R.29 NC:
  - Banks: The effectiveness of the MMA’s powers under the 2010 Banking Act has not been established.
  - Financial sectors other than banking and securities businesses: Competent authorities have no supervisory power to ensure financial institutions’ compliance with the AML/CFT requirements due to the absence of such requirements and/or competent authorities designated to supervise/regulate these sectors.

### Money or Value-Transfer Services (SR.VI) — description and analysis (summary)
- Legal framework:
  - SR.VI requires designation of competent authorities to register and/or license persons performing MVT services, maintain a current list of licensed/registered MVT service operators, and ensure compliance with licensing/registration requirements.
  - Neither the MMA Act nor the 2010 Banking Act authorizes the MMA to license and regulate/supervise MVT service operators.
  - Nevertheless, the MMA issues informal “licenses” to applicants for operating MVT services, and conducts “supervision” (on-site and off-site) on the “licensees” despite the lack of legal basis.
  - The MMA indicated that a regulation governing the MVT industry was being drafted to close this gap.
- Application of FATF Recommendations (R.4-11, 13-15 and 21-23, and SR.VII):
  - At the time of assessment, MVT service providers in the Maldives were not subject to AML/CFT requirements.
  - The MMA AML Circular provides guidance and suggests reporting entities, including MVT service providers, formulate and adopt written AML/CFT policies and procedures; provide adequate training; carry out CDD measures to identify customer; identify and report unusual and suspicious transactions; maintain customer information; appoint a compliance officer; and not disclose suspicions except to the FIU.
  - The Circular is not enforceable. The MVT service provider met believed it must comply with the Circular and that non-compliance might lead to sanctions, based on an MMA quasi-license letter that indicates revocation may occur for failure to comply with laws, regulations, including circulars.
- MVT operator practices described:
  - Standardized sender and receiver forms used.
  - Identifies every customer (senders and receivers) except when amount received is below US$1,000: asks for original ID documents (national ID cards for Maldivians; passports for foreigners).
  - If sender suspected of acting on behalf of others, requests information on the person on whose behalf the money is transferred and may phone that person to understand purpose.
  - Receivers are asked for ID documents except if value received is below US$1,000.
  - Payment is made if receiver information matches sender information.
  - No identification of the beneficial owner of funds received.
  - All identification information collected, including copies of ID documents, is kept by the MVT service for more than 3 years in accordance with its internal procedure.
  - This MVT service operator has not filed STRs with the FIU.
- Monitoring of Value-Transfer Service Operators:
  - The MMA conducts a yearly on-site inspection of every MVT service.
  - In the last 2 years it conducted 6 on-site inspections and has sometimes provided guidance and specific recommendations to improve AML/CFT policies.
  - Routine off-site monitoring performed: every month MVT service operators send the MMA standardized forms indicating sums transferred with breakdowns by customers’ nationality (Maldivians and foreigners), direction of money flow (in and out), destination or origin country, and purpose of transaction (8 categories as defined by the MMA).
  - MMA incorporates this information into its database to develop statistics; MVT operators have been submitting monthly forms for 9 years; most recent format update occurred in early 2010.
  - Authorities indicated no notable unlicensed cross-border money remittance activities observed, but recognized a domestic informal money transfer system serving people on various atolls.
- List of Agents:
  - MVT service operators are not required to keep a current list of their agents, but MMA indicated it is common practice for them to keep relevant information, including transaction details and list of agents, and to make this information available to the MMA.
- Sanctions:
  - Considering there are no AML/CFT obligations in place for MVT service operators, there are no sanctions for noncompliance.

*Source: text from the provided IMF assessment excerpt.*

### 682.      The NBFI, which is responsible for supervision of non-banking financial institutions deemed

### _cr1201 - 682.      The NBFI, which is responsible for supervision of non-banking financial institutions deemed

### NBFI supervision capacity
- The NBFI, responsible for supervision of non-banking financial institutions deemed within the purview of the MMA, has 4 staff members, and lack experience and expertise due to their new coming to supervisory work.

### Applying Best Practices Paper for SR.VI (c. VI.6)
- The Best Practices have not been taken into account by the authorities.

### Special Recommendation VI — Money or Value Transfer Services (MVT)
Findings
- No competent authority has been designated for licensing/registration and regulation/supervision of MVT service operators.
- MVT service operators are not subject to AML/CFT obligations, including customer due diligence, record keeping and suspicious transaction reporting.
- MVT service operators are not required to maintain a list of their agents and make that list available to the competent authorities.
- No sanctions available for non-compliance of MVT service operators with AML/CFT requirements (due to the absence of such requirements).
- The Maldives authorities have not taken sufficient action to make the operators of potential informal MVT system subject to AML/CFT requirements.

Recommendations
- Designate competent authorities responsible for licensing/registration and regulation/supervision of the MVT service operators.
- Require in law or regulation that MVT service operators comply with AML/CFT measures, including conducting customer due diligence, keeping records, identifying and reporting suspicious and unusual transactions, and monitoring cross-border wire transfers.
- Require MVT service operators to keep current lists of their agents and make them available to the designated competent authority.
- Introduce sanctions for MVT service operators’ breaches of their AML/CFT obligations.
- Assess the potential informal MVT system operating in the country and take measures to address the risks, if any.

Compliance rating
- SR.VI NC

### Preventive measures — Designated Non-Financial Businesses and Professions (DNFBPs)

Scope and current coverage
- DNFBPs active in the Maldives: lawyers, accountants, and dealers in precious metals and stones (namely jewelers).
- At present there is no AML/CFT framework, legal or otherwise, applicable to any Maldivian DNFBPs (authorities considering including all of them in future AML/CFT framework).
- Gambling (including casinos and internet casinos) is outlawed under the Constitution. Authorities report no real estate agents and no TCSPs as separate professions; lawyers provide real estate intermediation and legal person formation services. Authorities report no trust business but anecdotal evidence suggests trust operations conducted by lawyers.

Sector-specific notes
- Lawyers: No bar association or equivalent. To practice lawyers must have a law degree and register with the AGO. AGO unable to estimate number of legal professionals engaged in commercial activities for clients.
- Accountants: No accountant’s association or equivalent; no regulatory framework for accounting. Market self-regulates qualifications, according to interviewed accountants.
- Jewelers: Jewelry trade not well developed and generally does not extend to high value transactions.

Customer due diligence and record-keeping (R.12)
Findings
- DNFBPs are not subject to customer due diligence and record keeping obligations, and there is no guidance on those matters.

Recommendations
- Put in place a regulatory framework for DNFBPs active in the Maldives.
- Require DNFBPs to comply with CDD and record keeping requirements in line with Recommendations 5, 6, 8, 9, 10 and 11.

Compliance rating
- R.12 NC
  - There are no regulating bodies for DNFBPs in the Maldives.
  - There are no AML/CFT requirements for DNFBPs in the Maldives.

Suspicious Transaction Reporting (R.16)
Findings
- STR obligations do not extend to any DNFBP sectors because DNFBPs are not included in the AML/CFT regime.

Recommendations
- Impose suspicious transaction reporting requirements on DNFBPs in line with Recommendation 16.
- Implement the AML/CFT regulatory framework for DNFBPs.
- Ensure protection from criminal and civil liability for DNFBPs, their directors, officers and employees reporting in good faith.
- Prohibit DNFBPs and their personnel from disclosing that an STR or related information is being or has been reported to the FIU.
- Require DNFBPs to establish internal controls, training and audit programs in line with Recommendation 15.
- Require DNFBPs to give special attention to transactions and relationships with persons from or in countries that do not or insufficiently apply the FATF Recommendations in line with Recommendation 21.

Compliance rating
- R.16 NC
  - No STR requirements for DNFBPs.
  - No provisions in line with Recommendations 14, 15 and 21.

Regulation, supervision, and monitoring (R.24-25)
Findings
- No existing laws, guidelines or mechanisms for monitoring and ensuring compliance of DNFBPs with AML/CFT requirements.
- Unclear which agency would monitor compliance once DNFBPs are included, given absence of regulating bodies.
- Awareness among DNFBPs of ML/TF risks and possible future AML/CFT measures is low.

Recommendations
- Subject DNFBPs to AML/CFT requirements under R.12 and R.16.
- Designate competent authorities responsible for AML/CFT supervision for DNFBPs.
- Issue AML/CFT guidance for each DNFBP industry reflecting sector-specific ML/TF risks.
- Assess resources required to monitor compliance of highest-risk DNFBP sectors and allocate resources accordingly.

Compliance ratings
- R.24 NC — No regime for AML/CFT regulation and supervision of DNFBPs.
- R.25 NC — No existing guidelines for DNFBPs on AML/CFT.

Other non-financial businesses and professions; modern, secure transaction techniques (R.20)
Findings
- Maldives has not assessed ML/TF risk in the non-financial sector and therefore has not identified additional businesses/professions at risk.
- Draft AML/CFT legislation considers applying measures to dealers in high value goods, pawnshops, gambling, auction houses, investment advisers.
- Maldives economy is largely cash-based; highest denomination banknote is Rf 500 (approximately US$39). No measures taken to reduce reliance on cash.
- Banks provide credit and debit card services; two other companies provide credit card services. Bank of Maldives provides internet banking in Dhivehi and English.
- No specific laws on electronic payment systems and internet banking. Drafting legislation to enable mobile phone banking, regulations on payment systems, and separate regulation on financial transaction reporting.

Recommendations
- Undertake a risk assessment of ML/TF in non-financial businesses and professions (other than DNFBPs).
- Consider applying AML/CFT preventive measures to non-financial businesses/professions found to be at risk.
- Continue developing measures to use modern, secure techniques for financial transactions less vulnerable to ML.
- Introduce measures to reduce reliance on cash and encourage development and use of modern, secure transaction techniques.

Compliance rating
- R.20 NC
  - Gaps in measures to encourage modern and secure transaction techniques.
  - No formal risk assessment of vulnerabilities of other non-financial businesses and professions.

### Legal persons and access to beneficial ownership (R.33)

Types and numbers of legal entities
- Types of legal entities established under Maldivian legislation: companies, partnerships, co-operative societies and non-profit associations.
- Regulating laws: Companies Act 1996, Partnerships Act 1996, Co-operative Societies Act 2007, Association Act 2003.
- There are approximately 7,000 companies in the Maldives, almost half of which are inactive and in the process of being wound down by the Registrar of Companies.

Table 25 — Numbers of legal entities registered in 2009:
- Companies: 7,539
- Partnerships: 3
- Co-Operative Societies: 7
- Non-profit Organizations: 1,108

Company-level requirements and registry practices
- Companies must register as private limited or public limited with the Registrar of Companies and submit Memorandum and Articles of Association, which should include names of the persons forming the company and, for private limited companies, clearly identify the shareholders (Section 4 of the Companies Act).
- Public limited companies are subject to Securities Act 2006 and related regulations, including a Corporate Governance Code by the CMDA.
- Foreign companies conducting business in the Maldives must register as foreign companies (Section 94 of the Companies Act). Foreign investment must be registered under the Law on Foreign Investments in the Republic of Maldives 1979.
- Every company must keep a register of its members with particulars: name and address of members; number of shares held by each member; amount paid on the shares of each member (Sections 16 and 17).
- Companies must submit to the MHA an annual report containing names of directors and details of the company’s members of the past year.
- Section 74(a) of the Companies Act 1996 allows lifting the corporate veil and holding directors liable if directors misuse the legal entity in furtherance of criminal activity; authorities have never used Section 74(a) to lift the corporate veil.

