Tonga’s Money Laundering and Corruption Risk: A Looming Threat

Kuala Lumpur - The tiny Pacific nation of Tonga is facing a significant risk of money laundering and corruption, with millions of dollars in criminal proceeds being laundered through purchases of houses or vehicles, payment of private school fees or donations to churches.

Deficiencies in Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Regime

According to a recent report, there is limited evidence of criminal proceeds being sent overseas or foreign proceeds of crime transferred to Tonga. However, the report highlights several deficiencies in the country’s AML and CFT regime.

• The Transaction Reporting Agency (TRA), responsible for monitoring financial transactions, lacks access to tax information and resources, making it difficult to effectively use financial intelligence to support investigations.
• While the MLPCA and MLPC Regulations contain customer due diligence and reporting requirements for financial institutions and cash dealers, Designated Non-Financial Businesses and Professions (DNFBPs) are only covered by the MLPCA. This lack of coverage has led to inadequate implementation of preventive measures.

Capacity Building and Outreach

The report also notes that while Tongan authorities have a limited understanding of AML obligations among DNFBPs, there is a lack of outreach to these entities on reporting requirements. To address this concern, the report recommends building capacity for cross-border cooperation in anti-corruption and AML efforts.

Confiscation Regime

The report highlights that the country’s confiscation regime is limited, with only cash seizures having been made in drug-related cases. Authorities have yet to restrain or confiscate assets related to other predicate offences, such as corruption, due to challenges in conducting financial investigations.

Recommendations

To address these concerns, the report recommends:

• Reviewing customer due diligence requirements to ensure alignment with international standards.
• Strengthening the framework around confiscation of criminal proceeds.
• Ensuring the Financial Intelligence Unit (FIU) is adequately staffed, resourced, and trained.
• Improving information sharing between the FIU and anti-corruption agencies.
• Building improved capacity for cross-border cooperation in anti-corruption and AML efforts.

Conclusion

Tonga’s money laundering and corruption risk is a serious concern that requires immediate attention. The country must take concrete steps to address these issues, including strengthening its AML regime, improving financial intelligence, and enhancing cross-border cooperation. Failure to do so could have severe consequences for the country’s financial stability and reputation.