Cablegate: 2002-2003 International Narcotics Control

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A
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

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

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.

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