Tonga Struggles to Combat Money Laundering and Corruption

Nuku’alofa, Tonga - A new report has highlighted the significant challenges faced by Tonga in combating money laundering and corruption. The Pacific nation’s financial system is largely laundered through legitimate means such as house purchases, vehicle sales, private school fees, and donations to churches, with limited evidence of criminal proceeds being sent overseas.

Challenges in Combating Money Laundering

The report found that the country’s Transaction Reporting Agency (TRA) lacks access to tax information and resources, making it difficult to effectively use financial intelligence to support investigations and trace criminal proceeds related to money laundering. Additionally, the MLPC Regulations contain customer due diligence and reporting requirements for financial institutions and cash dealers, but Designated Non-Financial Businesses and Professions (DNFBPs) are only covered by the AML/CFT Act.

Weaknesses in the Current Framework

• The regulations lack sanctions or penalties for non-compliance, which hinders their effectiveness.
• DNFBPs have limited understanding of their AML obligations.
• No suspicious transaction report has triggered a criminal investigation or forfeiture action.

Recommendations to Strengthen Anti-Money Laundering Regime

The report recommended that Tonga:

• Strengthen its framework around confiscation of criminal proceeds
• Improve information sharing between law enforcement agencies and the Financial Intelligence Unit (FIU)
• Consider setting up joint investigation mechanisms into corruption and money laundering
• Build improved capacity for cross-border cooperation in anti-corruption and AML

Tonga’s Commitment to Improving Anti-Corruption Efforts

In response to the report’s findings, Tongan authorities have vowed to take immediate action to strengthen its AML/CFT regime and improve its anti-corruption efforts. The country is committed to working with international partners to build improved capacity for cross-border cooperation in anti-corruption and AML, and to recover the proceeds of corruption located abroad.

Conclusion

The report’s recommendations are aimed at helping Tonga to improve its ability to detect, prevent, and prosecute money laundering and corruption-related crimes, and to effectively confiscate criminal proceeds. The country’s commitment to implementing these recommendations is crucial to preventing further corruption and ensuring that its financial system remains secure.