Financial Crime World

Nauru Tightens Financial Regulations to Combat Money Laundering and Terrorism Financing

Strengthening Anti-Money Laundering and Combating the Financing of Terrorism Regulations

Nauru has taken a significant step to enhance its financial regulatory framework by implementing new anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The country aims to crack down on illicit financial activities and align its banking sector with international standards.

Implementation of FATF Recommendations

In line with the Financial Action Task Force’s (FATF) recommendations, Nauru has implemented measures to regulate and supervise financial institutions effectively. This includes requiring banks and financial institutions to comply with AML/CFT requirements.

Financial Institutions Subject to Regulation

Financial institutions in Nauru include:

  • Entities accepting deposits
  • Lending institutions
  • Issuers of financial instruments
  • Managers of funds
  • Securities traders
  • Money transfer service providers

To operate a financial institution in Nauru, entities must:

  • Obtain a license under the Banking Act 1975
  • Register as a business or legal entity
  • Obtain a business license

AML/CFT Obligations

Financial institutions are required to comply with AML/CFT obligations, including:

  • Customer due diligence
  • Monitoring electronic currency transfers
  • Reporting suspicious activity
  • Adhering to targeted financial sanctions

Failure to comply can result in severe penalties, including:

  • Fines of up to $200,000 or 2 years in prison for individuals
  • $1 million fine for bodies corporate

Ban on Shell Banks and Reporting Requirements

Nauru has banned dealings with shell banks and requires reporting entities not to maintain business relationships with them or allow them to use their accounts.

Key Agencies Involved

Key agencies involved in implementing AML/CFT regulations in Nauru include:

  • Minister for Finance
  • Registrar of Banks
  • Nauru Financial Intelligence Unit (FIU)
  • Registrars of Business Names, Corporations, Partnerships, or Trusts
  • Authority established under the Beneficial Ownership Act 2017

Basel Principles and International Cooperation

Nauru has also incorporated the Basel Principles into its banking laws to promote transparency and accountability in the financial sector. The country remains committed to forming partnerships with international organizations that will benefit the development of its financial sector, although it is not yet a member of the International Association of Insurance Supervisors (IAIS) or the International Organization of Securities Commissions (IOSC).