Financial Crime Investigation Process Under Scrutiny in Niue: US Treasury Issues Advisory

The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning financial institutions operating in the US to exercise enhanced scrutiny when dealing with transactions involving Niue, a small island nation in the South Pacific.

Niue’s Financial Sector Plagued by Systemic Problems

Niue, which relies on New Zealand for external affairs, has been identified by the Financial Action Task Force on Money Laundering as non-cooperative in the fight against money laundering. The country’s financial sector, comprising one domestic bank, one offshore bank, and over 3,000 International Business Companies (IBCs), is plagued by systemic problems.

Lack of Resources and Supervision

• Niuean government lacks resources to effectively supervise and regulate its financial institutions.
• Foreign private sector interests take on these responsibilities without clear effectiveness.
• No ongoing supervision of licensed offshore banks.
• Financial institutions are not prohibited from issuing anonymous accounts or reporting suspicious transactions.

IBCs Operating Under Strict Secrecy Laws

• IBCs operate under strict secrecy laws, making it difficult for authorities to identify beneficial owners, directors, or managers unless compelled by the courts.
• Niuean Cabinet has the power to exempt institutions from any or all requirements of the country’s financial laws, with no possibility of challenging such decisions through other procedures.

Deficiencies in Counter-Money Laundering Program

The deficiencies in Niue’s counter-money laundering program have created significant opportunities for criminals to launder and protect illegal proceeds. As a result, FinCEN is advising US banks and other financial institutions to give enhanced scrutiny to transactions involving Niuean entities or accounts.

Reporting Requirements

• Financial institutions subject to the suspicious transaction reporting rules should carefully examine the facts of such transactions to determine if they require reporting under those rules.
• Those not yet subject to specific reporting rules should consider these transactions in relation to their reporting obligations under other applicable laws.

No Curtailment of Legitimate Business

The advisory does not mean that US financial institutions should curtail legitimate business with Niue, but rather exercise enhanced due diligence when dealing with transactions involving the country. The Treasury Department will consider reports of suspicious transactions related to Niuean transactions as relevant to possible violations of law or regulation.

Technical Assistance Offered

US officials are ready to provide technical assistance to Niuean authorities as they work to remedy the deficiencies in their counter-money laundering systems.