Partnerships and co-operatives
- Partnerships register partnership agreement and identify partners and managing partner with MED (Partnerships Act 1996, Section 9). Partners can be held jointly liable; MED collects partnership agreement and partner identity.
- Co-operative Societies must register with Registrar of Co-operative Societies (Co-operative Societies Act 2007). Minimum of 10 members required (Section 12). Registrar has powers including freezing accounts, stopping activities, and winding up if society acts outside founding objectives (Sections 11(c) and 60). Identification information of directors and members must be submitted and can be shared with government authorities upon request.

Information maintenance and access
- MED is responsible for monitoring and enforcing obligations under Companies Act, Partnerships Act and Co-operative Societies Act. Records contain Memorandum and Articles of Association and Partnership Agreements.
- None of the legal entities are required to provide the registrar with updates in case of changes to the information provided.
- MED maintains information on companies, partnerships and co-operatives registered; law enforcement and investigative authorities and other agencies have access upon filing a formal application as prescribed by MED, but the information is not sufficient to establish a clear picture of a legal entity’s beneficial ownership.
- MED maintains information manually, which can lead to delays in accessing records.

- *Source: _cr1201 - 682.      The NBFI, which is responsible for supervision of non-banking financial institutions deemed*

### 718.      The MED stated that if a shareholder was a company, the shareholders of that company

### _cr1201 - 718.      The MED stated that if a shareholder was a company, the shareholders of that company

### Beneficial ownership of companies (Recommendations 33; R.33 NC)
- Current practice:
  - If a shareholder is a company, the MED requires disclosure of that company's shareholders but does not look beyond the first layer of ownership (para. 718).
  - The Companies Act does not prohibit nominee shareholders or nominee directors; no information was provided on whether these are current practice (para. 719).
  - Pursuant to Section 29 of the Companies Act, shares must be issued in nominative form; there are therefore no bearer shares in the Maldives (para. 720).
  - Private sector representatives reported being able to request MED records and receive them in one to two weeks; information on directors and shareholders is normally complete but annual accounts are often not up-to-date (para. 721).
- Main weaknesses inhibiting access to beneficial ownership information (paras. 722–724):
  - The rate of compliance with the obligation to provide the MED with updated information is inadequate.
  - The MED lacks capacity to enforce compliance with the obligation.
  - Company records are currently held manually; the MED is moving towards computerizing records.
  - There is no requirement that legal persons maintain information on whether their shares are held beneficially and, if so, details of the beneficial owner.
  - Investigative agencies have a reasonable range of powers to obtain company information, but effectiveness is reduced because MED and companies do not maintain beneficial ownership information and due to low compliance and enforcement.
- Recommendations to comply with Recommendation 33 (para. 725):
  - Ensure that adequate, accurate and current information on the beneficial ownership and control of legal entities is readily accessible to relevant authorities.
  - Require the MED to maintain information as to whether shares of registered entities are held beneficially and, if so, to maintain details of the beneficial owner.
- Compliance rating and justification:
  - R.33 NC
    - Current measures do not ensure adequate transparency concerning beneficial ownership and control of legal persons.
    - Records are held manually by the MED and are not updated consistently, particularly company accounts.
    - MED records do not include adequate, accurate and current information about beneficial ownership.
    - These factors inhibit law enforcement effectiveness and timely access to information.

### Legal arrangements and trusts (Recommendation 34; R.34 NC)
- Legal framework and practice (paras. 726–731):
  - Current Maldivian law does not address establishment of legal arrangements such as the common law trust; a draft Trust Act was prepared in 2008 but authorities met were not aware of the draft (para. 726).
  - Authorities and private sector indicated there is no trust business in the Maldives, although some Malé law firms’ websites suggest they provide services in relation to trusts established under other jurisdictions (para. 727).
  - Private sector reported informal arrangements where foreigners partner with locals to circumvent foreign investment rules; treated by courts as non-interest earning loans (para. 728).
  - The Islamic concept of Waqf (known as hiba) is recognized but not really used; hiba requires registration in a Court of Law to be legally recognized (para. 729).
  - There are currently no measures to prevent misuse of legal arrangements such as trusts (para. 730).
  - Information relating to hiba and guardianship of property is kept by the court and is accessible to law enforcement after formal application (para. 731).
  - No information was provided on access to beneficial ownership of legal arrangements by financial institutions (para. 732).
- Recommendation (para. 733):
  - Take measures to prevent unlawful use of legal arrangements for money laundering and terrorist financing and ensure adequate transparency concerning the beneficial ownership and control of trusts and Awqaf.
- Compliance rating and justification:
  - R.34 NC
    - No measures in place to ensure adequate transparency of Awqaf and trusts.

### Non-Profit Organizations (SR.VIII) — sector description, oversight, and risks
- Sector profile and data (paras. 734–736):
  - NPOs are generally community based; all inhabited islands except two have at least one NPO dedicated to community development (para. 734).
  - There are approximately 1,108 NPOs registered as associations in Maldives; no breakdown between domestic vs. foreign NPOs was provided (para. 734).
  - No mechanisms exist to track NPO finances or estimate amounts involved in the sector. Pursuant to the Associations Act (2003), NPOs should report all international funds, but this is not consistently followed and current legislation does not penalize failure to report donations (para. 735).
  - Authorities suspect some associations of providing financial support to terrorists abroad, but this is mostly based on unsubstantiated information and has not led to charges under the Terrorism Act (para. 736).
- Legal framework and registration (paras. 737–741, 756):
  - NPOs are governed by the Association Act 2003 administered by the Registrar of Associations within the MHA; registration is required before starting activity (para. 737).
  - Governing Regulation must be submitted under Section 5; foreign NPOs must register under Section 34, with the Maldives Red Crescent exception (paras. 738–739).
  - Section 19(b) and Section 25 prohibit formation for illegal purposes and allow liability where an association is used as a veil for illegal acts (paras. 740).
  - Information about NPOs is maintained by the Registrar and accessible to law enforcement and the public upon formal application; a limited electronic database exists (Excel worksheets) (para. 741).
  - Section 2 requires every association to be registered before starting activities (para. 756).
- Reporting, record-keeping, and supervision (paras. 742–746, 748–758):
  - No sector-wide review has been completed; an NGO scoping exercise is in process by MHA with UNDP support and redrafting of the Associations Act was scheduled to be completed by end of 2011 (para. 742).
  - No outreach has been undertaken to protect the NPO sector from terrorist financing abuse (para. 743).
  - Registered NPOs are required to produce an annual report before March of every year; the annual report template requires: a) summary of objectives; b) changes in executive committee; c) main conclusions of general meetings; e) activity calendar for next year. The annual report must be endorsed by AGM, signed by Executive Committee members and submitted to MHA within 30 days of endorsement (para. 744).
  - Under Section 27, NPOs must keep records of income and expenditure for 5 years and conduct annual audits (Sections 28-30); in practice not all NPOs submit reports (para. 745).
  - Information submitted at registration must identify governing body and founding members; updates should be provided on an ongoing basis (para. 748).
  - Registrar information is publicly available upon formal application (para. 749).
  - There is no supervision beyond monitoring of registration, reports, and record-keeping obligations (para. 747).
  - NPOs are required to keep financial records for 5 years and submit annual reports including an annual audit; fundraising is allowed for NPO objectives (para. 758).
- Sanctions and enforcement (paras. 750–755, 755–755 summary):
  - Section 25: persons who misuse an NPO for illegal activities shall be personally liable; this provision has yet to be tested in Maldives (para. 750).
  - Section 32: Registrar may cancel registration for breaches including late submittal of annual report; Section 33: court can cancel registration if NPO engaged in activities contravening laws (para. 751).
  - Section 37: Registrar may penalize an association with a fine not exceeding 500 (five hundred) Rufiyaa (para. 752).
  - Section 27(b): unregistered operation or incorporation may incur penalty of two to five years sentence in jail or banishment or house arrest (para. 753).
  - NGOs are fined by Rf 500 (approx. US$39) for late submission of annual reports. If they consecutively fail to submit annual and financial report for two years, the registrar has discretion to cancel their registration. So far, no registration has been cancelled for failure to comply or for conducting illegal activities (para. 755).
- Information sharing, investigations, and international cooperation (paras. 759–762):
  - No additional measures beyond the Registrar exist to ensure effective investigation and gathering of information on NPOs (para. 759).
  - No measures have been taken to hold relevant information on NPOs of potential terrorist financing concern to ensure effective domestic cooperation, coordination and information sharing; efficacy is compromised if annual reports are not submitted and not actively pursued or enforced (para. 760).
  - No specific provisions to allow access to administration and management information during investigations; law enforcement can access MHA-held information through a request (para. 761).
  - There has been no specific sharing of information, preventative action, or investigative expertise relating to suspected NPO exploitation for terrorist financing. No cases of terrorist financing have been prosecuted and no NPOs investigated for possible links to terrorist financing. If the ROA suspects terrorist financing, it must inform the MPS (para. 762).

*Source: _cr1201 - 718.*

### 763.      There is no specific point of contact for international requests regarding NPOs but

### _cr1201 - 763.      There is no specific point of contact for international requests regarding NPOs but

### NPO sector — description and risk assessment
- Maldives has a system of registration for NPOs; information is available on the purposes and objectives of registered NPOs and the identity of their executive committees.  
- No information was provided on the level of compliance with the registration system or on the usefulness of the information registered to authorities such as law enforcement agencies.  
- There is no active or adequate system to promote effective supervision and monitoring of the NPOs, and no true understanding of risks of terrorist financing in the sector.  
- The authorities are undertaking a scoping exercise; this should include an assessment of the overall terrorist financing risk in the NPO sector.  
- There is a lack of a coordinated national strategy aimed at protecting NPOs from abuse for terrorist financing.  
- The Ministry of Home Affairs (MHA) requires significant capacity boosting to fulfill its oversight function.

### Recommendations for compliance with Special Recommendation VIII
- Review existing laws and regulations with a view to identifying gaps in coverage.  
- Review the NPO sector to identify those NPOs which are at risk of abuse by terrorist financiers.  
- Work with the NPO sector and the public to raise awareness among regulators and NPOs of the vulnerability of NPOs to abuse for terrorist financing.  
- Increase the financial, personnel and technical resources available to MHA to allow them to develop and implement more effective supervision programs.  
- Implement more effective supervision programs.  
- Enhance domestic coordination between MHA and various other competent authorities involved in AML/CFT.  
- Ensure clear mechanisms of international cooperation to respond to international requests.

