Solomon Islands

Debentures (including debenture stock, bonds, notes, and other similar instruments)

Interests in a managed investment scheme

Other instruments commonly understood as securities.

**Investment Tokens/Security Tokens:** Tokens explicitly designed to represent ownership, a share in profits, voting rights, or other traditional equity/debt-like features in an underlying asset, project, or company. This includes initial coin offerings (ICOs) structured as investment contracts.

**"Pre-Functional" or "Hybrid" Utility Tokens:** Tokens marketed and sold primarily as an investment opportunity before the underlying platform or service is fully developed and functional. Even if intended for future utility, the initial sale with an expectation of profit makes them securities.

**Fractionalized NFTs (in certain contexts):** If NFTs are fractionalized and sold to multiple investors with the expectation of sharing in the appreciation of the underlying digital asset, they could be seen as an investment contract.

**Governance Tokens with Economic Rights:** If governance tokens also convey rights to a share of platform fees, profits, or future asset distributions, they may be deemed securities.

**Pure Utility Tokens:** Tokens that primarily provide immediate access to a product or service, with no reasonable expectation of profit from the efforts of others, and are not marketed as an investment.

**Pure Payment Tokens/Cryptocurrencies:** Tokens intended solely as a medium of exchange or store of value, and not offered or sold as part of an investment scheme. However, it's important to note that the CBSI does not recognize cryptocurrencies as legal tender and has warned against their use.

**True Collectible NFTs:** Unique digital assets primarily acquired for aesthetic, cultural, or personal value, without an associated investment scheme promising future financial returns from the efforts of others.

**Prospectus Requirements:** Issuers may need to prepare and register a prospectus or offer document with the Registrar of Companies, providing full disclosure of material information about the token, the project, the risks, and the issuer.

**Disclosure Obligations:** Ongoing disclosure requirements might apply, similar to those for publicly traded companies, though the specifics would depend on the nature of the "security" and the issuer.

**Licensing:** While not explicitly for "token issuers," entities offering or dealing in securities might need to be licensed or authorized if such a framework exists for traditional securities brokers or investment advisors under a future Securities Act or related regulations.

If a token is deemed a security, its secondary trading would theoretically fall under any general rules applicable to the trading of unlisted securities (e.g., shares in private companies).

There are no regulated cryptocurrency exchanges operating under Solomon Islands' jurisdiction. Trading would typically occur on offshore platforms, which are outside the direct regulatory purview of the Solomon Islands authorities.

The CBSI has warned the public against the risks of trading cryptocurrencies due to their volatility, speculative nature, and lack of regulation.

**Lack of Specific Legislation:** Without a dedicated framework, enforcement actions are harder to initiate.

**Limited Market Activity:** The scale of cryptocurrency activity and offerings originating directly from the Solomon Islands is likely small compared to larger economies.

**Focus on Warnings:** The CBSI's primary approach has been preventive, issuing general public warnings about the risks of cryptocurrencies, scams, and their non-recognition as legal tender.

**Companies Act 2009:** For breaches related to illegal offerings of unregistered securities or failures in disclosure.

**Penal Code (Chapter 26):** For fraud, scams, or other criminal activities related to deceptive crypto schemes.

**Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) Act 2002:** The Financial Intelligence Unit (FIU) could potentially investigate suspicious transactions involving cryptocurrencies, especially if linked to illegal activities, though this is separate from securities classification.

**Companies Act 2009:** This is the primary legislation that would be used to define "securities."

**URL:** http://www.paclii.org/sb/legis/consol_act/ca2009121/ (via Pacific Islands Legal Information Institute - PacLII)

**Central Bank of Solomon Islands (CBSI):** While not providing specific crypto securities guidance, their website contains general warnings and statements regarding cryptocurrencies.

**URL:** https://www.cbsi.com.sb/ (Check their "News & Media" or "Publications" sections for relevant advisories). *Specific advisories often pop up as press releases or public notices.* For example, they have issued warnings against crypto scams and unregulated schemes.

**Financial Intelligence Unit (FIU) of Solomon Islands:** Responsible for AML/CTF, which can indirectly touch upon crypto activities.

