Financial Crime World

Cybercrime Epidemic Hits Finance Sector in Nauru, Warns US Treasury Department

The United States Department of the Treasury has issued a warning to banks and financial institutions operating in Nauru, urging them to be on high alert for transactions involving the small South Pacific island nation. This move is part of efforts to combat cybercrime and money laundering.

Nauru’s Weak Anti-Money Laundering Regime

Nauru, with a population of just 10,600, has been identified by the Financial Action Task Force (FATF) as non- cooperative in the fight against money laundering. The country’s weak anti-money laundering regime has created significant opportunities for money laundering and the protection of criminal proceeds.

Offshore Banks Licensed by Nauru

Offshore banks licensed by Nauru are not required to obtain identification information from customers or maintain transaction records, making it an attractive hub for criminal activity.

Lack of Supervision and Enforcement Mechanisms

The lack of supervision and enforcement mechanisms in Nauru’s financial sector has created significant opportunities for money laundering and the protection of criminal proceeds. The country’s commitment to bank secrecy also increases the risk that transactions involving Nauruan offshore entities and accounts will be used for illegal purposes.

Enhanced Scrutiny Required

As a result, banks and financial institutions operating in the US are advised to give enhanced scrutiny to any transaction originating in or routed through Nauru, or involving entities organized or domiciled in the country. This includes carefully examining available facts relating to such transactions to determine if they require reporting under the Bank Secrecy Act.

Technical Assistance Offered

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

Important Notes

  • The issuance of this advisory does not mean that financial institutions should curtail legitimate business with Nauru, but rather that they must be vigilant in detecting and reporting suspicious activity.
  • Banks and financial institutions operating in the US are advised to exercise enhanced due diligence when dealing with transactions involving Nauru.