NAURU REGULATORY UPDATES: FINANCIAL CRIMES ENFORCEMENT NETWORK ISSUES ADVISORY
Warning Issued by FinCEN
The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory to banks and financial institutions operating in the United States, urging them to exercise enhanced scrutiny on transactions involving Nauru. This move is in response to serious systemic problems within Nauru that create opportunities for money laundering.
Systemic Issues in Nauru
According to FinCEN, Nauru has several legal, supervisory, and regulatory systems with significant deficiencies:
- Lack of criminal offense: Money laundering is not considered a criminal offense in Nauru.
- Offshore bank secrecy laws: Offshore banks licensed by Nauru are not required to obtain identification information from customers or maintain customer records.
FATF’s Non-Cooperative Status
The Financial Action Task Force on Money Laundering (FATF) has identified Nauru as non-cooperative in the fight against money laundering due to these deficiencies. However, Nauru has shown awareness of the issue and is cooperating with officials from other countries in certain criminal investigations and reviewing its offshore banking sector.
FinCEN’s Advisory
FinCEN’s advisory emphasizes that transactions involving Nauruan entities or accounts may be used for illegal purposes due to the country’s bank secrecy laws and lack of supervisory mechanisms. As a result, US financial institutions are advised to give enhanced scrutiny to all financial transactions originating in or routed to or through Nauru.
No Curtailment of Legitimate Business
The advisory does not mean that US financial institutions should curtail legitimate business with Nauru. FinCEN will consider any report relating to a transaction described in this advisory as constituting a report of a suspicious transaction relevant to a possible violation of law or regulation, for purposes of the prohibitions against disclosure and protection from liability.
Technical Assistance from US Officials
US officials are ready to provide technical assistance to Nauruan officials as they work to remedy the deficiencies in their counter-money laundering systems.