Financial Crime World

Samoan Financial System Faces Criticism Over Lack of Effectiveness in Combating Money Laundering and Terrorist Financing

A recent assessment by international experts has revealed several weaknesses in Samoa’s financial system, including its ability to combat money laundering and terrorist financing. The report, conducted as part of a mutual evaluation between the Asia-Pacific Group on Money Laundering (APG) and the Financial Action Task Force (FATF), identified areas where Samoa falls short of international standards.

Weaknesses in Combating Money Laundering and Terrorist Financing

The assessment highlighted several concerns, including:

  • Inadequate risk assessments: While the private sector has conducted national risk assessments (NRAs), only general feedback has been provided to financial institutions and designated non-financial businesses and professions.
  • Lack of comprehensive approach: Samoa has not implemented a comprehensive, risk-based approach to allocating resources and implementing measures to prevent or mitigate money laundering and terrorist financing.
  • Exemptions from obligations: The exemption of trustee companies providing offshore financial services from certain obligations under the Money Laundering Prevention Act 2007 is concerning. Although only one exemption has been granted in practice, the report notes that this potentially broad exemption was not based on a proven low risk.

Additional Concerns

The assessment also identified several other concerns, including:

  • Lack of legislation: Samoa lacks legislation to support targeted financial sanctions related to terrorism and weapons proliferation financing.
  • Legal framework deficiencies: The legal framework needs to be amended to address technical deficiencies.
  • Proportionate and dissuasive sanctions: The range of sanctions applicable to financial institutions and designated non-financial businesses and professions is not considered proportionate and dissuasive.

Response and Recommendations

In response to these findings, Samoa’s authorities have been tasked with implementing several key actions, including:

  • Providing feedback on NRAs: Providing feedback on findings from NRAs to financial institutions and designated non-financial businesses and professions.
  • Implementing comprehensive approach: Implementing a comprehensive, risk-based approach to allocating resources and implementing measures to prevent or mitigate money laundering and terrorist financing.
  • Strengthening legal framework: Strengthening the legal framework by amending relevant legislation and developing targeted financial sanctions.

Conclusion

The report’s findings are a wake-up call for Samoa, highlighting the need for urgent action to improve its financial system’s effectiveness in combating money laundering and terrorist financing. Failure to address these weaknesses could have serious consequences for Samoa’s financial stability and reputation.