Financial Crime World

The Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Regime in Nauru: Evaluation and Recommendations

Overview

The report outlines the results of a Mutual Evaluation conducted on Nauru’s AML/CFT regime, assessing its compliance with international standards set by the Financial Action Task Force (FATF).

Key Findings

  • Legislation: Comprehensive legislation is in place, including the Anti-Money Laundering and Counter-Terrorism Financing Act 2008 (AMLA), which aligns with FATF Recommendations.
  • CDD Requirements: While AMLA sets out customer due diligence (CDD) requirements, gaps exist in beneficial ownership and enhanced CDD for high-risk customers.
  • Financial Institutions: Nauru does not have prudentially regulated institutions operating within its jurisdiction. Western Union is the only financial institution currently operating in Nauru.
  • STR Reporting: No suspicious transaction reports (STRs) have been filed due to narrow scope of predicate offences and restrictive conditions related to tax matters.
  • Internal Controls: AMLA defines requirements for internal controls, but more is needed in relation to audit.
  • Supervision and Enforcement: The Financial Intelligence Unit (FIU) has authority to conduct inspections and reviews, but procedures and capacity are not well developed.

Recommendations for Nauru

  1. Develop and implement risk-based approaches to AML/CFT measures.
  2. Enhance CDD requirements, including beneficial ownership and enhanced CDD for high-risk customers.
  3. Establish a prudential regulator or supervisor to oversee financial institutions.
  4. Implement effective supervision and enforcement of AML/CFT requirements.
  5. Develop and implement guidelines on STR reporting, originator information, and “red flags” for suspicious transactions.

Conclusion

The report highlights areas where Nauru needs to improve its AML/CFT regime to better align with international standards and effectively combat money laundering and terrorism financing. By implementing these recommendations, Nauru can strengthen its compliance with FATF Recommendations and enhance its ability to prevent and detect AML/CFT activities.