**None to Partial (with Strong Cautionary Stance):** Solomon Islands does not have a comprehensive regulatory framework specifically for virtual assets. The approach is primarily one of public warning and monitoring by the Central Bank, rather than explicit regulation, licensing, or outright ban of the underlying technology or trading (though no legal protections exist). There are efforts to address AML/CTF risks, but virtual assets are not yet fully integrated into existing financial laws.

**Central Bank of Solomon Islands (CBSI):**

**Role:** The CBSI is the primary monetary authority and supervisor of the financial system. It has taken the lead in issuing public warnings regarding the risks associated with cryptocurrencies. While it doesn't regulate crypto directly through a specific framework, its mandate covers financial stability and consumer protection, prompting its cautionary stance.

**Specific Stance:** The CBSI has repeatedly warned the public that cryptocurrencies are **not legal tender** in Solomon Islands and are highly volatile, speculative, and pose significant risks due to a lack of regulation, consumer protection, and potential for use in illicit activities.

**Solomon Islands Financial Intelligence Unit (SIFIU):**

**Role:** Responsible for receiving, analyzing, and disseminating financial intelligence to combat money laundering and terrorist financing. While the existing Anti-Money Laundering Act might not explicitly mention virtual assets service providers (VASPs), SIFIU would be the key agency for any future efforts to bring virtual assets under AML/CTF obligations, in line with international standards (e.g., FATF recommendations).

**URL:** https://sif.mof.gov.sb/ (Typically housed under the Ministry of Finance and Treasury)

**Central Bank of Solomon Islands Act 2012 (and any subsequent amendments):**

**Date:** 2012 (or latest amendment)

**Relevance:** Establishes the CBSI's powers and responsibilities, which include regulating the financial system and ensuring monetary stability. This Act forms the basis for the CBSI's public warnings and oversight of the broader financial sector, even without direct crypto provisions.

*(Note: A direct public URL for the full text of all national acts can be difficult to find; often available through the Attorney General's Chambers or legal databases.)*

**Anti-Money Laundering Act 2002 (and subsequent amendments):**

**Date:** 2002 (with subsequent amendments, e.g., in 2011, 2019)

**Relevance:** This is the primary legislation for combating money laundering and terrorist financing. However, the existing Act **does not explicitly define or address virtual assets or Virtual Asset Service Providers (VASPs)**, creating a regulatory gap concerning AML/CTF obligations for crypto businesses. Solomon Islands, as a FATF member (or observer), is under pressure to update its AML/CTF regime to explicitly cover virtual assets in line with FATF Recommendation 15.

*(Note: Similar to the CBSI Act, direct public URLs for legislative texts are often not readily available from government sites.)*

There is **no specific licensing regime** or regulatory framework for cryptocurrency exchanges or platforms operating in Solomon Islands.

Individuals are **not explicitly prohibited** from trading cryptocurrencies, but they do so **entirely at their own risk**, with no legal recourse or consumer protection mechanisms in place.

The CBSI's consistent public warnings effectively serve to discourage participation in the crypto market due to the perceived high risks.

**No Legal Tender Status:** Cryptocurrencies are not recognized as legal tender in Solomon Islands, meaning they cannot be used to settle debts or make payments legally required in Solomon Islands Dollars.

**No Official Exchanges:** There are no officially licensed or regulated cryptocurrency exchanges operating under Solomon Islands jurisdiction. Any trading would occur on international platforms.

**Solomon Islands Financial Intelligence Unit (SIFIU)**

**Role:** SIFIU is responsible for receiving, analysing, and disseminating financial intelligence related to suspected money laundering and terrorist financing. It also provides guidance to reporting entities and monitors their compliance with AML/CFT obligations.

**Financial Intelligence Unit Act 2021:** This Act establishes the SIFIU and defines its powers and functions.

**Anti-Money Laundering and Counter-Terrorist Financing Act 2021 (the AML/CFT Act):** This comprehensive legislation aligns the Solomon Islands with international FATF standards, covering customer due diligence, reporting obligations, and broader AML/CFT requirements for financial institutions, which increasingly include VASPs.

