Tonga’s Dependence on Remittances and Aid Masks Underlying Risks

Wellington, New Zealand - Tonga’s reliance on remittances from abroad and international aid has masked underlying risks in its financial system, a new report warns.

Shortcomings in Anti-Money Laundering and Counter-Terrorist Financing Measures

The Asia-Pacific Group (APG) has released a comprehensive assessment of Tonga’s anti-money laundering and counter-terrorist financing measures, highlighting significant shortcomings in the country’s understanding of money laundering and terrorist financing risks. The report found that:

• Tonga’s first Money Laundering/Terrorist Financing National Risk Assessment (NRA), adopted in 2019, is outdated and lacks critical information.
• The assessment was based on data collected as far back as 2015, which has since changed significantly.
• Tongan authorities did not consult systematically with regional stakeholders and partners, including New Zealand and Australia, in preparing the NRA.

Lack of Understanding of Money Laundering Risks

The report highlights a lack of understanding of money laundering risks among competent government authorities, law enforcement agencies, and private sector entities, including banks and designated non-financial businesses and professions (DNFBPs).

“Tonga’s financial system is heavily reliant on remittances from abroad and international aid,” said an APG spokesperson. “However, this dependence masks underlying risks that need to be addressed to ensure the integrity of the country’s financial system.”

Recommendations

The report recommends that Tonga:

• Increase efforts to improve anti-money laundering and counter-terrorist financing national coordination.
• Prioritize increasing the allocation of resources to the Tongan Revenue Authority (TRA) to enable comprehensive risk-based supervision.
• Consult systematically with regional stakeholders and partners, including New Zealand and Australia, in preparing future assessments.
• Improve understanding of money laundering risks among competent government authorities, law enforcement agencies, and private sector entities.

Conclusion

Tonga’s financial system is vulnerable to exploitation by criminal organizations and terrorists due to a lack of understanding of money laundering and terrorist financing risks. The country needs to prioritize addressing these risks and improving its anti-money laundering and counter-terrorist financing measures to ensure the integrity of its financial system.