US embassy cable - 03COLOMBO139

UNCLAS SECTION 01 OF 02 COLOMBO 000139 
 
SIPDIS 
 
DEPARTMENT FOR SA/INS, INL 
JUSTICE FOR OIA, AFMLS, AND NDDS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: SNAR, EFIN, PGOV, PREL, MV 
SUBJECT:  2002-2003 International Narcotics Control 
Strategy Report (INSCR) Part II Financial Crimes and Money 
Laundering - Maldives 
 
REF: 02 State 240035 
 
1.  Provided below is Post's response to reftel request for 
information on Maldives' regulations and practices 
regarding financial crimes and money laundering.  This 
submission is based on information received from the 
Ministry of Foreign Affairs of the Maldives and other 
publicly available documents. 
 
2.  Maldives is not considered an important regional 
financial center.  The financial sector of the Maldives is 
very narrowly based with five commercial banks (one 
international bank, three branches of public banks from 
neighboring countries and one state owned Maldives Bank), 
two insurance companies, a government provident fund, and a 
leasing company.  HSBC set up in 2002 is the only 
international bank operating in Maldives.  HSBC's strong 
regulatory, supervisory and disclosure standards are 
expected to improve the financial sector in Maldives.  The 
International Finance Corporation (IFC) of the World Bank 
group has invested in a joint venture leasing company 
recently.  There are no offshore banks and finance 
companies. 
 
Laws and Regulations to prevent money laundering 
--------------------------------------------- --- 
 
3.  Maldives Monetary Authority (MMA) is the regulatory 
agency for the financial sector.  MMA has authority to 
supervise the banking system through Maldives Monetary 
Authority Act and regulations on banks and financial 
institutions.  These laws and regulations provide MMA 
access to records of financial institutions and allow it to 
take actions against suspended criminal activities.  Banks 
are required to report any unusual movement of funds 
through the banking system on a daily basis following 
events of September 11.  There is no specific legislation 
to deal with money laundering but separate laws address 
narcotics trade, terrorism, and corruption:  Law No 17/77 
on Narcotic Drugs and Psychotropic Substances prohibits 
consumption and trafficking of narcotics.  The law also 
prohibits laundering of proceeds from narcotics trade. 
(ii) Law No 2/2000 on Prevention and Prohibition of 
Corruption prohibits corrupt activities by both public and 
private sector officials.  It provides for the forfeiture 
of proceeds and also empowers judicial authorities to 
freeze accounts pending a court decision. 
 
4.  The Government of Maldives has approved the development 
of an Anti-Money Laundering Law and establishment of a 
financial intelligence unit.  MMA is seeking technical 
assistance from the US and the World Bank for these 
activities. 
 
Terrorist Finance 
----------------- 
 
5.  Law no 10/90 on Prevention of Terrorism in the Maldives 
deals with some aspects of money laundering and terrorist 
financing.  The law defines terrorist offences and acts of 
terrorism which include causing and attempting to cause 
death and bodily harm, instilling fear into a person or the 
public, kidnapping, hostage taking, hijacking, importation 
and use of firearms, ammunition, explosives, dealing in 
firearms and related items and setting fire and causing 
damage to property.  Provision of funds or any form of 
assistance towards the commissioning or planning any such 
terrorist activity is unlawful. 
 
6.  MMA has issued "know your customer" directives and 
other instructions to banks enforcing freeze order requests 
received from the U.S. Government.  The MMA directives are 
binding on the banks and other financial institutions. 
According to the Maldives Foreign Ministry, MMA monitors 
unusual financial transactions through banks, financial 
institutions and money transfer companies through its bank 
supervision activities.  To date, there have been no known 
cases of terrorist financing activities through banks in 
Maldives.  The four foreign banks operating in the country 
also follow instructions issued with regard to terrorist 
financing by their parent organizations. 
 
International Cooperation 
------------------------- 
 
7.  Key officials of the Maldives Law Commission, Attorney 
General's office and the MMA attended several conferences 
on combating money laundering and terrorism in 2002.  In 
July 2002, OECD concluded that the Maldives is not a tax 
haven.  OECD said that Maldives does not have an offshore 
sector in financial services and is heavily transparent. 
OECD also reported that Maldives does not have 
administrative practices that prevent the effective 
exchange of information.  According to an IMF staff report 
dated December 2002, Maldivian authorities believe that the 
Maldives is in line with international guidelines to combat 
money laundering and financing of terrorism.  The IMF 
deferred a discussion on the subject as data were still 
being compiled at the time of the IMF mission. 
Amselem