**Financial Transactions Reporting Act 2010:** This Act also contributes to the framework, particularly regarding the reporting of certain transactions.

**Identification and Verification of Identity:**

**Natural Persons:** Obtain full name, date of birth, residential address, nationality, and unique identification number (e.g., passport, national ID). Verify this information using reliable, independent source documents, data, or information.

**Legal Persons/Entities (e.g., Companies):** Obtain name, legal form, proof of existence, powers that regulate and bind the legal person, and the names of relevant persons holding senior management positions.

**Beneficial Ownership:** Identify and verify the identity of the natural person(s) who ultimately own or control the customer (typically 25% or more ownership/control threshold for legal entities).

**Purpose and Intended Nature of the Business Relationship:** Understand the reason for the customer establishing the relationship and the expected nature of their virtual asset activities.

**Ongoing Monitoring:** Continuously monitor the business relationship and transactions to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile. This includes monitoring for unusual or suspicious activities.

**Enhanced Due Diligence (EDD):** Apply EDD measures in higher-risk situations, including:

When dealing with Politically Exposed Persons (PEPs).

Complex, unusually large transactions, or unusual patterns of transactions that have no apparent economic or lawful purpose.

Anonymity-enhancing virtual assets or technologies.

**Simplified Due Diligence (SDD):** May be applied in very limited, low-risk circumstances, but these are rare for VASPs given the inherent risks.

**Reporting Obligation:** Reports must be submitted to the SIFIU promptly. SIFIU guidance usually specifies a timeframe (e.g., within 24-48 hours of forming suspicion).

**Content of Report:** STRs must contain comprehensive information about the customer, the transaction(s), the grounds for suspicion, and any other relevant details.

**No Tipping-Off:** VASPs and their employees are strictly prohibited from informing the customer or any third party that an STR has been or will be submitted.

Copies of documents used for CDD (identification, verification).

Records of all transactions, including amounts, types of virtual assets, dates, and parties involved (including "Travel Rule" information if applicable).

Business correspondence related to the customer.

Records of suspicious transaction reports submitted.

Records of internal risk assessments and training.

**Retention Period:** Records must be retained for at least **five (5) years** after the business relationship has ended or after the date of an occasional transaction.

**Accessibility:** Records must be readily accessible to SIFIU or other competent authorities upon request.

**Appointment of a Compliance Officer/MLRO:** A designated person responsible for overseeing AML/CFT compliance, including receiving internal suspicious activity reports and acting as the primary liaison with SIFIU.

**Risk Assessments:** Regularly conduct institutional and customer risk assessments to identify, assess, and understand their ML/TF risks.

**Internal Policies and Procedures:** Develop and implement written policies, procedures, and controls to mitigate identified risks and ensure compliance with AML/CFT laws.

**Training:** Provide ongoing AML/CFT training to all relevant employees, ensuring they understand their obligations and can identify suspicious activities.

**Independent Audit/Review:** Periodically subject their AML/CFT program to independent audit or review to assess its effectiveness.

**Licensing/Registration:** VASPs are expected to register or be licensed by a competent authority. Even if a specific VASP license doesn't exist yet, they fall under the "reporting entity" definition which often implies a registration requirement with SIFIU.

**"Travel Rule":** VASPs should collect and transmit required originator and beneficiary information (name, account number/wallet address, physical address, national ID, customer number, date and place of birth) for virtual asset transfers above a de minimis threshold. This is a crucial FATF recommendation for VASPs.

**Sanctions Screening:** Implement controls to screen customers and transactions against national and international sanctions lists (e.g., UN Security Council sanctions lists).

**New Technologies and Products:** Assess and mitigate the ML/TF risks associated with new technologies or products they offer before launching them.

**United Nations Financial Sanctions Act 2017:** This Act provides the legal framework for implementing UN Security Council resolutions related to financial sanctions, particularly concerning terrorism and proliferation financing.