### Compliance with Special Recommendation VIII — rating and underlying factors
- Rating: SR.VIII NC  
- Summary of factors underlying rating:  
  - No overall strategy to identify and address AML/CFT risks within the NPO sector and no review of the domestic NPO sector.  
  - No outreach to the NPO sector or raising awareness on FT risks or promotion of overall healthy NPO governance.  
  - Supervision of NPOs is inadequate and compliance with registration and financial reporting obligations is low.  
  - Insufficient transparency of NPOs because the information maintained is insufficient.  
  - No ongoing updating and recording of information about those who control NPOs and the operation of these NPOs.  
  - No clear mechanisms to respond to international requests.

### National coordination (R.31 & R.32) — mechanisms and analysis
- Maldives has established a domestic coordination mechanism dedicated to AML/CFT issues and some bilateral MoUs to exchange views and information.  
- An AML/CFT Steering Committee was created under the lead of the FIU to ensure coordination and cooperation amongst relevant authorities. Work procedures state the Committee’s purpose is to “coordinate implementation of national anti-money laundering and combating terrorist financing (AML/CFT) policies and for the participating members of this Committee to share information.”  
- Committee composition: chaired by the Governor of the MMA and comprises ACC; AGO; DIE; MMA FIU; CMDA; MCS; MPS; MFT; PGO; and DJA. The MNDF is not a formal member but authorities plan to invite the MNDF to future meetings.  
- Logistical support for the Committee is provided by the staff of the MMA.  
- Committee meets once a month, or more frequently if necessary; MMA issues meeting minutes and the minutes of each previous meeting must be adopted officially during the next meeting.  
- The Committee has been useful as a dialogue platform but has not yet reached decisions on policy matters.  
- Bilateral MoUs exist (e.g., between MNDF and MCS; ACC and MPS in process); informal cooperation occurs between MCS and DIE, and among MPS, MMA and MNDF.  
- No formal mechanism exists for consultation between competent authorities and the private sector.  
- Statistics (applying R.32): Not available.

### Recommendations for R.31 & R.32 and compliance
- Recommendations:  
  - Make better use of the AML/CFT Steering Committee.  
  - Authorities are encouraged to take planned steps to invite the MNDF.  
- Compliance ratings and factors:  
  - R.31 PC — Coordination committee is in place but has not delivered tangible outcomes.  
  - R.32 NC — No statistics maintained.

### International conventions and UN resolutions (R.35 & SR.I) — status and analysis
- Maldives is a UN member and signatory to various UN conventions.  
- Vienna Convention: signed and ratified (respectively on December 5, 1989 and September 7, 2000). The Law on Narcotic Drugs and Psychotropic Substances Act 1977 (Law No. 17/77) was passed to implement the Convention; it contains provisions on criminalization of various drug offenses and laundering of proceeds of these offenses.  
- ICSFT: acceded on April 20, 2004, but has not implemented the convention and relevant UNSC resolutions comprehensively; in particular, there is no separate, autonomous terrorist financing offense and no formal mechanism that would comply with the detailed requirements of the convention and resolution.  
- Palermo Convention: Maldives is not party; accession process reportedly underway and hoped to be concluded by end of 2011.  
- Implementation gaps:  
  - Implementation of Vienna Convention Articles 3-11, 15, 17 & 19 is far from comprehensive; no specific measures for Articles 15, 17 and 19.  
  - Implementation of ICSFT (Articles 2-18) is weak; additional legal measures needed.  
  - No steps taken to implement Palermo Convention provisions.  
- UNSCR implementation: MFA communicates designations under UNSCR 1267 to supervisory authorities (MMA, CMDA) and law enforcement (MPS, MCS); MMA and CMDA forward designations to licensees. However, no sound and comprehensive framework ensures effective and prompt freezing and, where necessary, seizing of assets related to persons designated under UNSCR 1267. No mechanism in place for implementation of UNSCR 1373.  
- Additional: Maldives is party to the SAARC Convention on Mutual Assistance in Criminal Matters.

### Recommendations and compliance for R.35 & SR.I
- Recommendations:  
  - Fully implement the Vienna Convention.  
  - Become a party to and fully implement the Palermo Convention.  
  - Fully implement the International Convention for the Suppression of the Financing of Terrorism and relevant UNSCRs as prescribed under Special Recommendations I and II.  
- Compliance ratings and factors:  
  - R.35 NC — Vienna convention has not been fully implemented; ICSFT has not been fully implemented; Maldives is not party to the Palermo Convention, nor has it implemented its provisions.  
  - SR.I NC — Terrorist financing has not been criminalized in a way that is fully consistent with the ICSFT; No comprehensive mechanism in place to ensure full implementation of obligations under UNSCR 1267, 1373 and their successor resolutions.

### Mutual Legal Assistance (R.36-38, SR.V) — legal framework and practice
- There is no legislative framework regulating mutual legal assistance (MLA) in Maldives. Some MoUs exist between Maldivian law enforcement authorities (notably MCS) and foreign counterparts; their number is relatively low and implementation scarce; MoUs were not provided to the assessment team.  
- Maldives is party to the Vienna Convention, the ICSFT, and the SAARC 2008 Convention on Mutual Legal Assistance in Criminal Matters.  
- In absence of domestic MLA legislation, measures that may be taken on behalf of a requesting State are mainly defined in existing MoUs (not reviewed). Authorities assert domestic powers may be used to assist other countries, but some powers may not lie on a sound legal basis.  
- Production, search and seizure of information, documents, or evidence from financial institutions or other natural or legal persons on behalf of a requesting State are possible; for information detained by financial institutions or lawyers, a court order would be needed.  
- Other forms of assistance (taking evidence/statements; effecting service of judicial documents; facilitating voluntary appearances; identification, freezing, seizure, or confiscation of assets linked to money laundering or terrorist financing) have not been requested to date; authorities assume these measures could be taken despite absence of MLA legal framework.  
- Authorities report few MLA requests received; all dealt with exchange of information (financial and non-financial) only.  
- No information provided on timeliness of responses to MLA requests; no external information from APG members to assess constructiveness or effectiveness.  
- Authorities could not recall rejecting an MLA request; most requests involved sharing information and were accommodated. It is unclear whether domestic limitation of money laundering offense to proceeds of drug offenses would limit assistance in cases with different predicates. Assessors found no indication of unreasonable or unduly restrictive conditions to mutual legal assistance.  
- No formal process for execution of MLA requests has been established; efficiency and timeliness of providing assistance are not established.  
- No law or practice identified that fiscal matters impede provision of MLA; Maldives has no income tax.  
- No banking secrecy under Maldivian law, but contractual confidentiality agreements exist; authorities need a court order to request production of information held by banks and lawyers, but no legal basis for this request was specified.  
- Authorities consider themselves entitled to use their “normal” powers to benefit a requesting State, though not provided in legislation; this has not been tested.  
- Due to lack of experience and low number of requests, no mechanisms have been devised to avoid conflicts of jurisdiction or determine best venue for prosecution in multi-jurisdictional cases.  
- Additional elements: powers available under R.28 may be used on behalf of another State (not tested); experience limited to exchanges of information outside MLA context.  
- International cooperation under SR.V: no general or specific legal provisions govern MLA in relation to terrorism and FT investigations; the 1990 Terrorism Prevention Act does not address international cooperation. Intelligence Department of the MPS collaborates with foreign agencies (United States, United Kingdom, India) to share intelligence on terrorism; statistics indicate requests received so far dealt with terrorism rather than FT. Sharing of information conducted as described for money laundering offense.

*Source: _cr1201 - 763.*

### 808.      There are no mechanisms in place for avoid potential conflict of jurisdiction.

### _cr1201 - 808.      There are no mechanisms in place for avoid potential conflict of jurisdiction.

### International mutual legal assistance (MLA) — legal basis and practice
- 808–811: There are no mechanisms in place to avoid potential conflict of jurisdiction.
- 809: Authorities state powers granted under domestic law "could be used on behalf of another jurisdiction, but there is no legal basis for this."
- 810: Authorities were unable to establish whether the absence of dual criminality could be an obstacle to assistance; they opined that it would not be an obstacle and that assistance, particularly exchange of information, would be provided.
- 811: Authorities have no experience in MLA in terrorist financing cases; the same description applies under SR.V.

### Timeliness, provisional measures, asset freezing, seizure, confiscation, and coordination (R.38; SR.V)
- 812: "There are currently no legal provisions that address the conditions and procedures under which the Maldives may assist other jurisdictions in identifying, freezing, seizing or confiscation assets located in its territory that may be linked to money laundering offense, terrorist financing, or any other type of crime."
- 813: Authorities reported no requests received from or made to another country for identification, freezing, seizing or confiscation of assets; they have no practical experience and "were unable to provide an opinion as to the procedures that would be followed."
- 813: Authorities could not tell whether they could take any measure with respect to property of corresponding value.
- 814: "No arrangements have been concluded with other states with a view to coordinate seizing or confiscation actions."
- 815: Authorities have neither contemplated establishment of an asset forfeiture fund nor the conclusion of sharing of confiscated assets.
- 816: Authorities have no domestic experience with non-criminal confiscation orders and were unable to establish whether they would respond to requests from other jurisdictions for assistance in that matter.
- 817: "No statistics were provided."
- 818: Assessment of effectiveness: authorities appear willing to provide assistance and have done so in practice, but have limited experience (mainly exchange of information) and little experience in seizing, freezing and confiscating assets; "it is unlikely that the authorities could respond in a timely fashion." Overall arrangements "do not appear to be effective."
- 819: Recommendation: establish a comprehensive framework to enable Maldivian authorities to cooperate with investigative and prosecutorial authorities in other countries; while bilateral MoUs and treaties are possible, recommended that Maldives issue a comprehensive MLA law.

### Recommendations and comments to comply with R.36–R.38 and SR.V
- 820 — To comply with Recommendation 36 and SR.V:
  - Criminalize money laundering and terrorist financing in line with the standard to ensure current deficiencies do not limit the scope of mutual legal assistance.
  - Establish a comprehensive framework to allow for the widest possible range of MLA in money laundering and/or terrorist financing investigations, prosecutions and related proceedings; ensure MLA can be rendered in a timely, constructive and effective manner.
  - Ensure that MLA is not subject to unreasonable, disproportionate or unduly restrictive conditions.
  - Establish clear and efficient processes for execution of MLA requests in a timely way and without undue delays.
  - Ensure that, where legal professional privilege does not apply, MLA is not refused on the grounds of secrecy or confidentiality laws for financial institutions and DNFBPs.
  - Ensure that powers of competent authorities required under Recommendation 28 are also available for use in response to MLA requests.
  - Consider establishing mechanisms to avoid conflicts of jurisdictions.
- 821 — Clarification recommendation:
  - Ensure that requests for MLA cannot be refused on the sole ground that the offense may also be considered to involve fiscal matters.
- 822 — To comply with Recommendation 37 and SR.V:
  - Ensure that, to the greatest extent possible, MLA may be rendered in the absence of dual criminality, in particular for less intrusive and non compulsory measures; ensure technical differences between Maldivian laws and those of the requesting State do not pose an impediment where dual criminality is requested.
- 823 — To comply with Recommendation 38 and SR.V:
  - Establish a legal framework for effective and timely responses to requests for freezing, seizing and confiscating assets (including laundered property, proceeds, instrumentalities, intended instruments, and property of corresponding value) at the request of foreign authorities in line with Recommendation 38.
  - Consider establishing an asset forfeiture fund into which all or part of confiscated property could be deposited.
  - Consider authorizing the sharing of confiscated assets with foreign authorities when confiscation is result of coordinated law enforcement actions.

