RESEARCH: Kiribati General Regulatory Framework for Virtual Assets and Sanctions Compliance

International Obligations and Standards

• UN Security Council Resolutions (UNSCRs): As a UN member state, Kiribati is obligated under international law to implement targeted financial sanctions related to terrorism, terrorist financing, and proliferation financing. This obligation is codified domestically in the Anti-Money Laundering and Countering the Financing of Terrorism Act 2018, Section 44, which mandates the freezing of assets based on UN Security Council Resolutions. UN Charter, Article 25 – Note: This source confirms the binding nature of UNSCRs on all UN member states, including Kiribati.

• Financial Action Task Force (FATF) Recommendations: Kiribati is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Through this membership, Kiribati is expected to implement FATF Recommendations. FATF Recommendation 15 (New Technologies) and its Interpretive Note explicitly state that Virtual Asset Service Providers (VASPs) are subject to AML/CFT obligations, including targeted financial sanctions. FATF Recommendation 15 and Interpretive Note – Direct link to the FATF Recommendations document; the Interpretive Note to R.15 is contained within. See also FATF Guidance for a Risk-Based Approach to Virtual Assets and VASPs

Domestic Legislation: Kiribati Anti-Money Laundering and Countering the Financing of Terrorism Act 2018

• Anti-Money Laundering and Countering the Financing of Terrorism Act 2018 (AML/CFT Act 2018): This Act provides the legal basis for identifying, freezing, and seizing assets related to terrorism and proliferation, and for reporting suspicious activities. It designates a wide range of "financial institutions" and "designated non-financial businesses and professions (DNFBPs)" as reporting entities (Part II, Division 1). The Act does not explicitly name Virtual Asset Service Providers (VASPs) in its current form. However, consistent with Kiribati's commitment to FATF standards through its APG membership, future amendments or guidance are anticipated to clarify their inclusion. AML/CFT Act 2018, Kiribati – Official Kiribati Parliament legislation page; search for "Anti-Money Laundering and Countering the Financing of Terrorism Act 2018". APG Membership List – Confirms Kiribati as an APG member, reinforcing its commitment to FATF standards.

• Terrorism (Suppression of Financing) Act: This Act provides specific definitions and mechanisms for dealing with terrorism and terrorist financing, including the freezing of assets of designated persons and entities. The Act implements UN Security Council Resolution 1267 and 1373 obligations. Terrorism (Suppression of Financing) Act, Kiribati – Same source; search for "Terrorism (Suppression of Financing) Act".

Key Compliance Obligations for Financial Institutions and DNFBPs

• Customer Due Diligence (CDD): The AML/CFT Act 2018, Part III (Sections 14-24), explicitly requires reporting entities to implement customer due diligence procedures, including identifying and verifying the identity of customers and beneficial owners. AML/CFT Act 2018, Part III – Official legislation text.

• Ongoing Monitoring: Section 27 of the AML/CFT Act 2018 requires ongoing monitoring of business relationships, including scrutiny of transactions to ensure consistency with the customer's profile and business risk. AML/CFT Act 2018, Section 27

• Sanctions Screening: While the AML/CFT Act 2018 does not explicitly mandate "screening" as a direct statutory obligation, Section 44 mandates the freezing of assets based on UN Security Council Resolutions. The operational requirement for regular screening of customers, beneficial owners, and counterparties against relevant international sanctions lists (at onboarding and on an ongoing basis) is a necessary implication and best practice for compliance. AML/CFT Act 2018, Section 44

• Automated Tools: There is no specific requirement in Kiribati law for VASPs to use automated screening tools. The claim that "VASPs are encouraged to use automated screening tools" reflects international best practice guidance from FATF and other bodies, not a domestic legislative mandate. For FATF guidance on automated tools: FATF Guidance on Digital Identity – Relevant for technology-based compliance.

• Reporting and Freezing: Section 44 of the AML/CFT Act 2018 mandates the freezing of funds and assets of designated persons/entities. Section 37 requires reporting entities to submit Suspicious Transaction Reports (STRs) to the Kiribati Financial Intelligence Unit (FIU). AML/CFT Act 2018, Sections 37 and 44

International Sanctions Regimes Relevant to Kiribati Entities

• Venezuela (certain entities/individuals): Office of Foreign Assets Control (OFAC) sanctions apply to persons/entities subject to U.S. jurisdiction. Kiribati entities with U.S. links or dealing in U.S. dollars must comply. OFAC Venezuela Sanctions – OFAC official page.

• Russia/Belarus (since the invasion of Ukraine): OFAC, EU, and UK sanctions apply. Kiribati entities engaging with these jurisdictions must screen against respective lists. OFAC Russia Sanctions – OFAC official page. EU Sanctions Map – EU official sanctions map.

Penalties for Non-Compliance

• Kiribati Domestic Penalties: The AML/CFT Act 2018 prescribes penalties for non-compliance:

  • Fines: Section 54(1) provides for fines up to AUD 5 million for body corporates and AUD 500,000 for individuals for serious breaches. AML/CFT Act 2018, Section 54
  • Imprisonment: Section 54(2) provides for imprisonment of up to 5 years for individuals involved in serious breaches, including facilitating terrorist financing. [Same section]
  • Asset Forfeiture: Part VII of the Act provides for seizure and forfeiture of assets related to offenses. AML/CFT Act 2018, Part VII
  • Reputational Damage: Not a statutory penalty, but a practical consequence. The FIU may publish details of enforcement actions. Kiribati FIU – Official FIU website (if available).

• International Penalties (OFAC, EU): Even for non-U.S. or non-EU entities, engaging in transactions that violate OFAC or EU sanctions can lead to:

  • Civil Monetary Penalties: OFAC can impose civil penalties up to the greater of $334,658 per violation or twice the value of the transaction (for U.S. persons). OFAC Civil Penalties
  • Criminal Charges: For egregious violations, criminal prosecution can lead to fines and imprisonment. OFAC Enforcement
  • Inclusion on Sanctions Lists: The entity could be added to OFAC's Specially Designated Nationals (SDN) List. OFAC SDN List
  • Loss of Access: Prohibition from accessing U.S. or EU financial markets and services. OFAC Guidance
  • Correspondent Banking Restrictions: Banks may terminate correspondent relationships due to sanctions risk. FATF Correspondent Banking Guidance

Sources

• UN Charter, Article 25
• FATF Recommendations (including R.15)
• FATF Guidance on Virtual Assets and VASPs
• Kiribati Parliament - Acts (AML/CFT Act 2018 and Terrorism Act)
• APG Members List
• OFAC Venezuela Sanctions
• OFAC Russia Sanctions
• EU Sanctions Map
• OFAC Civil Penalties and Enforcement
• OFAC SDN List
• FATF Guidance on Correspondent Banking