**Asset Freezing:** VASPs must immediately freeze any funds or other assets (including virtual assets) belonging to, or controlled by, designated persons or entities appearing on UN sanctions lists. This includes funds derived from or generated by such assets.

**Prohibition on Making Funds Available:** VASPs are prohibited from making any funds, financial assets, economic resources, or virtual assets available, directly or indirectly, for the benefit of designated persons or entities.

**Reporting Obligations:** Any VASP that identifies a designated person or entity as a customer, beneficial owner, or transaction party, or discovers assets belonging to such individuals/entities, must immediately report this to the SIFIU.

**Implementation of UN Lists:** The Solomon Islands, through the CBSI/SIFIU, regularly issues advisories or directives based on the UN Security Council's consolidated lists, which include individuals and entities associated with:

ISIL (Da'esh) and Al-Qaida (1267/1989/2253 Sanctions List)

The Taliban (1988 Sanctions List)

DPRK (North Korea) (1718 Sanctions List)

Other terrorism and proliferation financing related designations as determined by UNSC resolutions.

**United Nations Financial Sanctions Act 2017:** Accessible via the Pacific Islands Legal Information Institute (PacLII): https://www.paclii.org/sb/legis/num_act/unfsa2017326/

**US Persons and Nexus:** Any VASP that is a "US Person" (US citizen, resident, entity incorporated in the US or subject to US jurisdiction) *must* comply with all OFAC sanctions globally.

**US Financial System Interaction:** Even non-US VASPs risk penalties if their transactions involve a US nexus (e.g., using a US-based exchange, stablecoin issued by a US entity, US dollar-denominated transactions cleared through the US financial system).

**EU Persons and Nexus:** Similarly, VASPs that are "EU Persons" or have a nexus to the EU (e.g., serving EU customers, using EU-based infrastructure, dealing with euro-denominated virtual assets) must comply with EU sanctions.

**Correspondent Banking and De-risking:** Non-compliance with OFAC/EU sanctions by a Solomon Islands VASP can lead to de-risking by global financial institutions (including banks and larger crypto exchanges), effectively cutting off access to the international financial system.

**OFAC Sanctions Programs and Country Information:** https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information

**Implement Risk-Based Screening:** Conduct ongoing screening of their customers, beneficial owners, and transaction counterparties against the relevant sanctions lists (UN, and prudently, OFAC/EU lists).

**Know Your Customer (KYC) / Customer Due Diligence (CDD):** Integrate sanctions screening into their CDD processes for all new and existing customers.

**Transaction Monitoring:** Monitor transactions for patterns or attempts to circumvent sanctions.

**Record-Keeping:** Maintain records of all screening activities and any sanctions hits, including the actions taken.

**Internal Controls:** Establish robust internal policies, procedures, and training programs to ensure effective sanctions compliance.

**UN Sanctions Regimes:** These target specific countries or regions (e.g., North Korea, certain individuals/entities in Libya, Sudan, Yemen, Somalia) and prohibit or restrict transactions, trade, and financial services.

**OFAC/EU Comprehensive Sanctions:** These impose broad restrictions on dealings with specific jurisdictions (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine like Crimea, Donetsk, Luhansk). Even for a Solomon Islands VASP, conducting transactions with parties in these comprehensively sanctioned jurisdictions can expose them to US/EU enforcement actions.

**CBSI/SIFIU Directives:** The SIFIU may issue specific directives or guidance regarding transactions with high-risk jurisdictions or those subject to specific international measures.

**Fines:** Substantial monetary penalties. For example, the UN Financial Sanctions Act 2017 outlines penalties for breaching a financial sanction, which can be significant.

**Imprisonment:** Individuals found in violation of sanctions laws can face terms of imprisonment.

**Loss of License/Registration:** VASPs operating under a license or registration would risk revocation, effectively ending their ability to operate.

**Reputational Damage:** Significant harm to the entity's reputation, making it difficult to conduct business locally and internationally.

**United Nations Financial Sanctions Act 2017**, Part 4 (Offences and Penalties).

The **CBSI/SIFIU** would be responsible for disseminating any domestic lists of "designated persons" or "entities" which are derived directly from UN Security Council resolutions, rather than independently created country-specific lists unique to the Solomon Islands. VASPs are expected to monitor official CBSI/SIFIU communications for any such designations.

