Financial Crime World

Nauru’s Anti-Money Laundering/Counter-Terrorist Financing Efforts

Key Points Summarized

  • Nauru has a limited banking sector with no commercial banks operating in the country.
  • There is no national currency, and all transactions are conducted in Australian dollars or other foreign currencies.
  • The country lacks a comprehensive AML/CFT framework, including lack of clear procedures for freezing assets.

FATF Assessment

In 2012, the FATF evaluated Nauru’s AML/CFT regime and identified several deficiencies in the country’s efforts against money laundering and terrorist financing. These included:

  • Lack of a comprehensive national strategy to combat money laundering
  • No clear understanding of the risks associated with money laundering

US State Department Assessment

The US State Department noted that Nauru does not conform with regard to several government legislations, including:

  • Criminalized Beyond Drugs: The jurisdiction has extended anti-money laundering statutes and regulations to include nondrug-related money laundering.
  • Arrangements for Asset Sharing: By law, regulation or bilateral agreement, the jurisdiction permits sharing of seized assets with third-party jurisdictions that assisted in the conduct of the underlying investigation.
  • Cooperates with International Law Enforcement: By law or regulation, banks are permitted/required to cooperate with authorized investigations involving or initiated by third-party jurisdictions, including sharing of records or other financial data.

Nauru’s Membership and Compliance

Nauru is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. However:

  • The country has not been listed as an equivalent jurisdiction by the European Union.
  • There are no records showing that Nauru exchanges information with the United States regarding money laundering or terrorist financing.

Recommendations

The Government of Nauru (GON) should:

  • Amend its AML legislation to include a greater number of predicate offenses and reduce restrictive conditions in relation to tax matters.
  • Supervise alternative remittance providers.
  • Prioritize ratification of UN Conventions, including the UN Convention against Corruption and the 1988 UN Drug Convention.