Financial Crime World

Financial Crime Definition Takes Center Stage in NAURU

The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory to financial institutions operating in the US, warning them to exercise enhanced scrutiny over transactions involving NAURU, a small South Pacific island nation.

Background on NAURU

NAURU, with a population of approximately 10,600, has been seeking to establish itself as an offshore financial center, granting 400 licenses to so-called offshore banks. However, FinCEN has identified serious systemic problems in NAURU’s counter-money laundering regime, which allows for significant opportunities and tools for money laundering and the protection of criminal proceeds.

Lack of Effective Measures

Money laundering is not a criminal offense in NAURU, and offshore banks licensed by the country are not required to obtain customer identification information or maintain transaction records. Additionally, NAURU maintains strong bank secrecy laws, making it difficult for authorities to investigate and prosecute financial crimes.

The Financial Action Task Force on Money Laundering (FATF) has identified NAURU as non-cooperative in the fight against money laundering, citing its lack of effective measures to prevent and detect money laundering.

FinCEN’s Advisory

Despite efforts by NAURU to address these issues, FinCEN believes that the country’s legal, supervisory, and regulatory systems create significant opportunities for financial criminals. Therefore, US banks and other financial institutions are advised to give enhanced scrutiny to all transactions involving NAURU or entities organized or domiciled in the country.

  • Financial institutions should carefully examine available facts relating to any such transaction to determine if it requires reporting under the Bank Secrecy Act or other applicable law.
  • The Treasury Department has emphasized that the issuance of this advisory does not mean that US financial institutions should curtail legitimate business with NAURU.

Technical Assistance Offered

In a statement, FinCEN Director James F. Sloan said that US officials are willing to provide technical assistance to NAURU as it works to remedy its deficiencies in counter-money laundering systems.