**Understand and implement the UN Financial Sanctions Act 2017 and the AML/CFT Act 2021.**

**Screen all customers, beneficial owners, and transaction counterparties against the UN Security Council Consolidated Lists.**

**Proactively screen against OFAC's SDN list and the EU Consolidated Financial Sanctions List** to mitigate extraterritorial risks, preserve correspondent banking relationships, and access global crypto liquidity.

**Implement robust KYC/CDD procedures and transaction monitoring systems** tailored to the risks associated with virtual assets.

**Report any hits or suspicious transactions to the SIFIU** promptly.

**Stay updated with advisories and guidance** issued by the CBSI and SIFIU.

**No specific crypto custody license:** There is no dedicated license for virtual asset custodians.

**Potential application of existing licenses:** If an entity's activities involving digital assets were deemed to fall under the definition of banking business, financial institution services, or securities trading, it would likely require a license under the **Financial Institutions Act 1998** or other relevant financial legislation administered by the CBSI. However, this would depend on how digital assets are legally characterized, which is currently ambiguous for custody.

**Anti-Money Laundering (AML) / Counter-Terrorist Financing (CFT):** The **Anti-Money Laundering and Counter-Terrorist Financing Act 2002 (as amended)** is the primary legislation for AML/CFT. The Solomon Islands is a member of the Asia/Pacific Group on Money Laundering (APG), which aligns with FATF standards. While the Act broadly covers "financial institutions," it is not explicitly clear if "virtual asset service providers" (VASPs), including custodians, are explicitly defined and captured under its scope for registration or licensing beyond general reporting obligations. Many jurisdictions initially apply AML/CFT to VASPs before developing specific operational rules.

**Segregation of Client Assets Rules:**

**No specific crypto rules:** There are no explicit rules mandating the segregation of client digital assets from the custodian's proprietary assets.

**General fiduciary principles:** For traditional financial institutions, general principles of fiduciary duty and client asset protection would typically apply, implying segregation. However, without specific legislation for digital assets, the enforceability and interpretation for crypto assets would be unclear.

**No specific crypto requirements:** There are no specific insurance or bonding requirements for digital asset custodians.

**General capital adequacy:** Licensed financial institutions might be subject to capital adequacy requirements as part of their licensing conditions, but this typically does not extend to specific insurance for digital asset theft or loss.

**No specific mandates:** There are no legal mandates in the Solomon Islands for using cold storage or any particular security measures for digital assets under custody. This is an operational detail typically specified in advanced crypto regulatory frameworks.

**No specific definition:** There is no legal definition of a "qualified custodian" for digital assets in the Solomon Islands. This concept is usually part of robust regulatory regimes that define specific criteria for institutions entrusted with client assets (e.g., minimum capital, professional liability, security audits).

There is **no publicly available information** indicating any specific pending legislation for cryptocurrency or digital asset custody in the Solomon Islands. While the CBSI may be monitoring international developments or reviewing its financial sector laws, no draft laws or public consultations on this specific topic have been announced.

**Central Bank of Solomon Islands (CBSI):** The primary regulatory body.

**Central Bank of Solomon Islands Act 2012:** Governs the powers and functions of the CBSI.

*Often found under the "Legislation" or "Publications" section of the CBSI website.*

**Financial Institutions Act 1998:** Regulates financial institutions and banking activities.

**Anti-Money Laundering and Counter-Terrorist Financing Act 2002 (as amended):** The key legislation for combating financial crime.

*Typically accessible through the Solomon Islands Parliament website or legal databases specializing in national legislation.* (Specific URL difficult to provide without a central government legal publication site.)

**FATF Mutual Evaluation Reports for Solomon Islands:** While not legislation, these reports provide insight into the country's AML/CFT framework and how it addresses new technologies like virtual assets.

*Search the FATF website for "Solomon Islands mutual evaluation report":* https://www.fatf-gafi.org/