Peer Review of the Automatic Exchange of Financial Account Information 2024 Update

Nauru

Overall findings

Nauru’s legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While Nauru’s international legal framework to exchange the information with all of Nauru’s Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has deficiencies significant to the proper functioning of elements of the AEOI Standard. More specifically, the deficiencies relates to the approach to non-Participating Jurisdictions and the enforcement framework.

The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.

Overall determination on the legal framework: In Place But Needs Improvement

Conclusions on the legal framework

General context

Nauru commenced exchanges under the AEOI Standard in 2018.

In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Nauru:

• enacted the Automatic Exchange of Financial Account Information Act 2016; and

• introduced the Automatic Exchange of Financial Account Information Regulations 2017.

Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.

With respect to the exchange of information under the AEOI Standard, Nauru is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017.

Detailed findings

The detailed findings for Nauru are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (www.oecd.org/tax/transparency/documents/aeoi-terms-of-reference.pdf).

CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.

Determination: In Place But Needs Improvement

Nauru’s domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures but it needs improvement in relation to the definition of the term Participating Jurisdiction (SR 1.2) and the framework to enforce the requirements (SR 1.4).

SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.

Nauru has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.

Nauru has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in a manner that is largely consistent with the CRS and its Commentary. However, a deficiency has been identified. More specifically, Nauru’s legislative framework does not incorporate the requirements in relation to certain Entities not located in Participating Jurisdictions in line with the AEOI Standard. This deficiency does not ensure that all Investment Entities that are not in Participating Jurisdictions are subject to the “look-through” approach to identify their Controlling Persons.

Recommendations:

Nauru should amend its domestic legislative framework to ensure that the approach taken with respect to the 15 jurisdictions defined as a Participating Jurisdiction and with which Nauru does not have an agreement to exchange CRS information with (one of which has not implemented the AEOI Standard), is in accordance with the AEOI Standard..

SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.

Nauru has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.

Nauru has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. Most significantly, Nauru’s legislative framework does not include an explicit legal basis to enforce a sanction where a Reporting Financial Institution is a legal arrangement

Recommendations:

Nauru should ensure that its anti-avoidance rule covers avoidance of CRS reporting and due diligence when entered into by Account Holders or intermediaries, not just by Financial Institutions.

Nauru should amend its legislative framework to ensure that there is an explicit legal basis to enforce a sanction when there is non-compliance by a Reporting Financial Institution that is a legal arrangement

CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.

Determination: In Place

Nauru’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Nauru’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Nauru and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).

SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.

Nauru has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.

Recommendations:

No recommendations made.

SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.

Nauru put in place its exchange agreements without undue delay.

Recommendations:

No recommendations made.

SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.

Nauru’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.

Recommendations:

No recommendations made.

Comments by the assessed jurisdiction

No comments made.