### Ratings and factors underlying ratings (R.36–R.38; SR.V)
- R.36: NC
  - Lack of framework to enable widest range of MLA.
  - MLA may be prohibited or subject to unreasonable, disproportionate or unduly restrictive conditions.
  - No consideration given to mechanisms for determining best venue for prosecution when prosecution may be initiated in more than one country.
  - Lack of comprehensive criminalization of money laundering and terrorist financing undermines ability to provide MLA.
  - Effectiveness was not established.
- R.37: PC
  - Lack of clarity whether MLA can be rendered in absence of dual criminality for less intrusive and non compulsory measures.
- R.38: NC
  - No laws and procedures for effective and timely responses to requests for identification, freezing, seizing or confiscation of assets related to money laundering, terrorist financing or other predicate offenses.
  - No arrangements for coordination of seizure and confiscation actions with other countries.
  - Lack of comprehensive criminalization undermines ability to provide MLA.
  - Effectiveness was not established.
- SR.V: NC
  - Lack of framework to enable widest range of MLA and ensure it is not prohibited or unduly restrictive.
  - No consideration of mechanisms for determining best venue for prosecution.
  - Lack of clarity on dual criminality for less intrusive and non compulsory measures.
  - No laws and procedures for freezing, seizing or confiscating assets related to FT.
  - No arrangements for coordination of seizure and confiscation actions with other countries.
  - Lack of comprehensive criminalization of terrorist financing undermines ability to provide MLA.
  - Effectiveness was not established.

### Extradition (R.37, R.39, SR.V) — legal framework, practice, and recommendations
- 824: "There is currently no legal framework for extradition," but Maldives has entered into two extradition treaties (Sri Lanka and Pakistan) and is party to the SAARC Convention on MLA in Criminal Matters; copies of treaties were not provided to assessment team.
- 825: In theory, money laundering is an extraditable offense, but narrow criminalization and absence of an extradition framework make it unclear how a request would be implemented; authorities do not know whether absence of dual criminality would impede cooperation.
- 826: In absence of legal framework, extradition may only be granted within circumstances and conditions proscribed in the treaties.
- 827: Authorities state nothing prevents extradition of Maldivian nationals, but no such case in practice.
- 828: In absence of clear procedures and practical experience, it was not established that Maldives could handle extradition requests without delay.
- 829: "There are no simplified procedures for extradition in place."
- 830: "Not available" for statistics.
- 831: Effectiveness: authorities have little experience in extradition; effectiveness of current arrangements could not be established.
- 832 — Recommendations to comply with R.39 (and R.37) and SR.V:
  - Criminalize money laundering and terrorist financing in line with the standard and ensure both are extraditable offenses.
  - Establish a legal framework to enable extradition of individuals charged with money laundering and/or terrorist financing; ensure extradition requests and proceedings relating to money laundering and terrorist financing are handled without undue delay.

### Other forms of international cooperation (R.40; SR.V) — practice, channels, and limitations
- 833: Cooperation addressed in a few domestic provisions (Banking Act and CMDA Securities (General) Regulations) and in international agreements mainly through SAARC.
- 834: Maldives is SAARC member; various law enforcement and investigative authorities have memberships with other international/regional organizations such as Interpol; no specific authorities other than the MPS identified.
- 835: Formal MLA channels are rare; cooperation more frequent via law enforcement counterparts. Two instances of information exchange related to money laundering: one in 2006 and one in 2007 via Interpol NCBs.
- 836–835: Table 26 and Table 27 present statistics exchanged between NCB Malé’ (MPS) and other Interpol NCBs and intelligence information exchange between the Intelligence Department of the MPS and partner agencies (January 2007–August 2010). Relevant exact figures preserved in source tables (years 2006–2010; various counts per crime type and information type).
- 837: Information may be provided spontaneously or upon request; information provided on a variety of crimes and is not limited to money laundering, predicate offenses under the Drugs Act, or terrorist financing.
- 838: Information exchange does not seem limited by disproportionate or restrictive conditions; authorities willing to cooperate despite absence of clear legal framework; fiscal-matter involvement is not viewed as an obstacle (Maldives did not have a fiscal regime in place at time of assessment).
- 839: "A strict interpretation of the confidentiality and privacy provisions, however, prevents law enforcement authorities from having access to all relevant information."

_Excerpt from _cr1201 - 808.      There are no mechanisms in place for avoid potential conflict of jurisdiction._

### 840.      No precise information was provided on the timeliness of the responses provided by the

### _cr1201 - 840.      No precise information was provided on the timeliness of the responses provided by the

### Cooperation with foreign counterparts (MMA, CMDA, Customs)
- MMA:
  - With the December 2010 entry in force of the 2010 Banking Act and its Section 54 in particular, the MMA has the authority to share information with its foreign counterparts.
  - On December 19, 2010, the MMA signed a MoU with the United Arab Emirates Central Bank to facilitate cooperation and exchange of information on banking supervision, technical assistance and training, as well as for combating money laundering and terrorist financing purposes.
  - Prior to December 2010, the MMA did not have the legal authority to cooperate, but nevertheless shared information for supervision purposes with counterparts in countries where parent companies of financial institutions operating in Maldives were located.
  - Limitation: The MMA may only cooperate with its foreign counterparts on banking sector issues.
- CMDA:
  - Authorized by the Securities (General) Regulations (Section 13(d)) to investigate on behalf of foreign regulatory authorities, or otherwise assist in investigations in securities transactions; so far this provision has not been put to use.
  - CMDA is a member of IOSCO and a signatory to its multilateral MoU, under which the CMDA is required to provide assistance and cooperation to foreign regulatory authorities in investigation of securities related transactions.
  - So far, no bilateral MoUs have been signed between the CMDA and a foreign counterpart, but the CMDA indicated a couple may be concluded in the near future.
- Customs:
  - Maldives is a member of the World Customs Organization (WCO) and shares information in accordance with WCO rules.
  - As a SAARC member, it is party to the SAARC Agreement on Mutual Administrative Assistance in Customs Matters (2005).
  - Maldives has entered into bilateral agreements and MoUs with other countries’ Customs services including with China, Malaysia, Thailand, Australia and India.

### FIU information-sharing and limitations
- FIU Authorized to Make Inquiries on Behalf of Foreign Counterparts (c. 40.4.1):
  - The FIU may share information with its foreign counterparts only as far as STRs received from the banking sector are concerned.
  - FIU-to-FIU informal sharing of information is limited in other sectors because counterpart FIUs are reluctant to share information in the absence of a legal framework to protect how that information would be dealt with in the Maldives.
- Limitation: Lack of sound legal basis for the establishment of the FIU and lack of authorization to exchange information other than related to the banking sector with foreign counterparts.

### Recommendations (to comply with Recommendation 40 and related)
- Introduce legal authority for the MMA to cooperate with its foreign counterparts (including outside the banking sector).
- Establish the FIU on a sound legal basis and authorize it to exchange information with its foreign counterparts.

### Ratings: Recommendation 40 and Special Recommendation V
- R.40: PC
  - Factors underlying rating:
    - The MMA may only cooperate with its foreign counterparts on banking sector issues.
    - The CMDA has not signed MoUs with its foreign counterparts and the MMA has signed only one MoU.
    - Lack of sound basis for the establishment of the FIU and lack of authorization to exchange information other than related to the banking sector with foreign counterparts.
- SR.V: NC
  - Factors underlying rating mirror those for R.40:
    - MMA limited to banking sector cooperation.
    - CMDA has not signed MoUs; MMA signed only one MoU.
    - Lack of sound basis for the establishment of the FIU and lack of authorization to exchange information other than related to the banking sector with foreign counterparts.

### Resources, expertise, and statistics (R.30 and R.32)
- Staffing and expertise:
  - MPS seems sufficiently resourced; other authorities such as the ACC, MCS, DIE and PGO are understaffed.
  - Supervisory authorities (MMA and CMDA) require additional staff to undertake functions effectively, notably given the introduction of mandatory AML/CFT requirements for banks.
  - With the exception of the FIU, all relevant authorities lack sufficient AML/CFT expertise and knowledge.
- Legal and review work:
  - Maldivian authorities are working on a new AML/CFT law; unclear to what extent they are reviewing the effectiveness of current measures in mitigating money laundering and terrorist financing risks.
- Statistics:
  - Overall, outside the MPS and FIU, statistics are scarce.
- Recommendations (to comply with Recommendation 30):
  - Increase the MMA and the CMDA’s human resources as well as expertise in support of their supervisory function.
  - Increase the PGO, and the judiciary’s resources and training in AML/CFT matters.
  - Provide training on AML/CFT matters to all relevant authorities.
- Compliance ratings:
  - R.30: PC
    - Most relevant agencies need additional staff.
    - Insufficient AML/CFT training for all authorities except the FIU.
  - R.32: NC
    - No evidence that the authorities are reviewing the effectiveness of the current AML/CFT framework, notably by assessing money laundering and terrorist financing risks in the Maldives.
    - No comprehensive statistics available at the AGO, MMA and CMDA.

### General legal framework gaps and systemic issues
- Critical challenges:
  - Adoption of a comprehensive legal framework is a key challenge: several areas (such as criminal procedure and mutual legal assistance) are not covered by comprehensive legislation and are addressed on a case-by-case basis.
  - Some existing legislation (such as the Penal Code) is in urgent need of update.
  - Draft AML/CFT law had not been finalized at the time of the assessment and was yet to be submitted to Parliament.
- Recommendation:
  - Authorities should ensure that necessary laws (such as the revised Penal Code and a criminal procedure law) are passed, as current legislative gaps significantly impair the effectiveness of the AML/CFT system.

