NAURU ASSET RECOVERY EFFORTS FAIL TO PRODUCE RESULTS, SAY OFFICIALS

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U.S. Treasury Department Proposes New Rules to Combat Money Laundering and Terrorist Financing

WASHINGTON D.C. - April 15, 2003

The U.S. Treasury Department has announced a proposal aimed at combating money laundering and terrorist financing by requiring American financial institutions to sever ties with Nauru’s banking system.

Background: Nauru’s Financial Sector in Crisis

• Nauru’s financial sector has been plagued by problems, including a lack of transparency and effective regulatory oversight.
• The island nation has struggled to recover from the collapse of its phosphate mining industry, which was once the country’s primary source of revenue.

Proposed Rule: Cutting Off Correspondent Accounts

The proposed rule would require U.S. banks and other financial institutions to terminate correspondent accounts held by Nauru-based banks.

• Correspondent accounts: used for transactions between foreign banks and their American counterparts.
• Purpose: limit Nauru’s ability to launder money and finance terrorist activities.

Impact on Financial Institutions

The proposed rule would affect not only Nauru-based banks but also foreign banks that provide services to Nauru financial institutions indirectly.

• U.S. financial institutions affected: depository institutions, securities broker-dealers, mutual funds, and futures commission merchants.

Public Hearing and Comment Period

Written comments on the proposed rule may be submitted within 30 days of its publication in the Federal Register. The Treasury Department has scheduled a public hearing on the matter for May 14, 2003.