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Thursday, 20 June 2002
Page: 4109


Mr WILLIAMS (Attorney-General) —On 6 June 2002 (Hansard page 2950) Mr McClelland asked the following question without notice:

Can the Attorney confirm that the Secretary of the Asia-Pacific Money Laundering Secretariat has claimed that Nauru's laws allow money laundering by organised criminals, people smugglers and terrorists, saying:

“Until Nauru has a full and comprehensive law in place and other anti-money laundering standards and measures.... it will be a vulnerable place for money laundering and it will be attractive to money launderers”.

Given that Australia provides substantial financial aid to Nauru, what action has the government taken since September 11 of last year to ensure that Nauru closes down these arrangements?

The answer to the honourable member's question is as follows:

I can confirm that in response to a question from an ABC journalist, who asked whether, in the absence of appropriate measures against money laundering in Nauru, does it mean that it is possible that money could be laundered through Nauru to terrorist organisations, the Head of the Asia-Pacific Money Laundering Secretariat did make the above statement on 6 June 2002.

The lack of adequate legislation and banking supervision in Nauru has been a matter of concern to the international community for some time. The Financial Action Taskforce on Money Laundering (FATF), of which I previously said Australia is a very active member, had identified Nauru in 2000 as being a `non-cooperative country' in respect of the fight against money laundering. In August 2001 the FATF set a deadline of 30 November 2001 for Nauru to enact suitable anti-money laundering legislative amendments or otherwise countermeasures would be applied.

Officers of my Department provided advice to Nauru, through the Department of Foreign Affairs and Trade, on possible legislative amendments and offered further assistance, if required, prior to the FATF deadline.

The deadline was not met and members of the FATF subsequently applied counter measures. In implementing the FATF countermeasures, Australia, through the Australian Transaction Reports and Analysis Centre(AUSTRAC) is reviewing all transactions reported which refer to Nauru, including all international funds transfer instructions to and from Nauru. Instructions were issued to cash dealers in January 2002.

Despite the enactment of new legislation on 6 December 2001, in considering the status of Nauru in January 2002, the FATF determined that Nauru had not adequately addressed the deficiencies found in the process of licensing, regulation and supervision of its offshore banking sector. The FATF, as does Australia, remains committed to working with Nauru to address the outstanding issues.

While Australia is prepared to assist Nauru with advice on the operation and regulation of its offshore banking sector, the decision to maintain financial arrangements such as `shell banks', is ultimately one for the Republic of Nauru. (For information, US correspondent accounts with foreign shell banks are now prohibited under the USA Patriot Act 2001.)

However, the Nauru delegation to the Asia Pacific Group on Money Laundering on 7 June 2002 stated that they hoped “to strengthen our legal and administrative framework in combating money laundering by developing plans with the technical assistance from Australia, the Commonwealth Secretariat and other international organizations”.