### Selected findings from Table 1: Ratings of Compliance with FATF Recommendations (high-level excerpts)
- Legal systems:
  - Recommendation 1 (Money laundering offense): NC
    - Money laundering only criminalized in relation to offenses under the Drugs Act; other designated categories of offenses are not predicate offenses.
    - Money laundering offense under the Drugs Act does not extend to “conversion” and concealment/disguise elements as required; Maldives requires proof of intent for concealment or disguise.
    - A money laundering conviction can only be obtained if there is a conviction for the predicate offense.
  - Recommendation 2 (Mental element and corporate liability): NC
    - Intent cannot be inferred from objective facts except in limited circumstances.
    - No criminal liability for legal persons other than companies; no effective and proportionate sanctions for legal persons other than companies.
  - Recommendation 3 (Confiscation and provisional measures): NC
    - Confiscation appears limited to tangible, corporeal assets with a very direct link to the predicate offense.
    - No possibility to confiscate property of corresponding value or all property derived directly or indirectly from proceeds of crime; no comprehensive provisions for freezing/seizing beyond four Acts.
- Preventive measures (selected):
  - R.4 (Secrecy laws): PC — strict interpretation of privacy provisions prevents law enforcement access in investigations.
  - R.5 (CDD): NC — CDD requirements apply only to banks and securities sector licensees; multiple gaps in legal/regulatory requirements for identification, verification, beneficial ownership, ongoing due diligence, timing, and enhanced measures.
  - R.6 (PEPs): NC — no obligations for identification, senior management approval, source of wealth/funds verification, or enhanced ongoing monitoring.
  - R.7 (Correspondent banking): NC — no obligations on banks to govern correspondent banking relationships.
  - R.8 (New technologies/non face-to-face): NC — no obligations to prevent misuse of technological developments or to address non face-to-face risks.
  - R.9 (Third parties/introducers): NC — no provisions for reliance on third parties for CDD.
  - R.10 (Record-keeping): NC — only banks and securities licensees subject to record-keeping; requirements insufficient or absent for other sectors and for minimum five-year retention.
  - R.11 (Unusual transactions): NC — no obligations to pay special attention, examine background/purpose, or retain findings.
  - R.12 (DNFBP): NC — no regulating bodies or AML/CFT requirements for DNFBPs.
  - R.13 (STRs): NC — STR requirements limited to banks and to suspicions of laundering proceeds of Drugs Act offenses; attempted transactions not subject to reporting; extremely low number and doubtful quality of STRs.
  - R.14 (Protection/no tipping-off): PC — protection and prohibition against tipping off apply only to banks under the 2010 Banking Act.
  - R.15 (Internal controls/compliance/audit): NC — obligations limited to banks and securities licensees; requirements recent with limited demonstrated effectiveness; no binding obligations for audits, compliance officer duties, access to data, or employee screening.

*Source: IMF assessment excerpts contained in the provided content unit.*

### 16. DNFBP–R.13–15 & 21

### 16. DNFBP–R.13–15 & 21

### DNFBPs (Recommendations 13–15 & 21)
- As DNFBPs are not yet included in the AML/CFT regime in Maldives, STR requirements do not extend to DNFBPs.
- No provisions in line with Recommendations 14, 15 and 21.
- No STR requirements for DNFBPs.
- No provisions in line with Recommendations 14, 15 and 21.

### Sanctions
- NC
- Banks:
  - Effectiveness of sanctions applicable to AML/CFT non-compliance has not been established.
- Securities sector:
  - No sanction available for non-compliance with the CMDA 2010 AML Regulations until April 2011.
  - The criminal sanctions for non-compliance with Regulations (including the CMDA 2010 AML Regulations after April 2011) and administrative sanctions available are not effective, proportionate and dissuasive.
  - No sanction for directors or senior management of the securities dealing companies.
- Financial sectors other than banking and securities:
  - No sanctions for non-compliance with AML/CFT requirements since there are no such requirements in place.

### Shell banks (Recommendation 18)
- PC
- Current legislation does not prohibit shell banks in a comprehensive way.
- There is no prohibition to engage in or maintain a correspondent relationship with shell banks.
- There is no requirement in the legislation obliging financial institutions to satisfy themselves that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks.

### Other forms of reporting (Recommendation 19)
- C
- This recommendation is fully met.

### Other NFBP & secure transaction techniques (Recommendation 20)
- NC
- There are gaps with effective measures to encourage the development and use of modern and secure techniques for conducting financial transactions that are less vulnerable to money laundering.
- The Maldives has not yet undertaken a formal risk assessment of the vulnerabilities of other non-financial businesses and professions.

### Special attention for higher risk countries (Recommendation 21)
- NC
- No enforceable obligations for financial institutions to give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries which do not or insufficiently apply the FATF Recommendations.
- No obligations for financial institutions that in case of transactions with no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible, be examined, and written findings kept.
- No effective measures in place to ensure that financial institutions are advised of concerns about weaknesses in the AML/CFT system of other countries.
- No clear legal authority to enable the Maldives to apply a range of appropriate counter-measures across all financial sectors where a country continues not to apply or insufficiently applies the FATF Recommendations.

### Foreign branches & subsidiaries (Recommendation 22)
- N/A
- No Maldivian financial institutions have overseas branches or subsidiaries.

### Regulation, supervision and monitoring (Recommendation 23)
- NC
- With the exception of banks, none of the financial institutions active in the Maldives are subject to AML/CFT supervision and monitoring, since there are no enforceable AML/CFT requirements.
- No AML/CFT supervision conducted over banks due to the very recent introduction of the AML/CFT obligations: effectiveness of the supervision could therefore not be established.
- No legal framework for licensing/registration and regulation/supervision of insurance intermediaries and money changers.
- Insufficient fit and proper requirements for beneficial owners of financial institutions.
- No requirement for MVT service operators to be licensed or registered.
- No legal framework for the supervision of MVT service operators.
- Effectiveness was not established: The market entry and “fit and proper” requirements on banks and insurance undertakings have not been implemented sufficiently on existing operators; lack of experience and expertise of the MMA and the CMDA staff undermines effectiveness of their supervision.

### DNFBP—regulation, supervision and monitoring (Recommendation 24)
- NC
- There is no regime for AML/CFT regulation and supervision of designated non-financial business and professions considering that DNFBPs are not subject to AML/CFT requirements.

### Guidelines & Feedback (Recommendation 25)
- PC
- No guidelines provided to financial institutions other than banks and MVT service operators.
- Guidelines provided to banks and MVT service operators do not include current money laundering and terrorist financing trends and techniques and are not sufficient.
- There are no existing guidelines for DNFBPs on AML/CFT.
- No STR guidelines for financial institutions or DNFBPs either relating to terrorist financing or money laundering.
- Limited guidance provided by the MMA with respect to the reporting of suspected money laundering activities, but no guidance with respect to terrorist financing.
- Feedback has been given on the four STRs reported so far on an ad hoc basis – there is no policy relating to feedback and its possible implementation, such as the use of acknowledgement letters.

### The FIU (Recommendation 26)
- NC
- The FIU has no clear legal authority to receive STRs related to money laundering or terrorist financing from non-bank financial institutions and DNFBPs.
- The FIU does not have specific authority to analyse and disseminate money laundering or terrorist financing related STRs.
- The FIU does not have sufficient and timely direct or indirect access to financial, administrative and law enforcement information.
- The FIU does not provide guidance to financial institutions and DNFBPs on the specifications of reporting forms or the procedures that should be followed when reporting.
- The FIU does not have sufficient operational independence and autonomy to ensure that it is free from undue influence or interference.
- The information held by the FIU is not securely protected.
- The FIU does not publicly release periodic reports.

### Law enforcement authorities (Recommendation 27)
- NC
- No money laundering or terrorist financing investigations, prosecutions and convictions.
- No clear legal basis for the MPS on which to postpone or waive arrest of persons or seizure of money.
- Effectiveness was not established because the MPS has never used its powers for money laundering or terrorist financing investigations.

### Powers of competent authorities (Recommendation 28)
- PC
- The MPS cannot always effectively compel documents.
- Effectiveness has not been established because the MPS has never used its powers for money laundering or terrorist financing investigations.

### Supervisors (Recommendation 29)
- NC
- Banks:
  - The effectiveness of the MMA’s powers under the 2010 Banking Act has not been established;
- Financial sectors other than banking and securities businesses:
  - Competent authorities have no supervisory power to ensure financial institutions’ compliance with the AML/CFT requirements due to the absence of such requirements and/or competent authorities designated to supervise/regulate these sectors.

### Resources, integrity, and training (Recommendation 30)
- PC
- Most of the relevant agencies need additional staff.
- Insufficient AML/CFT training for all the authorities except the FIU.

### National co-operation (Recommendation 31)
- PC
- Coordination committee is in place but has not delivered tangible outcomes.

### Statistics (Recommendation 32)
- NC
- No evidence that (in the course of drafting the new AML/CFT law, or elsewhere) the authorities are reviewing the effectiveness of the current AML/CFT framework, notably by assessing money laundering and terrorist financing risks in the Maldives.
- No comprehensive statistics available at the AGO, MMA and CMDA.

### Legal persons–beneficial owners (Recommendation 33)
- NC
- Current measures in place do not ensure adequate transparency concerning the beneficial ownership and control of legal persons.
- Records are held manually by the MED and are not updated in a consistent manner, particularly in relation to company accounts. Records held by the MED do not include adequate, accurate and current information about beneficial ownership.
- Above factors inhibit effectiveness of law enforcement powers to obtain information about beneficial ownership and more generally to obtain information in a timely fashion.

### Legal arrangements – beneficial owners (Recommendation 34)
- NC
- No measures in place to ensure adequate transparency of Awqaf and trusts.

### Conventions (Recommendation 35)
- PC
- Vienna convention has not been fully implemented.
- ICSFT has not been fully implemented.
- The Maldives is not party to the Palermo Convention nor has it implemented its provisions.

### Mutual legal assistance (Recommendation 36)
- NC
- Lack of framework that would:
  - Enable the provision of the widest range of mutual legal assistance;
  - Ensure that MLA is not prohibited or subject to unreasonable, disproportionate or unduly restrictive conditions.
- No consideration given to mechanisms for determining the best venue for prosecution when prosecution may be initiated in more than one country.
- Lack of comprehensive criminalization of money laundering and terrorist financing undermines ability to provide MLA.
- Effectiveness was not established.

### Dual criminality (Recommendation 37)
- PC
- Lack of clarity as to whether MLA can be rendered in the absence of dual criminality in particular for less intrusive and non compulsory measures.

### MLA on confiscation and freezing (Recommendation 38)
- NC
- No laws and procedures for the provision of effective and timely response to requests for identification, freezing, seizing or confiscation of assets related to the money laundering, terrorist financing or other predicate offenses.
- No arrangements for coordination of seizure and confiscation actions with other countries.
- Lack of comprehensive criminalization of money laundering and terrorist financing undermines ability to provide MLA.
- Effectiveness was not established.

### Extradition (Recommendation 39)
- NC
- No legal framework for extradition.
- Lack of comprehensive criminalization of money laundering undermines ability to extradite.
- Effectiveness of current system based on treaties was not established.

### Other forms of co-operation (Recommendation 40)
- PC
- The MMA may only cooperate with its foreign counterparts on banking sector issues.
- The CMDA has not signed MoUs with its foreign counterparts and the MMA has signed only one MoU.
- Lack of sound basis for the establishment of the FIU and lack of authorization to exchange information other than related to the banking sector with foreign counterparts.

