On-shore VASP in Nauru

Nauru Financial Services Authority Act 2017: Establishes the NFSA.

Securities Act (e.g., Securities Act 1974): Defines what constitutes a "security." Finding a publicly accessible, definitive current version of Nauru's Securities Act is challenging, but its existence is implied by the NFSA's mandate.

Anti-Money Laundering and Counter-Terrorism Financing Act 2017 (AML/CTF Act 2017): While not about securities classification, this is crucial for all virtual asset service providers (VASPs) and virtual assets in Nauru, requiring them to comply with AML/CTF obligations.

Registration/Prospectus Requirements: Issuers would likely need to register the offering with the NFSA and/or publish a prospectus or offering document providing full disclosure to potential investors. This is to ensure investor protection and market transparency.

Licensing: Individuals or entities involved in the issuance, distribution, or advising on securities (including security tokens) may need to be licensed by the NFSA as financial service providers (e.g., brokers, dealers, investment advisers).

Licensed Platforms: Platforms (exchanges) facilitating the trading of security tokens would likely need to be licensed by the NFSA as securities exchanges or trading facilities.

Anti-Money Laundering and Counter-Terrorist Financing Act 2019: This Act sets out the preventive measures for financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs), including customer due diligence, suspicious transaction reporting, and record-keeping. It is the most direct piece of legislation for prudential AML/CFT obligations.

Identification and Verification:

For individuals: Obtain and verify identity using reliable independent source documents, data, or information (e.g., government-issued ID, proof of address).

For legal entities/arrangements (e.g., companies): Obtain and verify the entity's name, legal form, proof of existence, powers governing the entity, and identity of individuals holding senior management positions.

Beneficial Ownership: Identify and take reasonable measures to verify the identity of the beneficial owner(s) of customers, including understanding the ownership and control structure of legal persons.

Ongoing Due Diligence: Conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the VASP’s knowledge of the customer, their business, and risk profile.

Enhanced Due Diligence (EDD): Apply EDD measures for high-risk customers, relationships, or transactions (e.g., politically exposed persons (PEPs), cross-border correspondent relationships, complex transactions).

Reporting Obligation: Immediately report any transaction (or attempted transaction) that is suspected to be related to money laundering, terrorist financing, or other criminal activity.

No Tipping-Off: Prohibit the VASP, its directors, officers, or employees from disclosing to the customer or third parties that an STR has been filed (tipping-off).

Training: Provide regular training to employees on their STR obligations and how to identify suspicious activities.

Customer Records: All records obtained through CDD, including identification data, beneficial ownership information, and account files.

Transaction Records: Records of all domestic and international transactions, sufficient to reconstruct individual transactions.

STRs: Copies of all suspicious transaction reports filed.

Retention Period: Records must typically be retained for at least five (5) years after the business relationship has ended or after the date of an occasional transaction.

Nauru Financial Intelligence Unit (NFIU): The NFIU is the central agency responsible for receiving, analyzing, and disseminating financial intelligence reports, including STRs, and for overseeing compliance with AML/CFT obligations across relevant sectors.

Proceeds of Crime Act 2016 (as amended): This is the core legislation defining money laundering offenses, confiscation of proceeds of crime, and establishing the Nauru Financial Intelligence Unit (NFIU).

Crimes Act 2016: Addresses serious crimes, including terrorism financing.

Financial Transactions Reporting Act 2016 (as amended): Governs the reporting of financial transactions to the FIU.

Asia/Pacific Group on Money Laundering (APG) - Nauru Member Profile and Mutual Evaluation Reports: The APG website is the best place to find authoritative information on Nauru's AML/CFT framework and its compliance status.

Small Jurisdiction: Nauru is one of the world's smallest nations. Its financial sector is very limited, and the scale of cryptocurrency activity and the potential for "significant" violations (in terms of public reporting) is extremely low compared to larger economies.

Limited Public Disclosure: Even if minor enforcement actions occurred, small island nations often do not have robust public disclosure frameworks for financial enforcement to the same extent as major financial hubs.

Regulatory Capacity: While Nauru has a financial intelligence unit (FIU) and participates in global anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts (e.g., through the Asia/Pacific Group on Money Laundering - APG), its regulatory capacity and enforcement resources are constrained.

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Important Nuance: However, if a person or entity is deemed to be trading in cryptocurrencies as a business, or if the activities constitute a profit-making scheme, the gains derived could potentially be treated as ordinary income and subject to income tax (see below). The distinction between "investor" and "trader" is crucial and would depend on the facts and circumstances (frequency of transactions, intent, business-like nature of activities).

None Identified: As of the latest available information, Nauru does not have any specific tax legislation or amendments explicitly designed to address cryptocurrency or virtual assets. The existing general tax laws are applied.

Nauru Goods and Services Tax (GST) Act 2014: Nauru imposes a Goods and Services Tax (GST) on taxable supplies of goods and services.

Reference: While a direct URL for a Nauru-specific follow-up report on VA/VASP isn't always individually published, the progress is summarized in APG Annual Reports and within the APG's ongoing follow-up process for Nauru. The primary source for Nauru's AML/CFT framework and APG reports is the APG website: https://www.apgml.org/members/detail.aspx?id=63 and the Nauru Financial Intelligence Unit (NFIU) website (though it may have limited public resources).

Reference: While a direct public link to the very latest consolidated Nauru AML/CFT Act may be challenging to find online, the Nauru Financial Intelligence Unit (NFIU) would be the primary authority.