FATF AML Deficiency List
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
Weakness in Government Legislation to combat Money Laundering
World Governance Indicators (Average Score)
The Maldives is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in The Maldives was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, The Maldives was deemed Compliant for 1 and Largely Compliant for 0 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
The Maldives was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Maldives is comprised of a series of atolls in the Indian Ocean and is bisected by a number of international sea lanes. Authorities have expressed concern the islands are being used as a transit point for money laundering, narcotics trafficking, and illegal immigration to Europe. The country has a small financial market but is susceptible to money laundering and terrorist financing due to limited oversight capacity.
No official figures are available, but anecdotal evidence suggests illegal drug trafficking, a large black market for the purchase of dollars, and corruption produce significant amounts of illicit funds. Criminal proceeds reportedly come mainly from domestic sources. Drug trafficking is noted as one of the most frequent asset-generating crimes. Other offenses include human trafficking, piracy, and offenses committed by gangs. Even though the number of corruption cases is low, only a small percentage is prosecuted. Reports indicate the sums involved can be significant. There are indications funds raised in the country have been used to finance terrorism activities abroad.
Informal value transfer systems, such as hawala, are being used to transfer funds between the islands. The extent to which these systems are used to launder money is unclear.
On 17 June 2019, the European Union lifted all restrictive measures in place concerning Maldives.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 43
World Governance Indicator – Control of Corruption 46
The Maldives has rapidly grown into a middle-income country, driven by tourism development. In 2015, the economy’s growth slowed to 4.8%, mainly due to lower tourism sector growth as tourist arrivals from China declined. However, the slowdown is expected to reverse in 2016. Tourism, construction, transport, and the communications sector accounted for 50% of the output on average. Tourism-related tax receipts increased by 13% in 2015 due to higher tax rates. This increase in dollar tax receipts directly led to higher usable reserves in 2015. The current account deficit widened to $400 million in 2015 due to increases in construction related imports. A large and growing fiscal deficit remains an ongoing economic challenge.
In July 2015, Maldives’ Parliament passed a constitutional amendment legalizing foreign ownership of land; foreign land-buyers must reclaim at least 70% of the desired land from the ocean and invest at least $1 billion in a construction project approved by Parliament.
Diversifying the economy beyond tourism and fishing, reforming public finance, increasing employment opportunities, and combating corruption, cronyism, and a growing drug problem are near-term challenges facing the government. Over the longer term Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is 1 meter or less above sea level.
Agriculture - products:
coconuts, corn, sweet potatoes; fish
tourism, fish processing, shipping, boat building, coconut processing, woven mats, rope, handicrafts, coral and sand mining
Exports - commodities:
Exports - partners:
Thailand 18%, France 12.1%, Germany 10.7%, US 9.6%, Italy 6.8%, UK 6.4%, Sri Lanka 5.9%, Japan 4.6% (2015)
Imports - commodities:
petroleum products, clothing, intermediate and capital goods
Imports - partners:
UAE 18.4%, Singapore 13.8%, China 10.6%, India 10.4%, Malaysia 7%, Sri Lanka 5.6%, Thailand 5% (2015)
Investment Climate - US State Department
The Republic of Maldives comprises 1,190 islands in 20 atolls spread over 900 sq. km in the Indian Ocean. Maldives attracts over 1.2 million tourists annually. Tourism is the growth engine for the economy and accounts for approximately 70 percent of gross domestic product (GDP). The tourism sector’s contribution to the economy is split between direct (30 percent) and indirect (70 percent) via transportation, communication, and construction sectors. Tourism will likely continue to drive the economy with the government of Maldives promoting the construction of new island resorts.
Maldives is a multi-party constitutional democracy, but the transition to democracy has been a challenge. Parliament ratified a new constitution in 2008 that provided the first multi-party presidential elections. In 2012, the first democratically elected president, Mohamed Nasheed, stepped down, and Vice President Mohamed Waheed became the head of state. The current president, Abdulla Yameen Abdul Gayoom, was elected in 2013, and his administration has turned increasingly autocratic. In March 2015, former President Nasheed was jailed for a 13-year term on contentious terrorism charges. The former defense minister and several other political dissidents have been imprisoned as well, and the Maldives Bar Association has been dissolved.
Total GDP is approximately USD 3 billion. GDP growth averaged six percent during the past decade and has helped lift Maldives to middle income country status. However, in 2015 the GDP growth rate slowed to 1.5 percent according to the World Bank. (Maldives government claims a 2015 growth rate of 4.8 percent; however, the government has not provided documentation on its methodology for determining this rate.) Tourism contracted as the growth in tourist visits fell and average stays decreased. Per capita GDP, estimated at over USD 8,000, is the highest in South Asia. However, there is significant income disparity as many Maldivians do not benefit from the revenue generated by the tourism industry and have few job opportunities.
The World Bank projects economic growth will rise to 3.5 percent in 2016, but Maldives faces significant fiscal problems. Public debt remains very high and the International Monetary Fund (IMF) has recommended Maldives undertake fiscal consolidation through expenditure control. In 2010, the IMF withheld a loan facility due to Maldives’ failure to take sufficient steps to reduce the deficit. According to the Maldives Monetary Authority (MMA), the external current account deficit widened to about USD 400 million in 2015, or 13 percent of GDP. The IMF says tourism revenues may be underreported, suggesting the current account deficit may be overstated.
Maldives welcomes foreign investment, although the ambiguity of codified law acts as a deterrent. Historically, Maldives has been a small market with limited investment and business opportunities for U.S. companies. Although trade and investment have been liberalized, the Maldivian business community is small and close-knit, so new market entrants may find it difficult to make contacts. Companies report that foreign exchange shortages are affecting business, but the black market premium has narrowed due to an increased supply of foreign exchange.
Maldives became a member of the International Labor Organization in 2009. The U.S. government restored GSP trade status in December 2009 after Maldives passed the Employment Act. This law provides for the right of workers to form and join independent unions, but does not protect against anti-union discrimination. The Freedom of Peaceful Assembly Act effectively prohibits strikes by workers in the resort sector, the country’s largest source of foreign currency. The government of Maldives has threatened to revoke visas of Bangladeshi workers if they protested. Bangladeshis work throughout the tourism sector and in private business.
There is limited foreign portfolio investment other than holdings of hotel brands operating in Maldives. The Special Economic Zones Act, enacted in 2014 with the goal of facilitating strategic development projects, has yet to bring in any major investment. In May 2015, the Maldives Ministry of Tourism announced plans to build Chinese-friendly hotels and resorts in Maldives to cater to increasing tourist arrivals from China. One such project authorizes leasing the island of Kalhufahalufushi in Thaa Atoll for resort development to the China Machinery Engineering Corporation (CMEC). This global engineering contractor is set to become the first Chinese company to invest in Maldives. The number of Chinese tourists visiting Maldives more than tripled from about 100,000 in 2010 to a total of 359, 514 arrivals in 2015. Chinese tourists accounted for nearly one-third of arrivals with a 30 percent market share, representing the single biggest source of tourists to Maldives.
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