Money Laundering Penalty Eyed for Nauru
WASHINGTON (AP) _ The Treasury Department is proposing to apply one of its harshest penalties to punish the tiny Pacific island Nauru for money laundering activities: cutting off the country’s financial institutions from the U.S. banking system.
The department announced Tuesday that it was moving forward on a proposed rule that would bring this about.
If the measure ultimately is adopted, it would mark the first time the United States has used the power provided under the 2001 USA Patriot Act.
In December, Treasury designated Nauru a ``primary money laundering concern″ because it had not acted to combat the problem. At the same time, Treasury said it intended to impose the tough measure, which was proposed Tuesday.
Nauru is an island of less than 8 1/2 square miles and about 12,325 people, 26 miles south of the Equator in the Pacific Ocean. Its only industry is phosphate mining, and its reserves are almost depleted.
The measure would block Nauru’s institutions from the U.S. financial system by closing corresponding accounts with U.S. banks, securities dealers, mutual fund providers and others. Foreign banks and financial institutions use such accounts to do business in this country.
The 2001 USA Patriot Act broadened the government’s powers to go after money launderers and terror financiers.
Nauru is on the Financial Action Task Force’s list of countries that have failed to combat money laundering. The multinational task force is part of the Paris-based Organization for Economic Cooperation and Development.
Money laundering involves movement of profits from drug or arms trafficking, political corruption, prostitution and other illegal activities through a series of accounts or businesses to disguise them as proceeds of legitimate business.
The U.S. government also uses rules designed to control money laundering as a way to prevent people or groups from bankrolling terrorist activities.
Tuesday’s proposal by the Treasury Department is subject to public comment before any final action would be taken.
Also Tuesday, Treasury announced that it was removing the designation of a ``primary money laundering concern″ from Ukraine. Ukraine and Nauru were the only two countries for which the designation had been used under the 2001 Patriot Act.
``The Ukraine has taken important steps to improve their antimoney laundering regime,″ Treasury said. Still, the country remains on the OECD task force’s blacklist.
On the Net: Treasury Department: http://www.ustreas.gov/