Financial Crime World

Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) Policy Framework in Nauru

Definition of Financial Institution

The Anti-Money Laundering-Terrorism Financing Suppression Act 2023 defines a Financial Institution as a broader category than the Banking Act 1975, including entities that provide services such as banking, insurance, and securities.

Requirements for Financial Institutions

Financial institutions must register in Nauru and comply with Part 4 of the AML-TFS Act 2023, which includes:

  • Ongoing Compliance Obligations: Regular assessments to ensure adherence to AML/CFT regulations
  • Customer Due Diligence (CDD):
    • Standard CDD: Collecting and verifying customer information for all customers
    • Enhanced CDD: Conducting additional due diligence on high-risk customers or transactions
    • Simplified CDD: Reduced due diligence for low-risk customers or transactions
    • Correspondent Banking Relationships: Due diligence on correspondent banks and their customers
    • Shell Bank Due Diligence: Identifying and verifying the beneficial owners of shell banks
  • Electronic Currency Transfers: Reporting large cash transactions and suspicious activity
  • Reporting Obligations for Suspicious Activity: Filing reports with the Nauru Financial Intelligence Unit (FIU)
  • Targeted Financial Sanctions: Compliance with sanctions imposed by the government or international organizations

Penalties

Non-compliance with AML/CFT obligations can result in penalties of up to $200,000 or 2 years imprisonment, or both, for individuals, and $1,000,000 for bodies corporate.

Senior Management Liability

Directors or other members of senior management may be held liable for offences committed by the financial institution if they had actual knowledge or reckless disregard of the offence, or gave their authority, permission, or consent to the offence.

Agencies Involved in Implementing the Policy

The agencies involved in implementing this policy are:

  • Minister for Finance: Oversight and regulation of financial institutions
  • Registrar of Banks: Registration and supervision of banks operating in Nauru
  • Nauru Financial Intelligence Unit (FIU): Receiving and analyzing suspicious activity reports
  • Registrars of Business Names, Corporations, Partnerships, or Trusts: Verifying the beneficial ownership of entities
  • Authority established under Beneficial Ownership Act 2017: Implementing laws to regulate beneficial ownership

Application of Basel Committee on Banking Supervision Principles

Nauru’s position on the application of the Basel Principles to banks operating in Nauru is provided for under Section 7(1)(a)(iii) of the Banking Act 1975.

International Association of Insurance Supervisors (IAIS)

Nauru is not a member of IAIS, but intends to adopt their standards or principles through laws developed to regulate insurance service providers in Nauru.

International Organisation of Securities Commissions (IOSC)

Nauru is also not a member of IOSC, but intends to uphold the principles of IOSC should securities service providers set up business in Nauru.

Overall, this policy document provides a comprehensive framework for financial institutions in Nauru to comply with AML/CFT regulations and prevent money laundering and terrorist financing activities.