NAURU BANK SECRECY LAWS UNDER SCRUTINY AS BLACKLISTED FINANCIAL INSTITUTIONS RE-EMERGE
The International Criminal Court’s Financial Investigation Bureau (FIB) has raised concerns about several Nauru-registered banks that have continued to operate despite being blacklisted by the US Department of the Treasury in 2002. These banks were designated as money laundering concerns, leading to a prohibition on financial dealings between US institutions and any Nauru-licensed institution.
Background
In October 2001, the USA Patriot Act was introduced, which included amendments to the Bank Secrecy Act aimed at combating money laundering. The changes targeted over 400 offshore banks without a physical or legal presence elsewhere and those operating in jurisdictions where money laundering was not criminalized.
The Concerns
FIB Assistant Director Jon Merrett has expressed concern that some of these blacklisted banks have gone quiet for a period before re-emerging, attempting to disguise their origins. “It’s clear they hope people will have forgotten about the designation or believe they can persuade them they’re dealing with an entirely different entity,” Merrett said.
The Risks
US financial institutions are prohibited from opening or maintaining accounts for foreign financial institutions involved with Nauru or any institution licensed by the island nation, except for the Bank of Nauru, which serves as the Central Bank. The FIB is concerned that some banks may be unwittingly trading with or maintaining correspondent relationships with blacklisted Nauru financial institutions.
Recent Instances
Merrett warned that recent instances have shown US banks failing to realize they are dealing with a Nauru bank on the US Treasury list due to similar names or confusing branding. He emphasized the importance of verifying the identity of counterparties to avoid compromising compliance obligations and recommended contacting the FIB for clarification in cases of uncertainty.
Protective Measures
The FIB has compiled a comprehensive list of all Nauru banks and financial institutions named by the US Department of the Treasury and offers protective measures, including:
- Asset tracking
- Assistance with exiting correspondent relationships
Those seeking more information are advised to email fib@icc-ccs.org for full details.
Take Action
To avoid compromising compliance obligations and protect your institution from potential risks, it is essential to:
- Verify the identity of counterparties
- Contact the FIB for clarification in cases of uncertainty
- Take advantage of the protective measures offered by the FIB
By taking these steps, you can help ensure the integrity of the financial system and maintain compliance with regulations.