On 15 April 2010, the National Parliament of the Solomon Islands passed the Money Laundering and Proceeds of Crime (Amendment) Act (Amendment Act) which amends the Money Laundering and Proceeds of Crime Act 2002 (MLPCA). The Amendment Act brings Solomon Island's legislation in line with the Financial Action Task Force recommendations to combat money laundering and terrorist financing (FATF Recommendations).

These amendments may affect financial institutions (FI), cash dealers (CD), legal practitioners (LP) or other persons carrying on business in the Solomon Islands generally. Specifically, the Amendment Act now applies to LPs. The definitions of CD and FI have also been extended to cover a wider range of people than under the MLPCA previously. In addition, the Amendment Act imposes more onerous obligations on CDs and FIs. It is an offence not to comply with the requirements under the MLPCA, as amended.

Identification

The Amendment Act extends the MLPCA to a broader range of transactions and the identification and verification process standards. Provisions have been made, applicable to FIs, CDs and LPs, imposing obligations of identification and verification of the identity of a person in circumstances when the person:

  • opens an account;
  • engages the services of the FI, CD or LP for the purposes of providing one or more of their services;
  • enters into a business relationship with one of them; or
  • conducts or attempts to conduct a transaction.

There is an express requirement that FIs and CDs identify and verify the identity of a customer carrying out a funds transfer other than electronically, when they reasonably suspect that the customer may be involved in money laundering, financing of terrorism or in the commission of a serious offence.

Verification

Verification of the identity of occasional customers is also strengthened under the Amendment Act. The definition of beneficial owner now fully meets the FATF Recommendations.

The Amendment Act imposes an obligation on FIs, CDs and LPs to verify any persons acting on behalf of customers. The Amendment Act introduces the requirement to obtain information on the purpose and intended nature of the business relationship and if the customer is a politically exposed person, there are further obligations.

If an FI carries out cross border banking services or similar, it must gather further details in addition to those already required.

The reliance on third parties or intermediaries for customer due diligence was not contemplated under the MLPCA however this is now contemplated under the Amendment Act. It is the responsibility of the FIs, CDs or LPs to ensure the third party carries out the obligations as necessary and the third party must provide copies of all information and documentation they gather pursuant to their responsibilities under the Amendment Act.

Reporting

If the FI, CD or LP is not satisfied with any of the information provided, they must prepare a suspicious transaction report of any transactions attempted by the person and provide this report to the Unit. They must not proceed any further with the transaction.

Under the Amendment Act, there is an explicit requirement that FIs, CDs and LPs prepare a report if they have a reasonable suspicion that a transaction may be related to money laundering or terrorist financing and in circumstances where FIs, CDs and LPS have doubts about the adequacy of previously obtained customer identification.

FIs, CDs and LPs must conduct ongoing due diligence on its relationship with each of its customers and conduct ongoing scrutiny of transactions by its customers.

Where the transactions appear to be complex, unusually large and unusual with no apparent economic or lawful purpose, there is a duty to report this transaction or attempted transaction under section 14B (1) of the Amendment Act. This was not previously required under the MLPCA.

FIs, CDs and LPs must retain all evidence of identification of the person and any correspondence between the identified person and the FI, CD or LP for 6 years. Previously, there was ambiguity on this retention period which appeared to be only 5 years. It is also necessary to keep records of suspicious transactions etc.

If you carry on business in the Solomon Islands, you need to be aware of the changes that may affect you when attempting to carry out specific financial transactions as well as the obligations that have been introduced in respect of FIs, CDs and of course LPs. Please contact us if you would like further information on any of the issues raised above.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.