Financial Crime World

Assessment of Tonga’s Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) Measures

Regulatory Framework

Tonga’s Money Laundering Prevention and Control Act (MLPC Act) does not provide sufficient penalties or sanctions for non-compliance with regulations, making it challenging to enforce technical requirements.

  • Weak Enforcement: The lack of penalties or sanctions hinders the effective enforcement of AML/CFT regulations.
  • Difficulty in Compliance: The absence of clear consequences for non-compliance creates difficulties for businesses and individuals to adhere to AML/CFT regulations.

Effectiveness

Tonga has low levels of effectiveness across most areas, except one (IO.2), due to various factors such as:

  • Inadequate Training and Expertise: Competent government authorities and private sector entities lack adequate training and expertise in AML/CFT issues.
  • Insufficient Resources: There is a shortage of resources allocated to AML/CFT issues, hindering the effective implementation of regulations.

Risk Assessment and Co-ordination

Tonga has minor shortcomings with AML/CFT policies and co-ordination. However, there are moderate shortcoming on assessing risk and applying a risk-based approach:

  • Limited Understanding of ML/TF Risks: Competent government authorities and private sector entities have a limited understanding of money laundering (ML) and terrorism financing (TF) risks.
  • Need for Fundamental Improvements: There is a need for fundamental improvements in understanding ML/TF risks, policy, and co-ordination.

National Risk Assessment (NRA)

The NRA was adopted in October 2019 but has several shortcomings:

  • Out-of-date Information: Much of the information collected for the NRA was out-of-date by the time of its adoption.
  • Lack of Consultation: There has been no consultation across agencies and the private sector since the adoption of the NRA.

Risk Understanding

Tongan authorities did not consult systematically and regularly with regional stakeholders and partner organizations, affecting the reasonableness of Tonga’s risk understanding:

  • Inadequate Collaboration: The lack of collaboration with regional stakeholders and partner organizations hinders the development of a comprehensive understanding of ML/TF risks.

Terrorism Financing (TF) Risk

The NRA assesses TF as a “low” risk, but there appears to be some confusion in relation to this rating:

  • Contradictory Statements: The National AML/CFT Policy states that “terrorism” is a high-risk predicate crime, contradicting the low-risk assessment.

Understanding of ML Risks

Competent government authorities and private sector entities have a mixed understanding of ML risks, with a focus primarily on predicate crimes:

  • Limited Focus: The focus on predicate crimes hinders a comprehensive understanding of ML risks.

National AML/CFT Policy

The policy was endorsed by Cabinet during the on-site visit but has some shortcomings:

  • Missing Priority Areas: Some priority areas were not included, such as increasing the allocation of resources to the TRA (the AML/CFT supervisor) to enable comprehensive risk-based supervision.