Financial Institutions Urged to Exercise Caution on Nauru Transactions
Warning from the US Treasury Department
Washington D.C. - The US Treasury Department has issued a warning to financial institutions operating in the United States, advising them to exercise enhanced scrutiny on all financial transactions originating in or routed to or through the Republic of Nauru.
Background: Nauru’s Counter-Money Laundering Regime
Nauru, a small South Pacific island nation with a population of approximately 10,600, has sought to establish itself as an offshore financial center. However, its counter-money laundering regime is plagued by serious systemic problems, including:
- Lack of regulation and supervision
- Money laundering not being a criminal offense in Nauru
- Offshore banks licensed by the country are not required to obtain identification information from customers or maintain customer identification or transaction records
- Concerns that the Nauruan Agency Corporation (NAC), which licenses offshore banks, may not be capable of properly supervising the sector
FATF Designation: Non-Cooperative in Fight Against Money Laundering
As a result of these deficiencies, Nauru has been identified as non-cooperative in the fight against money laundering by the Financial Action Task Force on Money Laundering (FATF). Despite this, Nauru has indicated an awareness of its counter-money laundering deficiencies and is considering legislative changes to remedy them.
US Financial Institutions: Exercise Caution
US financial institutions are advised to carefully examine any transactions originating in or routed through Nauru, or involving entities organized or domiciled in the country. Institutions subject to the Bank Secrecy Act should report suspicious transactions to the relevant authorities.
The US Treasury Department will consider reports relating to such transactions as valid under the “safe harbor” provisions of the law, which protect financial institutions from liability for reporting suspicious transactions.
Technical Assistance from the US Treasury Department
The Treasury Department is ready to provide technical assistance to Nauruan officials as they work to improve their counter-money laundering systems.