In a scenario which can only truly be described using the words 'sledgehammer', 'crack', and 'nut', the Financial Action Task Force (FATF) announced on Wednesday that Nauru, the world's smallest independent republic, would be the first country to face sanctions from the OECD's 29 member countries.
Nauru, which covers an area of just 8 square miles and has a population of 12,000, was once prized by Australian businesses for its rich reserves of phosphate, but as supplies have dwindled, the island has been forced to seek alternative sources of income. This has resulted in the establishment of an offshore financial centre, home to around 400 banks.
The island jurisdiction was censured earlier this year, alongside Russia and the Philippines, for failing to adequately control money laundering practices taking place through the financial sector, and the US Treasury Department has estimated that in the year 1990, around $70 billion in illicit funds left Russia for Nauru.
In August, responding to inclusion on the second FATF blacklist of 'uncooperative' countries, Nauru President Rene Harris promised that his government would crack down on money launderers and tax evaders, blaming 'undesirable elements' for breaches in the republic's banking sector. However, despite the establishment of an independent regulatory body to supervise the finance industry, Nauru is soon set to become the first country to face economic sanctions.
According to the FATF, action which may be taken in the wake of Wednesday's decision includes preventing Nauru's banks and financial institutions from winning any new banking licenses in OECD member countries, and issuing government warnings about the risks of doing business with institutions in Nauru.
It is thought that the island's government will issue a response to the FATF announcement some time today.
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