Financial Crime World

Fiji’s Money Laundering Risks: A Growing Concern Amidst Porous Borders and cash Economy

In the Pacific Island nation of Fiji, money laundering and terrorist financing pose significant risks, according to a new report produced by the U4 Anti-Corruption Helpdesk. This article outlines the nature of these risks, their prevalence, and the measures Fiji has taken to address them.

Sources of Illicit Funds in Fiji

  • Narcotics trafficking: Fijian territories have been identified as a transhipment point for drugs, generating illicit cash flows.
  • Corruption: This remains a major source of illicit funds in Fiji, particularly in sectors such as law enforcement and politics.
  • Trade misinvoicing: This involves the misrepresentation of the value or volume of goods in international transactions to evade taxes or conceal funds.
  • Tax evasion and tax crimes: Activities such as VAT fraud contribute significantly to illicit funds in Fiji.

Vulnerable Sectors

  • Banking: This sector is particularly vulnerable to money laundering, with transactions worth $78.8 million investigated in 2018.
  • Real estate: Fiji’s real estate sector also poses a significant money laundering risk, as transactions are not subject to reporting requirements.
  • Foreign exchange: With a large influx of foreign currency from tourism and remittances, this sector is an attractive target for money launderers.
  • Non-profit sector: This sector is exposed to the risk of being used to fund terrorist activities, despite Fiji’s self-assessment as not being high risk.

Fiji’s AML-TF Regime and International Obligations

  • Self-assessment: Despite acknowledging these risks in its 2016 Money Laundering National Risk Assessment, Fiji does not consider itself a high-risk jurisdiction for money laundering and terrorist financing.
  • Terrorist financing: Fiji does not prioritize terrorism financing as a significant concern and has only partially complied with six FATF recommendations, including those related to targeted financial sanctions, non-profit organizations, and beneficial ownership.
  • Listing on EU’s blacklist: Fiji is currently listed on the EU’s blacklist of non-cooperative tax jurisdictions due to its failure to adhere to transparency, fair tax competition, and OECD’s Base Erosion and Profit Shifting minimum standards.

Illicit Financial Flows in Fiji

From 2006 to 2015, Fiji experienced illicit financial inflows worth $367 million and outflows worth $421 million, according to Global Financial Integrity. Around $46 million is believed to be laundered annually.

Improvements and Challenges

While Fiji has taken steps to improve its national AML-TF regime, significant challenges remain due to the country’s large, porous maritime borders and an economy where cash is still widely used. Despite these challenges, Fiji continues to make improvements and address these risks gradually.

Conclusion

Fiji’s money laundering and terrorist financing risks are a growing concern due to its porous borders and cash economy. While the country has taken steps to address these risks, significant challenges remain, particularly with regard to international obligations and compliance with FATF recommendations.