### Special Recommendations — Summary of Key Deficiencies
- SR.I Implement UN instruments — NC
  - Terrorist financing has not been criminalized in a way that is fully consistent with the ICSFT.
  - No comprehensive mechanism in place to ensure full implementation of obligations under UNSCR 1267, 1373 and their successor resolutions.
- SR.II Criminalize terrorist financing — NC
  - No separate, autonomous terrorist financing offense; only partially criminalized by the aiding and abetting provision.
  - The collection of funds for terrorist purposes has not been criminalized.
  - No evidence that the use “in full or in part” is covered.
  - No evidence was provided to show that all of the acts in the nine anti-terrorism instruments have been criminalized.
  - No evidence was provided showing the financing of terrorist acts meant to compel governments or international organizations is criminalized.
  - The financing of individual terrorists and of terrorist organizations is not criminalized.
  - The definition of “finance and property” is not clear enough to ascertain that all of the elements of the definition of “funds” in the ICSFT are included.
  - A link to a specific terrorist act must be established in order to successfully bring charges under Section 3.
  - The attempt to commit the offense under Section 3 is not criminalized.
  - Terrorist financing offenses are not predicate offenses for money laundering.
  - It is not possible to prosecute persons abroad who are alleged to have engaged in terrorist financing for acts committed or intended to be committed in the Maldives.
  - It is not possible to infer the intentional element from objective factual circumstances.
  - Very limited sanctions for legal persons are only applicable to those registered with the Government and active in the Maldives.
- SR.III Freeze and confiscate terrorist assets — NC
  - No laws and procedures in place to freeze terrorist funds or other assets of persons designated under S/RES/1267(1999).
  - No laws and procedures in place to freeze terrorist funds or other assets of persons under S/RES/1373(2001).
  - No laws and procedures to examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other jurisdictions.
  - No laws and procedures to apply freezing actions to funds or other assets wholly or jointly owned or controlled, directly or indirectly, by designated persons, terrorists, terrorist financiers, or terrorist organizations. Idem for funds or other assets derived or generated from funds or other assets owned or controlled by such persons.
  - No effective systems for communicating actions taken under S/RES/1373(2001), and actions initiated under the freezing mechanisms of other jurisdictions to financial institutions and other persons or entities that may hold targeted funds or assets.
  - No clear guidance to FIs and other persons or entities that may hold targeted funds or assets regarding their obligations in respect of freezing mechanisms.
  - No effective and publicly-known procedures for considering de-listing and for unfreezing funds or other assets of de-listed persons or entities.
  - No effective and publicly-known procedures for unfreezing, in a timely manner, funds or assets of persons or entities inadvertently affected by a freezing mechanism upon verification that they are not designated persons.
  - No appropriate procedures for authorizing access to funds or other assets frozen pursuant to S/RES/1267(1999), and in accordance with S/RES/1452(2002), necessary for basic expenses, payment of certain types of fees, expenses and service charges, or extraordinary expenses.
  - No provisional measures/confiscation regarding freezing, seizing, and confiscation of terrorist-related funds in other contexts than that of the United Nations Security Council Resolutions and freezing actions initiated in other countries.
  - No protection for the rights of bona fide third parties.
  - No appropriate measures to effectively monitor compliance with relevant legislation, rules or regulations.
  - No possibility to impose civil, administrative or criminal sanctions for failure to comply with such rules.
- SR.IV Suspicious transaction reporting — NC
  - No reporting requirements for financial institutions other than banks.
- SR.V International cooperation — NC
  - Lack of framework that would:
    - Enable the provision of the widest range of mutual legal assistance;
    - Ensure that MLA is not prohibited or subject to unreasonable, disproportionate or unduly restrictive conditions.
  - No consideration given to mechanisms for determining the best venue for prosecution.
  - Lack of clarity as to whether MLA can be rendered in the absence of dual criminality in particular for less intrusive and on compulsory measures or when prosecution may be initiated in more than one country.
  - No laws and procedures for the provision of effective and timely response to requests for identification, freezing, seizing or confiscation of assets related to terrorist financing.
  - No arrangements for coordination of seizure and confiscation actions with other countries.
  - Lack of comprehensive criminalization of terrorist financing undermines ability to provide MLA.
  - Effectiveness of MLA was not established.
  - No legal framework for extradition.
  - Lack of comprehensive criminalization of financing of terrorism undermines ability to provide extradition.
  - Effectiveness of extradition was not established.
- SR.VI AML/CFT requirements for money/value transfer services — NC
  - No competent authority has been designated for licensing/registration and regulation/supervision of MVT service operators.
  - MVT service operators are not subject to AML/CFT obligations, including customer due diligence, record keeping and suspicious transaction reporting.
  - MVT service operators are not required to maintain a list of their agents and make that list available to the competent authorities.
  - No sanctions available for non-compliance of MVT service operators with AML/CFT requirements (due to the absence of such requirements).
  - The Maldives authorities have not taken sufficient action to make the operators of potential informal MVT system subject to AML/CFT requirements.
- SR.VII Wire transfer rules — NC
  - No requirements for financial institutions to implement provisions relating to wire transfers.
- SR.VIII Non-profit organizations — NC
  - No overall strategy to identify and address AML/CFT risks within the NPO sector and no review of the domestic NPO sector.
  - No outreach to the NPO sector or raising awareness on terrorist financing risks or promotion of overall healthy NPO governance.
  - Supervision of NPOs is inadequate and compliance with registration and financial reporting obligations is low.
  - Insufficient transparency of NPOs because the information maintained is insufficient.
  - No ongoing updating and recording of information about those who control NPOs and the operation of these NPOs.
  - No clear mechanisms to respond to international requests.
- SR.IX Cross-Border Declaration & Disclosure — NC
  - There is no declaration or disclosure system in place in the Maldives.

### Table 2. Recommended Action Plan — Selected items
- FATF 40+9 Recommendations — Recommended Action (in order of priority within each section)
- 2.1 Criminalization of Money Laundering (R.1 & 2) — Recommendation 1:
  - Ensure that the predicate offenses for money laundering cover all serious offenses and not only offenses under the Drugs Act.
  - Comprehensively criminalize money laundering in keeping with the international standards. Bring the money laundering offense of the Drugs Act in line with Vienna and Palermo by criminalizing the “conversion” of criminal property, and the concealment or disguise of the true nature, location, disposition, movement, or rights with respect to property. Remove the requirement that intent be proven in relation to concealment or disguise.
  - Ensure money laundering charges may also be brought in the absence of a conviction for the predicate offense.
  - Ensure that in all instances the criminalization of the categories of offenses is in line with the relevant international conventions and standards.
  - Ensure that the ancillary offenses to money laundering, including conspiracy to commit and aiding and abetting, are criminalized.
  - Show effective use of the money laundering provisions.
- 2.1 Criminalization of Money Laundering (R.1 & 2) — Recommendation 2:
  - Allow for the intentional element of the offense of money laundering to be inferred from objective factual circumstances other than eyewitnesses, perhaps corroborated by strong documentary evidence.
  - Extend criminal liability for money laundering offenses to legal persons other than companies.
  - Ensure effective and proportionate sanctions are available for legal persons beyond companies.

*Source: _cr1201 - 16. DNFBP–R.13–15 & 21*

### 2.2 Criminalization of

### 2.2 Criminalization of Terrorist Financing (SR.II)

### Key requirements and recommendations
- Criminalize the offense of terrorist financing separately and autonomously in keeping with SR.II, instead of relying on the ancillary offense of aiding and abetting; and in doing so to ensure the following elements are all taken into account:
- Ensure that the collection of funds for terrorist purposes is criminalized.
- Ensure that the use in full or in part of funds for terrorist financing purposes is criminalized.
- Ensure that all acts in the nine anti-terrorism instruments are criminalized.
- Ensure that the terrorist financing offense applies to terrorist acts meant to compel governments and international organizations to act, or to abstain from acting.
- Criminalize financing of individual terrorists and terrorist organizations.
- Ensure that “finance and property” includes all the elements of the definition of “funds” as used in the ICSFT.
- Ensure that it is not necessary to have to prove an actual use of the funds or a link to a specific terrorist act.
- Criminalize the attempt to commit a terrorist financing offense.
- Make terrorist financing offenses predicate offenses for money laundering.
- Make sure that the terrorist financing offense applies to persons abroad who finance terrorist acts in the Maldives.
- Permit the inference of the intentional element of the offense from objective factual circumstances.
- For legal entities, allow for sanctions other than deregistration, e.g. fines, ensuring that they are effective, proportionate and dissuasive, and make them applicable also to those entities not registered in the Maldives.

*Source: IMF assessment chapter excerpt*

### 2.3 Confiscation, freezing, and seizing of proceeds of crime (R.3)

### Key requirements and recommendations
- Ensure that the confiscation provisions can be applied to “property” as defined by the Standard: Assets of every kind, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible, and legal documents or instruments evidencing title to or interest in such assets, regardless of whether these assets are held or owned by the defendant or a third party.
- Provide for the confiscation of instrumentalities for offenses other than those of the Drugs Act and the Fisheries Act.
- Allow for the confiscation of property of corresponding value.
- Allow for the confiscation of property derived directly or indirectly from the proceeds of crime.
- Provide for confiscation even if the property is held by a third party.
- Expand the use of freezing and seizing of property subject to confiscation to offenses other than those under the Drugs Act, the Corruption Act, the Gang Related Crimes Act, and the Fisheries Act.
- Allow in laws or other measures for the initial application to freeze or seize to be made ex parte or without prior notice.
- Authorities should utilize the confiscation provisions that do exist more often.
- Provide protection for the rights of bona fide third parties, consistent with the Palermo Convention standards.
- Ensure that it is possible to prevent or void any action aimed at prejudicing the ability of authorities to recover property subject to confiscation.
- Make effective use of the confiscation framework by putting in place comprehensive legal provisions allowing the courts to confiscate proceeds and instrumentalities in the context of any money laundering, terrorist financing or other predicate offense.

*Source: IMF assessment chapter excerpt*

### 2.4 Freezing of funds used for terrorist financing (SR.III)

### Key requirements and recommendations
- Enact laws and procedures to freeze terrorist funds or other assets of persons designated by the U.N. Al-Qaida and Taliban Sanction Committee in accordance with S/RES/1267.
- Enact laws and procedures to freeze terrorist funds or other assets of persons under S/RES/1373(2001).
- Enact laws and procedures to examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other jurisdictions.
- Enact laws and procedures to apply freezing actions to funds or other assets wholly or jointly owned or controlled, directly or indirectly, by designated persons, terrorists, terrorist financiers, or terrorist organizations, as well as to funds or other assets derived or generated from funds or other assets owned or controlled by such persons.
- Establish effective systems for communicating actions taken under S/RES/1373(2001), and actions initiated under the freezing mechanisms of other jurisdictions to financial institutionss and other persons or entities that may hold targeted funds or assets.
- Provide clear guidance to financial institutions and other persons or entities that may hold targeted funds or assets regarding their obligations in respect of freezing mechanisms.
- Establish effective and publicly-known procedures for considering de-listing and for unfreezing funds or other assets of de-listed persons or entities.
- Establish effective and publicly-known procedures for unfreezing, in a timely manner, funds or assets of persons or entities inadvertently affected by a freezing mechanism upon verification that they are not designated persons.
- Establish appropriate procedures for authorizing access to funds or other assets frozen pursuant to S/RES/1267(1999), and in accordance with S/RES/1452(2002), necessary for basic expenses, payment of certain types of fees, expenses and service charges, or extraordinary expenses.
- Enable the use of provisional measures/confiscation regarding freezing, seizing, and confiscation of terrorist-related funds in other contexts than that of the United Nations Security Council Resolutions and freezing actions initiated in other countries.
- Provide protection for the rights of bona fide third parties.
- Establish appropriate measures to monitor effectively compliance with relevant legislation, rules or regulations.
- Establish civil, administrative or criminal sanctions for failure to comply with such rules.

