APG report details how illegal funds circulate in Maldives economy
The APG’s report on Anti-Money Laundering and Counter-Terrorist Financing measures in the Maldives was released in October.
An evaluation report by the Asia Pacific Group on Money Laundering (APG) has outlined how illegal income enters and circulates within the Maldivian economy, warning that weaknesses in enforcement allow such funds to move through both formal and informal systems.
The APG’s report on Anti-Money Laundering and Counter-Terrorist Financing measures in the Maldives was released in October. It notes that while laws have been enacted to prevent money laundering and terrorist financing, gaps in implementation have allowed illicit funds to circulate.
According to the report, the Maldives is exposed to risks linked to illegal income generation, money laundering and the financing of terrorist groups. The main sources of illegal income identified include drug trafficking, fraud, organised crime, and deception-related offences.
Although the Maldives is not a drug-producing country, the APG said its geographic position has made it a transit point for regional and international drug trafficking involving cannabis, heroin and cocaine. The report noted links between Maldivian criminal groups and networks operating in South and Southeast Asia.
The APG also found that some foreign nationals operating businesses illegally in the Maldives provide unregulated money transfer services and engage in foreign exchange transactions outside formal systems.
On fraud and corruption, the report cited media accounts indicating the prevalence of fraudulent activity within government institutions and state-owned enterprises. Referring to a 2020 Transparency Maldives report, the APG said gaps in public procurement procedures increase the risk of fraud.
The report also cited the 2023 annual report of the Financial Intelligence Unit of the Maldives Monetary Authority, which noted increased involvement of politically exposed persons (PEPs) in corruption-related activities. According to the APG, such individuals often use family members and third parties to conceal transactions and abuse authority.
On terrorist financing, the APG said funds are generated by individuals in the Maldives with links to foreign terrorist groups. Funding sources include family members, business figures aligned with extremist ideologies, criminal gangs, and networks operating overseas.
The report said these funds are used for recruitment, travel, training, and support for families of members involved in terrorist organisations.
The APG found that illicit funds circulate through both formal and informal channels, including cash transactions, cross-border cash movements and unauthorised money exchange operations.
The report noted a high demand for remittance services in the Maldives due to the presence of a large foreign workforce. This demand has led to the growth of illegal remittance networks, the scale of which has not been fully identified.
In terrorism-related cases, the report said funds often move through intermediaries, making detection and disruption difficult.
While authorities are aware of these risks, the APG said offenders continue to exploit regulatory and legal gaps. The report highlighted several areas of concern, including weak oversight of voluntary organisations, which may be used for money laundering or terrorist financing.
It noted that 3,231 non-profit organisations are registered under the Ministry of Youth, managed by a limited number of staff and legal officers. The APG also cited insufficient action against illegal money exchange businesses and unlicensed remittance providers.
In the real estate sector, the report pointed to the absence of key regulatory frameworks, noting that transactions are often handled directly by developers rather than licensed agents. It also said controls on transactions involving politically exposed persons remain inadequate.
The APG recommended stronger action to dismantle informal and illegal financial networks and called for stricter oversight of politically exposed persons. It urged authorities to prioritise investigations into corruption and terrorist financing and to strengthen vigilance against money laundering risks.
While acknowledging efforts to improve legal frameworks, the APG said legislation alone is insufficient without effective enforcement. The report warned that without stronger action, the Maldives’ exposure as a transit point for drug trafficking, corruption and terrorist financing could increase.
