Financial Crime World

Mutual Evaluation of Nauru’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Regime

Key Findings

The Asia/Pacific Group on Money Laundering (APG) conducted a mutual evaluation of Nauru’s AML/CFT regime, highlighting both strengths and weaknesses in its framework.

Regulatory Framework

  • Nauru has a comprehensive AML/CFT legislative framework, with the Anti-Money Laundering Act (AMLA) 2008 being the primary legislation.
  • However, guidelines issued under earlier legislation need to be updated to reflect current obligations under the AMLA 2008.

Preventive Measures

Financial Institutions

  • There are no banks or other financial institutions operating in Nauru, except for one remitter, Western Union.
  • AML/CFT preventive obligations are set out in the AMLA 2008, but guidelines issued under earlier legislation need to be updated.

Designated Non-Financial Businesses and Professions (DNFBPs)

  • DNFBPs in Nauru are subject to AML/CFT obligations.
  • However, there are weaknesses in the application of these measures, particularly in identifying beneficial ownership and monitoring for unusual transactions.

Reporting Obligations

  • The report highlights that no suspicious transaction reports (STRs) have been filed to date due to a narrow range of predicate offences and restrictive conditions related to tax matters.

Supervision and Enforcement

  • Monitoring, supervision, and enforcement of compliance with AML/CFT requirements is the responsibility of the Financial Intelligence Unit (FIU).
  • However, its procedures and capacity are not yet well developed.

Recommendations

To strengthen Nauru’s AML/CFT regime and enhance its ability to prevent and detect money laundering and terrorist financing activities, the following recommendations are made:

  1. Update Guidelines: Update guidelines for financial institutions on STR reporting and CDD to reflect current obligations under the AMLA 2008.
  2. Risk-Based Approaches: Develop risk-based approaches in the application of preventive measures to DNFBPs.
  3. Enhance Supervision: Enhance supervision of financial institutions, including regular off-site and on-site inspections.
  4. Implement Sanctions: Implement effective and persuasive sanctions for failure to lodge STRs.

By implementing these recommendations, Nauru can improve its AML/CFT regime and effectively combat money laundering and terrorist financing activities.