MVR 100,000 fine if Maldivian businesses deposit money into foreigners' accounts

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The Sole Proprietorship regulations have prohibited a private business from directly or indirectly benefiting a foreigner and strict penalties will be imposed if such business deposits money into a foreigner's account, stated local media outlet Mihaaru in a Maldivian native Dhivehi language report on Tuesday.

Retail business has always been forbidden to foreigners. However, foreigners have taken control of many businesses by registering them in the name of Maldivians. It is also common for such businesses to transfer money to accounts in the names of foreigners.

The rules, gazetted on Monday, prohibit foreigners from running private businesses, while an additional article states that foreigners are prohibited from running private businesses for direct or indirect benefit.

"In connection with a private business transaction, if there is evidence of deposits into the bank account of a foreign entity, the Registrar shall have the power to determine that the business is directly or indirectly for the benefit of the foreign entity,” the article says in describing how a foreigner receives a business benefit.

Steps that can be taken if this is known include:

● Report to the appropriate authorities for action against the foreigner who received the money;

● Fine the person under whom the business was registered by an amount of MVR 100,000 (USD 6,485);

● Prohibition of registering a new business for five years; and

● Cancellation of business registration.

According to the rules, any such action taken against any business must be publicly announced.

To prevent foreigners from taking money abroad from private businesses, the rules require banks and remittance service providers to notify Maldives’ central bank, the Maldives Monetary Authority’s (MMA) Financial Intelligence Unit if the amount is not in line with the person's income.

The rules, which came into force with the gazette on Monday, outline some of the factors to be considered when inspecting private businesses. It also includes some things that will result in heavy fines.

Failure to register the name of the business, not obtaining a permit under another law, and parking goods outside the business will be fined from MVR 1,000 (USD 64) to MVR 100,000 at the time of inspection.

According to the rules, only Maldivians who have reached the age of 18 can register a Sole Proprietorship. The person must not have a private business registration. In addition, a person who has been convicted of conducting such a business for the benefit of a foreigner will not be re-registered unless it has been five years since the action was taken.

Penalties for depositing money into foreigners' accounts: MVR 100,000 fine, registration cancellation, and business prohibition. The rules also require banks to report suspicious transactions to the central bank. Inspections may result in fines for non-compliance. Private businesses can only be registered by Maldivians aged 18 or above. Previous offenders face a five-year re-registration ban.