Wed, Sep 05, 2018 - Page 13 News List

Nauru: From riches to rags

The once-wealthy island now barely survives on income from Australia’s detention regime and is pinning its economic hopes on undersea mining

The Guardian

An estimated US$70 billion in Russian mafia money went through Nauru’s banks in 1998 alone.

In 2002, the US treasury designated Nauru as a money-laundering state, alongside Ukraine, and imposed tough sanctions rivalling those slapped on Iraq.

“Nauru is notorious for permitting the establishment of offshore banks with no physical presence in Nauru or in any other country,” the US treasury said. “These banks maintain no banking records that Nauru or any other jurisdiction can review.”

SETTING THE SHIP STRAIGHT

The Financial Action Task Force (FATF), a global body that works to eliminate tax havens, has been working with Nauru to walk back from its foray into the wild west of finance.

By 2004 Nauru had passed anti-money laundering and terrorist financing laws and the offshore banking sector seems to have disappeared as fast as it arrived.

As of 2012, when the FATF reviewed Nauru, there were only 59 corporations registered under Nauru law, with a number of those pending for being struck off the registry. Fewer than five corporations per year have been registered over the past five years. In the past 10 years no new trust company licenses have been issued, although 15 unit trusts have been formed under the 11 existing unit trust licenses.

However, it remains a secretive destination and learning anything about Nauru’s corporate sector remains difficult. There is no corporations registry online, and Web sites advertising tax havens still list Nauru as an option.

In 2016, Westpac pulled out of providing banking on Nauru, citing concerns about compliance with international money-laundering regulations in a letter to customers. The only bank on the island is the Bendigo Bank, which opened in 2015.

A few weeks ago the finance minister, David Adeang, announced that Nauru was fully compliant with the European Commission’s tax and financial security regulations, and had been removed from its gray list, although the EU has not yet published a formal statement.

SAVED BY REFUGEES

Nauru’s economy has also improved since 2013, thanks to one industry: refugee detention and processing for Australia.

The first Nauru offshore detention experiment began in 2001, after the Tampa crisis. This was the catalyst for Australia to set up the camps in Nauru and Papua New Guinea.

It ran until 2007. The camp was bedeviled by problems: overcrowded tents and a shortage of water were the most pressing. Slowly it was established that, overwhelmingly, those who had come by boat were not “queue jumpers” or criminals or terrorists but rather people fleeing genuine persecution and who were owed protection. Most were resettled, and mostly in Australia.

Nauru’s second iteration as an isle of detention, instituted by a Labor government and carried on with unswerving determination by the current Liberal-National Coalition government, began in 2012.

The problems are undiminished. But the second Nauru detention regime, now formally replaced with a resettlement program on the island, has been kept carefully hidden. Foreign journalists — save for a handful of selected reporters — are forbidden entry to the island.

The financial cost has been enormous. Last year, Senate committee was told Australia’s offshore immigration detention program had cost the federal government at least US$5 billion since 2012.

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