Financial Crime World

Simplified Due Diligence Guide for Financial Institutions in Nauru

The Republic of Nauru’s Financial Intelligence Unit has issued a guideline aimed at helping financial institutions comply with the country’s anti-money laundering and targeted financial sanctions policies. The simplified due diligence guide is effective as of August 10, 2023, and outlines the requirements for reporting entities to meet their obligations under the Anti-Money Laundering Targeted Financial Sanctions Act 2023.

Simplified Due Diligence Procedures

The guideline allows a lower level of due diligence to be applied by reporting entities on existing customers based on available records. This simplified customer due diligence procedure is permitted in circumstances where the risk of money laundering or financing of terrorism is low and information about the customer’s identity and beneficial ownership is readily available.

What Simplified Due Diligence Includes

  • Lower level of scrutiny for customer identification
  • Source and legitimacy of funds
  • Transaction monitoring
  • Customer profiling

Reporting entities must also obtain specific information from customers, including:

  • Name
  • Residential address
  • Occupation
  • Legal form and nature of business activity

Situations Where Simplified Due Diligence is Not Applicable

Simplified due diligence is not applicable in situations where there is a suspicion of money laundering or terrorist financing, or when higher-risk scenarios prevail. Higher-risk scenarios include:

  • Customers residing in countries with high risks of financial crime
  • Involvement in high-risk business activities
  • Complex ownership structures
  • Political exposure
  • Potential involvement in financial crimes

Examples of Situations Where Simplified Due Diligence May be Required or Applied

  • Occasional or limited financial activities
  • Financial products providing defined services to specific customer types

Compliance Requirements

The guideline has been approved by the Financial Intelligence Unit and is effective as of August 10, 2023. The review date for the guide is set for August 9, 2026. Reporting entities in Nauru must comply with the requirements outlined in the guideline to meet their obligations under the Anti-Money Laundering Targeted Financial Sanctions Act 2023.

Importance of Compliance

For financial institutions operating in Nauru, understanding and implementing the simplified due diligence procedures outlined in this guideline is crucial to ensuring compliance with anti-money laundering and targeted financial sanctions policies. Failure to comply may result in severe penalties and reputational damage.

Note: The guide is available on the Financial Intelligence Unit’s website for financial institutions operating in Nauru.