U.S. Designates Sanctions Against Ukraine and Nauru for Lack of Anti-Laundering Laws

On December 20, 2002, the U.S. Department of the Treasury issued a notice advising the public that it designated Nauru and Ukraine as primary money laundering concerns pursuant to 31 U.S.C. § 5318A, as added by Sec. 311 of the USA PATRIOT Act of 2001. The Treasury has asked for comments during a 30 day period. The Treasury notice advises that it intends to impose the special measure in 31 U.S.C. § 5318A (b)(5), which will forbid financial transactions by U.S. financial institutions with any Nauru licensed institution, exception the Bank of Nauru (its Central Bank), unless otherwise excepted. 31 U.S. & 5318A (a)(2)(C) requires Treasury to impose this requirement by promulgation of a rule. Treasury intends to start a rulemaking shortly. Treasury explains that the reason it designated Nauru is its issuance of approximately 400 licenses for offshore banks with not physical presence in Nauru or in any other country, their maintenance of no bank records that Nauru or any other jurisdiction can review, and the cursory and wholly inadequate review of the entities obtaining offshore banking licenses, and the absence of any credible on-going supervision. Nauru requires its offshore banks not to engage in economics transactions involving either the currency of Nauru (currently the Australian dollar) or its citizens or residents. Hence, the offshore banks have no apparent legitimate connection with economy or business activity of Nauru. The only bank that seems to be physically located in Nauru is the Bank of Nauru, a local community bank that also serves as the Central Bank.