Financial Crime World

Banking Sector Fraud Trends in American Samoa Exposed

A recent report has highlighted growing concerns over fraud trends in American Samoa’s banking sector. The country’s financial system, dominated by commercial banks and Public Financial Institutions (PFIs), has been plagued by high levels of non-performing loans (NPLs) and significant uncertainty surrounding balance sheet data.

The State of the Banking Sector

  • Four commercial banks provide almost 60% of credit to the economy.
  • PFIs, such as the Samoa National Provident Fund and the Development Bank of Samoa, account for around 30%.
  • Close supervisory attention is required due to high and rising NPLs and the results of the FSAP stress tests.

Challenges Facing the Banking Sector

  • Banks are still dealing with the effects of past natural disasters, which has led to assessments of their health being impeded by significant uncertainty surrounding asset quality and provisioning.
  • High loan concentration and exposure to natural disasters represent significant risks to the financial system.
  • PFIs are particularly vulnerable to shocks due to low asset quality and strong linkages with state-owned enterprises.

Recommendations for Improvement

  • The authorities should step up oversight of PFIs, including through enhanced data collection and on-site reviews. Where substantial adjustments are needed, new lending should be restricted.
  • The Central Bank of Samoa has made important efforts to improve financial sector stability, including:
    • Conducting on-site inspections
    • Introducing elements of risk-based supervision
    • Expanding staff resources
    • Promoting financial inclusion

Priorities for Improvement

  • Improving the quality and coverage of financial sector data
  • Upgrading legal, regulatory, and supervisory frameworks
  • Building capacity and staff
  • Close monitoring through on-site supervision and asset quality reviews is top priority to address NPLs and other risks in the banking sector.

By addressing these challenges and priorities, American Samoa can work towards a more stable and resilient banking sector.