*Source: IMF assessment chapter excerpt*

### 2.5 The Financial Intelligence Unit and its functions (R.26)

### Key requirements and recommendations
- Establish on a sound legal basis the FIU as the center for receipt, analysis and dissemination of suspicious transactions reports from all reporting entities covered by the standard.
- Empower the FIU to have access, directly or indirectly and on a timely basis, to financial, administrative and law enforcement information.
- Enhance the overall quality and depth of analysis through better collection of information, improved analytical tools and further staff training.
- Require the FIU to provide guidance to financial institutions and DNFBPs regarding the manner of reporting, including the specification of reporting forms and the procedures that should be followed when reporting.
- Ensure that the information held by the FIU is securely protected and disseminated only in accordance with the law.
- Grant the FIU sufficient operational independence and autonomy by:
  - ensuring budgetary independence;
  - ensuring that the management of the FIU has autonomy in staff selection and retention within the FIU;
  - determining the conditions for the appointment and dismissal of the FIU head;
  - securing premises that allow for the protection of the information; and
  - allowing the FIU management to have an independent decision making process for the receipt, analysis and dissemination of STRs.
- Require the FIU to publicly release periodic reports including statistics, typologies and trends as well as information regarding its activities.
- Consider applying for Egmont membership once comprehensive AML/CFT legislation is passed and the FIU formally established.

*Source: IMF assessment chapter excerpt*

### 2.6 Law enforcement, prosecution and other competent authorities (R.27 & 28)

### Recommendation 27 — investigative and prosecutorial capacity
- Ensure that money laundering and terrorist financing offenses are investigated.
- Ensure that money laundering and terrorist financing offenses are prosecuted.
- Provide a legislative basis for the MPS to postpone or waive the arrest of suspected persons or the seizure of money.
- Although not directly required by the Recommendation, the authorities could also consider:
  - Creating a legal basis in order to use special investigative techniques.
  - Applying special investigative techniques in money laundering and terrorist financing investigations.
  - Creating permanent groups to investigate proceeds of crime.
- Consideration could also be given to cooperation with foreign authorities, including using special investigative techniques, given proper safeguards.

### Recommendation 28 — powers to compel evidence
- Enable its investigative agency to compel production of documents and records that also pertain to associates, or to have a reasonable expectation of obtaining a court order.
- Effectively use the power to compel documents and take witness testimony in money laundering and terrorist financing investigations.

*Source: IMF assessment chapter excerpt*

### 2.7 Cross-Border Declaration & Disclosure (SR IX)

### Key requirements and recommendations
- Introduce a compulsory cross-border currency declaration system or a disclosure system responding to the characteristics laid out in Special Recommendation IX in order to detect cross-border transportation of currency and bearer negotiable instruments that are related to money laundering or terrorist financing, and draft policies and procedures to support that system.
- Take legislative steps to ensure that a designated agency (such as the MCS, for example) has the authority to collect information from the carrier of currency or bearer negotiable instruments on the origin of the currency or bearer negotiable instruments and their intended use in cases of suspicion of money laundering or terrorist financing.
- Provide the designated agency with the authority to stop or restrain cash or bearer negotiable instruments for a reasonable time in order to ascertain whether evidence of money laundering or terrorist financing may be found, where there is a suspicion of money laundering or terrorist financing; or where there is a false declaration.
- Establish in law effective, proportionate and dissuasive sanctions for false cross-border currency declarations/disclosure or failure to declare/disclose.
- Establish in law effective, proportionate and dissuasive sanctions for the physical transportation of currency or bearer negotiable instruments that are related to money laundering or terrorist financing.
- Ensure that the prescribed threshold for declaration should not exceed US$/EUR 15,000.
- Seek closer cooperation with other neighboring countries, such as establishing mechanisms for regular information exchange on cash seizures and cross-border transportation reports.
- Ensure that the designated agency reports unusual movements of precious metals and stones to the countries of origination or destination.

*Source: IMF assessment chapter excerpt*

### 3. Preventive Measures – Financial Institutions

### 3.1 Risk of money laundering or terrorist financing
(Note: heading present; no specific bullets supplied in excerpt.)

### 3.2 Customer due diligence, including enhanced or reduced measures (R.5–8)
- Bring all financial institutions within the scope of the AML/CFT regime.
- Issue implementing regulations associated with CDD requirements under the 2010 Banking Act.
- Prohibit financial institutions from opening or maintaining anonymous or fictitious accounts by providing for an explicit prohibition of such accounts or by laying down clear positive identification requirements for all clients.
- Require in law or regulation all financial institutions to:
  - undertake CDD measures when establishing business relationships or when there are doubts about the veracity or adequacy of previously obtained customer identification data and to identify and verify their customers using reliable, independent source documents, data or information;
  - verify that any person acting on behalf of the customer is so authorized and identify and verify the identity of that person;
  - identify and verify the beneficial owner;
  - determine whether the customer is acting on behalf of another person and then to take reasonable steps to obtain sufficient identification data to verify the identity of that other person;
  - conduct ongoing due diligence on the business relationship and transactions.
- Require in law or regulation or other enforceable means financial institutions to:
  - verify the legal status of legal persons or legal arrangements by obtaining details of all directors;
  - understand the ownership and control structure of legal persons;
  - obtain information on the purpose and intended nature of the business relationship;
  - consider filing an STR and terminating the business relationship when a financial institution can no longer be satisfied that it knows the true identity of a customer;
  - undertake enhanced due diligence measures for higher risk categories of customers and provide guidance as to what these measures constitute;
  - verify the identity of the customer and beneficial owner before or during the course of establishing business relationships; and
  - not to open accounts, commence business relations or perform the transactions on failure to conduct CDD and consider making a suspicious transaction report. In case the financial institution has already commenced the business relationship, failure to conduct CDD should result in termination of the business relationship and the financial institution should consider making a suspicious transaction report.
- Financial institutions should be obligated to apply CDD requirements to existing customers on the basis of materiality and risk and to conduct due diligence on such existing relationships at appropriate times.
- Provide comprehensive guidance to all financial institutions on the procedures required to identify the ultimate natural person who owns or controls the customer;
- Put in place and implement comprehensive preventative measures in keeping with the requirements of Recommendation 6 on PEPs with appropriate and ongoing risk management procedures for identifying (and applying enhanced CDD to) PEPs, customers who are close relatives of PEPs, and accounts of which a PEP is the ultimate beneficial owner;
- Implement comprehensive preventative measures with respect to cross border correspondent banking and other similar relationships. Such measures would include:
  - Gathering sufficient information about the respondent institution to understand fully the nature of respondent’s business and to determine its reputation and quality of supervision;
  - Assessing the respondent institution’s AML and CFT controls;
  - Obtaining approvals from senior management before establishing correspondent relationships; and
  - Documenting the respective obligations of each institution.
- Implement comprehensive preventative measures in keeping with the requirements of Recommendation 8 on technological developments and non face-to-face transactions.

*Source: IMF assessment chapter excerpt*

### 3.3 Third parties and introduced business (R.9)
- Regulate reliance on third parties to perform elements of the CDD process and introduce business to financial institutions, notably by ensuring that: The elements that may be performed by third parties are those listed under Criteria 5.3 to 5.6 of the Methodology; the information collected by the third parties may be immediately available to financial institutions; the financial institutions are required to satisfy themselves that the third parties are regulated and supervised; and that the ultimate responsibility for customer identification and verification remains with the financial institutions relying on the third party.

*Source: IMF assessment chapter excerpt*

### 3.4 Financial institution secrecy or confidentiality (R.4)
- Ensure that the law enforcement authorities have timely and effective access to information in the course of money laundering and terrorist financing investigations.

*Source: IMF assessment chapter excerpt*

### 3.5 Record keeping and wire transfer rules (R.10 & SR.VII)
Recommendation 10:
- Impose record keeping requirements on all financial institutions.
- Specify in law or regulation that it is mandatory for financial institutions to maintain all necessary records on transactions for at least five years or longer following the completion of transaction.
- Require in law or regulation the maintenance of transaction records in such a way as to allow reconstruction of individual transactions.
- Require in law or regulation that records of identification data, account files and business correspondence to be maintained for at least five years following the termination of an account or business relationship.
- Require in law or regulation that financial institutions make customer and identification data available on a timely basis to domestic competent authorities.

Special Recommendation VII:
- Require financial institutions conducting wire transfers to include accurate originator information (name, address and account number) on funds transfers and related messages, as well as to conduct enhanced scrutiny of and monitor for suspicious fund transfers which do not contain complete originator information and comply with obligations with regard to their wire transfer obligations.

*Source: IMF assessment chapter excerpt*

### 3.6 Monitoring of transactions and relationships (R.11 & 21)
Recommendation 11:
- Require all financial institutions to pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose.
- Require all financial institutions to examine as far as possible the background and purpose of such transactions, set forth their findings in writing and to keep such findings available for competent authorities and auditors for at least five years.

Recommendation 21:
- Require all financial institutions to give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries which do not or insufficiently apply the FATF Recommendations.
- Require all financial institutions that in case of such transactions having no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible, be examined, and written findings should be kept.
- Develop adequate legal authorities to enable Maldives to apply a range of appropriate counter-measures across all financial sectors where a country continues not to apply or insufficiently applies the FATF Recommendations.

*Source: IMF assessment chapter excerpt*

### 3.7 Suspicious transaction reports and other reporting (R.13, 14, 19, 25, & SR.IV)
Recommendation 13:
- Require in law or regulation all financial institutions (not only banks) and alternative remitters (or money or value transfer service providers) in the Maldives to report suspicious transactions in keeping with R.13; this notably entails criminalizing money laundering and terrorist financing in line with Recommendations 1 and 2 and Special Recommendation II.
- Undertake comprehensive education and awareness raising with reporting parties to encourage greater quantity and quality of suspicious transaction reporting across all sectors.
- Require in law or regulation all reporting parties to report attempts of suspicious transactions.
- Specifically include a provision in law or regulation that provides that suspicious transactions should apply regardless of whether or not they involve tax matters.

Special Recommendation IV:
- Require in law or regulation all financial institutions (not only banks) and alternative remitters (or money or value transfer service providers) to report transactions when they suspect or have reasonable grounds to suspect that funds are linked or related to, or to be used for terrorism, terrorist acts or by terrorist organizations or those who finance terrorism; this notably entails criminalizing terrorist financing in line with Special Recommendation II. Undertake comprehensive education and awareness raising with reporting parties related to STRs on terrorist financing.

Recommendation 14:
- Extend safe harbor provisions and prohibition from tipping off to all financial institutions beyond banks.

Recommendation 25:
- Issue STR guidelines for financial institutions, including guidance in identifying suspicious transactions.
- Issue guidelines to money changers and money remitters to include all aspects of CDD, STR reporting, and other preventative measures.
- Require the FIU to regularly provide feedback relating to STRs to financial institutions.

