Financial Crime World

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Understanding Anti-Money Laundering (AML) Regulations in Nauru

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Red Flag Indicators for Suspicious Transactions

As a Virtual Asset Service Provider (VASP), it’s essential to identify and report suspicious transactions. The following are some common red flag indicators that can help you detect potential money laundering activities:

1. Transacting with Known Fraudulent Addresses or Bank Cards

  • Transacting with addresses or bank cards connected to known fraud, extortion, or ransomware schemes.
  • VA transactions originating from or destined to online gambling services.

2. Unusual Withdrawal Patterns

  • Using credit and/or debit cards linked to a VA wallet to withdraw large amounts of fiat currency (crypto-to-plastic).
  • Deposits into an account or a VA address that are significantly higher than ordinary with an unknown source of funds.

3. Lack of Transparency

  • Customer’s funds sourced directly from third-party mixing services or wallet tumblers.
  • Bulk of a customer’s source of wealth derived from investments in VAs, ICOs, or fraudulent ICOs.
  • Customer’s source of wealth disproportionately drawn from VASPs that lack AML/CFT controls.

The following are some common red flag indicators related to geographical risks:

1. Transactions with Unregistered Exchanges

  • Customer’s funds originate from or are sent to an exchange not registered in the jurisdiction where either the customer or exchange is located.

2. Transactions with High-Risk Jurisdictions

  • Customer utilises a VA exchange or foreign-located MVTS (Money Transfer Operator) in a high-risk jurisdiction lacking, or known to have inadequate, AML/CFT regulations for VA entities.
  • Customer sends funds to VASPs operating in jurisdictions that have no VA regulation, or have not implemented AML/CFT controls.

Reporting of Suspicious Activities

As a reporting entity, a VASP may use the red flag indicators to generate a Suspicious Activity Report (SAR) which is required under Section 59 of the AML-TFS Act 2023. The SAR should be provided to the FIU Supervisor.

Sanctions

The AML-TFS Act 2023 makes provision for proportionate and dissuasive sanctions, including penalties for VASPs, Senior Management staff, and Boards of Directors if they contravene any laws.