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Westpac pulls banking out of Nauru

Friday 15 April 2016 | Published in Regional


NAURU – One of Australia’s biggest banks has told the Nauru Government it will no longer do business with it or any of its entities.

The Westpac bank has also told its Australian customers who do business with the Nauru Government that they will have to close their accounts by the end of the month.

Early last month Westpac sent letters to customers who had business with the Nauru government.

The customers were informed they would have to close their accounts by the April 30 as the bank was no longer doing business with the Nauru government or any of its entities.

A source who has seen the letter, and who wants to remain anonymous, said Westpac acted after concerns were raised by the bank’s anti-money laundering and counter-terrorism financing experts.

The ABC understands the bank wrote to the Nauru government informing it of its intentions.

A Westpac spokeswoman did not deny the bank’s decision to severe ties with the Nauru was withdrawing from the tiny Pacific nation but declined to comment citing privacy concerns.

Westpac’s move to severe ties with the Nauru government will only affect Nauru government accounts and a handful of business entities.

The decision will not effect regular customers who make banking transactions to Nauru.

The Nauru government dismissed the reports of Westpac’s withdrawal as “misleading”, “politically motivated” and “fabricated”.

In a statement released on Thursday night the government said Westpac’s departure was part of a wider trend.

“The business relationship Nauru had with its former banking partner was severed when the bank withdrew financial services to not only Nauru, but nearly all of the Pacific small island states,” the statement.

“Unfortunately this has become the norm with a number of smaller higher risk and low turnover nations worldwide as large banks chase profits and abandon services to long established customers.

“Nauru in conjunction with its Pacific nation friends will continue to work with its global support families to reverse this trend.”

However, former Nauru president, opposition MP Marcus Stephen has expressed shock at the move by Westpac bank.

“We have been with Westpac since day one when we were under Australian administration and I believe there would be a lot of people that would be affected by this,” he said.

Stephen has called on the government to tell people what is going on.

“It’s really disappointing to hear that this has happened,” he said. “I think the government has a lot of explaining to do not only to the parliament but to the people and explain why this has happened.

“To my knowledge this is the first time that an Australian bank has taken such strong action.

“Nauru was on an international money laundering blacklist in 2001-2002 and even then the action wasn’t as strong.

“It must be a sign that Westpac feels that there’s something pretty wrong going on in Nauru.”

Money laundering and tax evasion expert from Griffith University, Professor Jason Sharman, said while Westpac’s move was directed at the current government, Nauru had a long history questionable financial dealings.

“Nauru really got itself into trouble setting up somewhere between 200 and 400 shell banks around about 15 years ago and some of them were implicated in a very big scandal to do with the Bank of New York,” Professor Sharman said.

“As a result Nauru was really stigmatised and subject to international sanctions at that time.

“I think the immediate question will be, well, what does Westpac know that we don’t and Australian banks tend to be a risk-averse bunch.

“So particularly when you have one bank pulling out because of the provisions of Australian anti-money laundering law it immediately creates pressure on other banks and financial institutions to start asking hard questions about their links or even just pre-emptively severing them in what’s been called de-risking.”

News of Westpac’s move came only a few days after Nauru became a member of the International Monetary Fund and World Bank.

Nauru Finance Minister David Adeang was in Washington this week to sign the admission documents and posed for a photo with the IMF’s managing director, Christine Lagarde.

In a statement, President Baron Waqa trumpeted his country’s entry into the two organisations.

“This shows just how far my administration has come in showing the world that we are now a fiscally mature and responsible economy, free of the burdens of past governments,” Waqa said.

The Bendigo Bank is the only Australian bank with a physical presence in Nauru after opening a local agency last year.

In a statement, Bendigo Bank said was monitoring strategies in place to prevent, detect and react to suspicious activity.