Nauru in deep FATF water

Nauru, the tiny Pacific island with a population around 12,000 and 400 offshore banks, is the first jurisdiction to fall completely foul of the Financial Action Task Force’s naming and shaming initiative against non-cooperative countries and territories (NCCTs). On 5 December, the FATF announced that its members will apply counter-measures against Nauru that it agreed in June this year. These responses go beyond Recommendation 21 which advises financial institutions to “give special attention” to transactions conducted with parties from countries with inadequate anti-laundering regimes. FATF members will now engage in “enhanced surveillance and reporting” of financial transactions and, in moves that it says should be “gradual, proportionate and flexible”, they will consider: enhancing identification requirements for clients from Nauru; issuing advisories on establishing beneficial ownership before entering business relationships with parties from Nauru; possible systematic reporting of transactions with Nauru; they will scrutinise with extra care any applications by banks from Nauru to establish branches in their jurisdiction; and look at warning non-financial sector firms about the risk of money laundering in dealings with Nauru.