South Pacific country fails to make sufficient changes to banking laws to escape FATF measures
The Financial Action Task Force (FATF) has imposed anti-money laundering measures on Nauru, a small country in the South Pacific, following its failure to make changes to its banking laws.
Nauru, the Philippines and Russia were given a 30 November deadline to make legislative amendments. Russia and the Philippines took action but are still on the FATF list of countries under investigation.
Nauru enacted the Anti-Money Laundering Act on 28 August 2001, but according to Helen Fisher, a spokeswoman for the Organisation for Economic Co-operation and Development (OECD), sufficient measures were, 'A ' not in place and B ' not in force.'
Despite the August act, Nauru still has several deficiencies in its legislation, according to Patrick Moulette, executive secretary of the FATF.
'Most importantly the legislation does not cover the offshore sector,' he said. 'Penalties for money laundering offences are also extremely lenient by international standards.'
Action against Nauru will include:
• Stringent requirements for identifying beneficial owners before business relationships are established with individuals or companies.
• Increasing the reporting burden of financial transactions on the basis that transactions with such countries are more likely to be suspicious.
• When considering requests for approving the establishment in FATF member countries of subsidiaries or branches or representative offices of banks, taking into account that the relevant bank is from a non-cooperating country.
• Warning non-financial sector businesses that transactions with entities within the country might run the risk of money laundering.
• Recommendation 21, which applies to all countries on the FATF money laundering list, will also be applied to Nauru. It says that financial institutions should give special attention to business relations and transactions with people, including companies and financial institutions, from countries that do not or insufficiently tackle money laundering.
The FATF is hoping these measures will force Nauru into line.
'Financial institutions are going to be extremely cautious when dealing with Nauru,' said Fisher. 'If financial institutions in other countries do not deal with them it will have a major effect.'
The FATF lacks legal authority to take action against Nauru, but member countries will take their own measures based on FATF recommendations.
According to Moulette, there are rumours of action already being taken in Nauru. 'We have heard that very recently Nauru passed further legislation to react to the decision of the FATF,' he said.
This information has not been confirmed but in any case, even if Nauru meets FATF anti-money laundering measures, it will, 'stay on the list until we are sure legislation is in place and being acted on,' according to Fisher.
The FATF will follow the situation in Nauru and reassess action against the country at its next plenary meeting in Hong Kong, from 30 January to 1 February 2002.
Other countries on the investigation list include The Cook Islands, Egypt, Guatemala, Indonesia, Lebanon, Ukraine, Myanmar, Nigeria, Philippines, St Kitts and Nevis, Dominica, Grenada, Hungary, Israel, Marshall Islands, Nauru, Niue, Russia and St Vincent and the Grenadines.
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