Financial Crime World

Tonga’s Economy Heavily Reliant on Subsistence Agriculture, Donor Aid and Remittances

======================================================

Tonga faces significant challenges in combating money laundering (ML) and terrorist financing (TF), according to a recent report by the Asia-Pacific Group (APG). The country’s economy is heavily reliant on subsistence agriculture, donor aid, and remittances from its diaspora community.

Outdated Risk Assessment

The APG report highlights that Tonga’s ML/TF risk assessment is outdated, with much of the information collected in 2015 being out-of-date by 2019. The lack of critical information on regional stakeholders and partners has also affected the reasonableness of Tonga’s risk understanding.

Shortcomings in Understanding ML Risks

The report highlights several shortcomings:

  • A mixed understanding of ML risks among competent government authorities, law enforcement agencies (LEAs), and private sector entities.
  • Many entities display a lack of understanding of risks across predicate crimes and within their own sectors.

National AML/TF Policy 2018-2022

Tonga’s National AML/TF Policy 2018-2022 was endorsed by Cabinet, but some priority areas were not included, such as increasing the allocation of resources to the Tonga Revenue Authority (TRA) to enable comprehensive risk-based supervision.

Recommendations for Improvement

The report recommends that Tonga:

  • Improve its ML/TF risk assessment by updating information and consulting with regional stakeholders and partners.
  • Increase resources allocated to AML/CFT supervision to enable comprehensive risk-based supervision.
  • Enhance coordination among government agencies and with regional stakeholders and partners.
  • Diversify its economy to reduce reliance on subsistence agriculture, donor aid, and remittances.

Key Recommendations

1. Improve ML/TF Risk Assessment

  • Update information
  • Consult with regional stakeholders and partners

2. Increase Resources for AML/CFT Supervision

  • Allocate more resources to TRA for comprehensive risk-based supervision

3. Enhance Coordination

  • Among government agencies
  • With regional stakeholders and partners

4. Diversify Economy

  • Reduce reliance on subsistence agriculture, donor aid, and remittances

Conclusion

The APG report highlights the need for Tonga to take a proactive approach to addressing ML/TF risks and improving its AML/CFT framework. The country needs to prioritize this issue to ensure its economic stability and security.