*Source: IMF assessment chapter excerpt*

### 3.8   Internal controls,

### 3.8   Internal controls, compliance, audit and foreign branches (R.15 & 22)

### Internal controls, compliance and audit (Recommendation 15)
- Require financial institutions to have adequately resourced and independent audits to test compliance with AML/CFT procedures.
- Lay down provisions relating to the overall role of compliance officer in financial institutions (other than in the securities sector) and his access to relevant data and records so as to enable him to effectively perform his functions.
- Require financial institutions to establish employee screening procedures when hiring new employees.
- Require financial institutions other than those active in the securities sector to provide training to their staff tailored to their specific job profile and the risk of money laundering and terrorist financing faced by the financial institution or the products it offers.
- Support effective implementation of internal controls through comprehensive AML/CFT supervision of all relevant sectors.

### Foreign branches and subsidiaries (Recommendation 22)
- Extend the requirements of the essential criteria of Recommendation 22 to foreign branches and subsidiaries of financial institutions. This is because, even though at present financial institutions in the Maldives do not have any branches or subsidiaries overseas, the situation may change in the future.

---

### 3.9   Shell banks (R.18)
- Explicitly prohibit the establishment of shell banks, or explicitly require locally incorporated banks to have physical presence (i.e. meaningful mind and management) in the Maldives, and foreign branches to be affiliated with foreign banks or financial groups.
- Prohibit financial institutions from engaging in or maintaining correspondent relationships with foreign shell banks.
- Oblige financial institutions to satisfy themselves that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks.

---

### 3.10 The supervisory and oversight system – competent authorities and SROs; Role, functions, duties and powers (including sanctions) (R.23, 29, 17 & 25)

### Recommendation 17 (Sanctions)
- Introduce a wide range of effective, proportionate and dissuasive criminal and administrative sanctions, including on their directors and senior management, for non-compliance with AML/CFT requirements when such requirements are established in sectors other than banks and securities.
- Introduce more effective and dissuasive criminal and administrative sanctions that generally applied to violation of Regulations in the securities sector.
- Introduce effective, proportionate and dissuasive criminal and administrative sanctions specifically applicable to directors and senior management of the securities dealing companies.

### Recommendation 23 (Designation and licensing)
- Designate by law the competent authority for AML/CFT regulation and supervision of the insurance industry, finance leasing companies and money changers.
- Designate by law the competent authority for licensing/registration and AML/CFT regulation/supervision of MVT service operators.
- Require insurance intermediaries to be licensed and designate by law the competent licensing authority.
- Ensure that beneficial owners of financial institutions are “fit and proper.”
- Implement the market entry and “fit and proper” requirements to existing banks and insurance companies.
- Conduct AML/CFT supervision of banks and the securities sector.

### Recommendation 29 (Powers of supervisors)
- Grant the competent authorities designated for the supervision of insurance undertakings and intermediaries, MVT service operators, finance leasing companies and money changers with adequate powers by law or regulation to inspect, compel production of, or get access to all records and books, sanction institutions and their directors and senior management, including for AML/CFT purposes and exercise these powers effectively.

### Recommendation 25 (Guidance)
- Provide adequate guidance to all types of financial institutions, including information on current money laundering and terrorist financing trends and techniques.

---

### 3.11 Money value transfer services (SR.VI)
- Designate competent authorities responsible for licensing/registration and regulation/supervision of the MVT service operators.
- Require in law or regulation that MVT service operators comply with AML/CFT measures, including conducting customer due diligence, keeping records, identifying and reporting suspicious and unusual transactions, and monitoring cross-border wire transfers.
- Require MVT service operators to keep current lists of their agents and make them available to the designated competent authority.
- Introduce sanctions for MVT service operators’ breaches of their AML/CFT obligations.
- Assess the potential informal MVT system operating in the country and take measures to address the risks, if any.

---

### 4. Preventive Measures – Nonfinancial Businesses and Professions (DNFBPs)

### 4.1 Customer due diligence and record-keeping (R.12)
- Take steps to put into place a regulatory framework for DNFBPs active in the Maldives.
- Require DNFBPs active in the Maldives to comply with CDD and record keeping requirements in line with Recommendations 5, 6, 8, 9, 10 and 11.

### 4.2 Suspicious transaction reporting (R.16)
- Impose suspicious transaction reporting requirements on DNFBPs active in Maldives in line with Recommendation 16.
- Implement the AML/CFT regulatory framework for DNFBPs.
- Ensure protection from criminal and civil liability for DNFBPs, their directors, officers and employees reporting in good faith.
- Prohibit DNFBPs, their directors, officers and employees from disclosing the fact that an STR or related information is being or has been reported to the FIU.
- Require DNFBPs to establish internal controls, training and audit programs in line with Recommendation 15.
- Require DNFBPs to give special attention to transactions and relationships with persons from or in countries that do not or insufficiently apply the FATF Recommendations in line with Recommendation 21.

### 4.3 Regulation, supervision, monitoring, and sanctions (R.17, 24, & 25)
- Subject DNFBPs to AML/CFT requirements as mentioned under R.12 and R.16.
- Designate competent authorities responsible for AML/CFT supervision for DNFBPs.
- Issue AML/CFT guidance for each industry in the DNFBP sector to reflect specific money laundering and terrorist financing risks in each sector.
- Examine the resources that would be required to monitor compliance of the DNFBP sectors that present the highest risk and allocate resources accordingly.

### 4.4 Other designated non-financial businesses and professions (R.20)
- Undertake a risk assessment of money laundering and terrorist financing in non-financial businesses and professions (other than DNFBPs) and consider applying AML/CFT preventive measures to those that are found to be at risk of being misused for money laundering or terrorist financing purposes.
- Continue to develop effective measures to develop and use modern and secure techniques for conducting financial transactions that are less vulnerable to money laundering.
- Introduce measures to reduce the reliance on cash and to encourage the development and use of modern and secure techniques for conducting financial transactions that are less vulnerable to money laundering and terrorist financing.

---

### 5. Legal Persons and Arrangements & Non-profit Organizations

### 5.1 Legal Persons – Access to beneficial ownership and control information (R.33)
- Ensure that adequate, accurate and current information on the beneficial ownership and control of legal entities is readily accessible to relevant authorities.
- Require the MED to maintain information as to whether shares of registered entities are held beneficially and, if so, to maintain details of the beneficial owner.

### 5.2 Legal Arrangements – Access to beneficial ownership and control information (R.34)
- Take measures to prevent the unlawful use of legal arrangements for money laundering and terrorist financing purposes and ensure adequate transparency concerning the beneficial ownership and control of trusts and Awqaf.

### 5.3 Non-profit organizations (SR.VIII)
- Review existing laws and regulations with a view to identifying gaps in coverage;
- Review the NPO sector for the purpose of identifying those NPOs which are at risk of abuse by terrorist financiers.
- Work with the NPO sector and the public to raise awareness among regulators and NPOs of the vulnerability of NPOs to abuse for terrorist financing.
- Increase the financial, personnel and technical resources available to MHA to allow them to develop and implement more effective supervision programs.
- Implement more effective supervision programs.
- Enhance domestic coordination between MHA and various other competent authorities involved in AML/CFT; and
- Ensure clear mechanisms of international cooperation to respond to international requests.

---

### 6. National and International Cooperation

### 6.1 National cooperation and coordination (R.31)
- Make better use of the AML/CFT Steering Committee.
- The authorities are also encouraged to take the planned steps to invite the MNDF.

### 6.2 The Conventions and UN Special Resolutions (R.35 & SR.I)
Recommendation 35:
- Fully implement the Vienna Convention.
- Become party and fully implement the Palermo Convention.
Special Recommendation I:
- Fully implement the International Convention for the Suppression of the Financing of Terrorism and relevant UNSCRs as prescribed under Special Recommendations I and II.

### 6.3 Mutual Legal Assistance (R.36, 37, 38 & SR.V)
Recommendation 36 and Special Recommendation V:
- Criminalize money laundering and terrorist financing in line with the standard to ensure that current deficiencies noted with respect to both offenses to not limit the scope of mutual legal assistance that the Maldives may offer.
- Establish a comprehensive framework to allow for the widest possible range of MLA in money laundering and/or terrorist financing investigations, prosecutions and related proceedings. In doing so, ensure that MLA can be rendered in a timely, constructive and effective manner.
- Ensure that MLA is not subject to unreasonable, disproportionate or unduly restrictive conditions.
- Establish clear and efficient processes for the execution of mutual legal assistance requests in a timely way and without undue delays.
- Ensure that, where legal professional privilege does not apply, mutual legal assistance is not refused on the grounds of secrecy or confidentiality laws for financial institutions and DNFBPs.
- Ensure that the powers of competent authorities required under Recommendation 28 are also available for use in response to requests for mutual legal assistance.
- Consider establishing mechanisms to avoid conflicts of jurisdictions.
- Although this does not currently appear to constitute an impediment to mutual legal assistance, for the sake of clarity, it is recommended that the authorities:
  - Ensure that requests for MLA cannot be refused on the sole ground that the offense may also be considered to involve fiscal matters.

Recommendation 37 and Special Recommendation V:
- Ensure that, to the greatest extent possible, mutual legal assistance may be rendered in the absence of dual criminality, in particular for less intrusive and non compulsory measures, and that, where dual criminality is requested, technical differences between the Maldivian laws and those of the requesting State do not pose an impediment to the provision of mutual legal assistance.

Recommendation 38 and Special Recommendation V:
- Establish a legal framework for effective and timely responses to requests for freezing, seizing and confiscating assets (i.e. laundered property from, proceeds from, instrumentalities used in or intended to be used in the commission of any money laundering, terrorist financing or predicate offenses, and property of corresponding value) at the request of foreign authorities in line with Recommendation 38.
- Consider establishing an asset forfeiture fund into which all or part of confiscated property could be deposited.
- Consider authorizing the sharing of confiscated assets with foreign authorities when confiscation is the result of coordinated law enforcement actions.

### 6.4 Extradition (R.39, 37 & SR.V)
- Criminalize money laundering and terrorist financing in line with the standard and ensure that both are extraditable offenses.
- Establish a legal framework to enable the extradition of individuals charged with a money laundering offense and/or terrorist financing. In doing so, ensure that extradition requests and proceedings relating to money laundering and terrorist financing are handled without undue delay.

### 6.5 Other Forms of Cooperation (R.40 & SR.V)
Recommendation 40 and Special Recommendation V:
- Introduce legal authority for the MMA to cooperate with its foreign counterparts (including outside the banking sector).
- Establish the FIU on a sound legal basis and authorize it to exchange information with its foreign counterparts.

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### 7. Other Issues

### 7.1 Resources and statistics (R.30 & 32)
- Increase the MMA and the CMDA’s human resources as well as expertise in support of their supervisory function.
- Increase the PGO, and the judiciary’s resources and training in AML/CFT matters.
- Provide training on AML/CFT matters to all relevant authorities.

### 7.2 Other relevant AML/CFT measures or issues
- Ensure that revised Penal Code is adopted and that criminal procedure rules are set out in law in order to enable the authorities to fight against ML and TF in an effective way.

*Source: _cr1201 - 3.8   Internal controls, compliance, audit and foreign branches (extracted from provided PDF content).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr1201.pdf_