FATF Status

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.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                          39

World Governance Indicator – Control of Corruption             40

The Republic of Maldives comprises 1,190 islands in 20 atolls spread over 348 square miles in the Indian Ocean. Tourism is the main source of economic activity for Maldives, directly contributing close to 30 percent of GDP and generating more than 60 percent of foreign currency earnings. The tourism sector experienced impressive growth, from 655,852 arrivals in 2009 to 1.7 million in 2019, before a steep decline in 2020 resulting from the COVID-19 pandemic. Tourism began to recover in late 2020 and reached 1.3 million in 2021, and 1.67 million in 2022. Although the Government of Maldives has emphasized the importance of economic diversification, tourism will likely continue to be the major driver of Maldives’ economy, with the government making major investments into expanding the country’s capacity to handle more visitors.

Prior to COVID, annual GDP growth averaged six percent during the decade through 2019, lifting Maldives to middle-income country status. Per capita GDP was estimated at USD 9,302 in 2021, the highest in South Asia. However, income inequality and a lack of employment opportunities remain a major concern for Maldivians, especially those in isolated atolls. Following the COVID-19 outbreak, GDP fell 33.5% percent in 2020. With the tourism industry’s recovery, GDP grew 31.6 percent in 2021 and 12.4 percent in 2022

Maldives is a multi-party constitutional democracy, but the transition from long-time autocracy to democracy has been challenging. Maldives’ parliament ratified a new constitution in 2008 that provided for the first multi-party presidential elections. Since 2018, following the election of President Ibrahim Mohamed Solih of the Maldivian Democratic Party who ran on a platform of economic and political reforms and transparency, Maldives has made strides in reducing corruption and increasing transparency compared to former President Abdulla Yameen, whose term in office was marked by corruption, systemic limitations on the independence of parliament and the judiciary, and restrictions on freedom of speech, press, and association. The country went from 130 out of 180 countries in the Transparency International Corruption Perception index in 2019 to 85 in 2021. The MDP won a super majority (65 out of 87) seats in parliamentary elections in April 2019, the first single-party majority in Maldives since 2008. Maldives is set to have a presidential election in September 2023; the current front runners are President Solih and MP Gasim Ibrahim, a wealthy Maldivian businessman and former coalition partner of Solih.

Serious concerns also remain about a small number of violent Maldivian extremists who advocate for attacks against secular Maldivians and may be involved with transnational terrorist groups. In February 2020, attackers stabbed three foreign nationals – two Chinese and one Australian – in several locations in Hulhumalé. ISIS claimed responsibility for an April arson incident on Mahibadhoo Island in Alifu Dhaalu atoll that destroyed eight sea vessels, including one police boat, according to ISIS’ online newsletter al-Naba. There were no injuries or fatalities. Speaker of Parliament and former President Mohamed Nasheed was nearly killed in a May 6, 2021, IED attack motivated by religious extremism. Nasheed sustained life threatening injuries and several members of his security and bystanders were also injured. Nine individuals have been charged in connection with the attack, with one already convicted.

Large scale infrastructure construction in recent years contributed to economic growth but has resulted in a significant rise in debt. The Maldives’ debt-to-GDP ratio increased from 58.5 percent in 2018 to an estimated 61.8 percent in 2019 according to the World Bank (WB); this further increased to 138 percent in 2020 according to the Ministry of Finance (MoF), an increase driven by a sharp drop-off in government revenue. Following the post-Covid-19 recovery of the tourism industry and the economy, the debt-to-GDP ratio has decreased to 111 percent in 2022, an improvement but still a significant percentage for a country that remains highly vulnerable to macroeconomic shifts.

Because of Maldives’ heavy dependence on imports, government expenditures ballooned following the steep rise in global fuel and commodity prices accompanying Russia’s invasion of Ukraine in 2022. While overall government revenue in 2022 was in line with budgeted estimates, the Government of Maldives’ budget for subsidies – primarily for fuel – and development project investments was fully spent by the end of June. While subsidies tempered inflation, the headline inflation rate at the end of 2022 was nearly six times the number at the end of 2021, growing from 0.5 percent to 2.9 percent. Official reserves, meanwhile, fell more than 40 percent between March and October, to $499 million from $865 million. By the end of the year, reserves had rebounded to $827 million, with usable reserves sitting at $267 million.

Maldives welcomes foreign investment, although the ambiguity of codified law and competition from politically influential local businesses act as deterrents. U.S. investment in Maldives has been limited and focused on the tourism sector, particularly hotel franchising and air transportation. In 2022, there were a total of 24 new foreign direct investments, out of which ten were in the tourism and hospitality sector, five in the construction sector, four in renewable energy projects, three in medical services, one in environment testing services, and one in safety system maintenance.

In 2013, Maldives-based Sun Travels and Tours terminated a foreign corporation’s 20-year management agreement for a luxury resort.  The business took the case to the International Court of Arbitration in Singapore and was awarded USD 27 million in damages, which was accepted by the Civil Court of Maldives in February 2023. In April 2023, the High Court issued a stay order on the Civil Court’s ruling.

On December 28, 2020, Maldives submitted an updated Nationally Determined Contribution (NDC) which includes an enhanced ambition of 26 percent decrease in emissions and carbon neutrality by 2030, conditioned on receiving financial, technological, and technical support.

Country Links

Maldives Monetary Authority