Financial Crime World

Tonga Takes Steps to Combat Money Laundering and Corruption

The Pacific island nation of Tonga has reaffirmed its commitment to tackling the interlinked threats of money laundering and corruption, as outlined in the country’s vision for 2021. In this article, we examine the progress made by the Tongan government in addressing these issues and identify areas that require further attention.

Strengthening Anti-Money Laundering Framework

Tonga has a robust anti-money laundering (AML) legal framework, comprising several laws and regulations. The primary legislation is the:

Money Laundering and Proceeds of Crime Act 2000

  • Has undergone amendments in 2010 to enhance its provisions
  • Provides a solid foundation for Tonga’s AML efforts

Additionally, the country has implemented regulations such as:

Counter Terrorism and Transnational Organised Crime Act 2013

  • Enhances Tonga’s ability to prevent and combat terrorism and transnational organized crime

Mutual Assistance in Criminal Matters Act 2000

  • Facilitates cooperation between Tongan authorities and their international counterparts in combating money laundering and corruption

Institutional Frameworks and Financial Intelligence Units

Several institutions share the responsibility of monitoring and enforcing Tonga’s AML framework, including:

Financial Intelligence Unit (FIU)

  • Responsible for analyzing financial information to prevent money laundering
  • However, there are concerns about the effectiveness of the FIU in using financial intelligence to support investigations and trace criminal proceeds

Law Enforcement Agencies

  • Such as the police play a crucial role in enforcing Tonga’s AML regulations

Customer Due Diligence Requirements

Tonga’s AML regulations require:

Financial Institutions and Cash Dealers

  • To implement customer due diligence measures
  • However, there is a gap in the framework for Designated Non-Financial Businesses and Professions (DNFBPs)

MLPC Regulations

  • Aim to enforce risk-based customer due diligence requirements
  • Lack sanctions or penalties for non-compliance

Capacity Building and Collaboration

Tonga faces significant challenges in addressing money laundering and corruption, including:

Limited Resources and Capacity

  • Essential that all stakeholders collaborate to address these issues, including legislatures, supervisory bodies, law enforcement, and the private sector
  • Consider setting up joint investigation mechanisms into corruption and money laundering

Recommendations

Based on the findings of a recent report, we recommend that Tonga:

  1. Review customer due diligence requirements to ensure alignment with international standards.
  2. Strengthen the framework for confiscating criminal proceeds and use this framework effectively.
  3. Ensure the FIU is adequately staffed, resourced, and trained to analyze corruption-related financial information.
  4. Improve information sharing between the FIU and anti-corruption agencies to maximize the use of reports collected in corruption investigations.
  5. Build capacity for cross-border cooperation in anti-corruption and AML.

By implementing these recommendations, Tonga can strengthen its efforts to combat money laundering and corruption, ultimately protecting its financial system and promoting economic stability.