Nauru Banking Sector Urged to Prioritize Due Diligence Amid Money Laundering Concerns
The Republic of Nauru’s Anti-Money Laundering Targeted Financial Sanctions Act 2023 has introduced a simplified due diligence framework for reporting entities to combat money laundering and terrorist financing.
Simplified Due Diligence Framework
The guidelines aim to ensure compliance with international standards set by the Financial Action Task Force (FATF) while also assisting supervisory authorities in assessing reporting entities’ adherence to due diligence requirements. According to Section 85 of the Act, reporting entities are required to apply simplified due diligence procedures when dealing with customers who pose a low risk of money laundering or terrorist financing.
Definition of Simplified Due Diligence
The guidelines define “simplified due diligence” as the lowest level of due diligence that can be applied by a reporting entity on an existing customer, based on the records in their custody. This includes situations where information about the customer’s identity and beneficial ownership is readily available, adequate checks are in place, or the customer is a state-owned enterprise with transparent ownership structures.
When to Apply Simplified Due Diligence
Reporting entities may apply simplified due diligence if they can demonstrate that the risk of money laundering or terrorist financing is low. However, simplified due diligence should not be applied in cases where there is suspicion of money laundering or terrorist financing, or when higher-risk scenarios prevail. Higher-risk scenarios include situations where customers are from countries known for high financial crime rates, have complex ownership structures, or are politically exposed individuals.
Required Information
Reporting entities are required to obtain specific information about customers subject to simplified due diligence, including:
- Name
- Residential address
- Occupation
- Legal form of business activity
Guidelines Issuance and Review
The guidelines were issued by the Financial Intelligence Unit on August 10, 2023, with an amended version released on September 11, 2023. The next review date is set for August 9, 2026.
Importance of Prioritizing Due Diligence
It is essential that reporting entities in Nauru prioritize due diligence to prevent financial crimes and maintain a safe and stable banking sector. By prioritizing due diligence, reporting entities can help ensure the integrity of the financial system and protect against money laundering and terrorist financing.