Small Pacific island, big laundry problem

SYDNEY, Australia -- The tiny Pacific island of Nauru has said it will bring in new laws to clamp down on money laundering before a deadline set by an international task force.

Nauru, in the middle of the Pacific almost midway between Australia and Hawaii, was given an ultimatum last week alongside Russia and the Philippines by the Financial Action Task Force (FATF), a Paris-based anti-money laundering agency.

The FATF, created by the Group of Seven industrial powers and now backed by 29 nations, gave the three countries until September 30 to comply or face sanctions.

The U.S. Treasury says $70 billion left Russia in 1998 alone for offshore accounts in Nauru, which has 10,000 people, one main road and 400 banks.

The chief secretary to the government of Nauru, Mathew Batsiua, said that once passed, the new laws would be "among the strongest in the region."

"Any suggestion that Nauru will not have the anti-money laundering legislation in place by the required date is nonsense," Batsiua said in a statement received by Reuters news agency in Sydney.

Little more than a giant phosphate mine, Nauru has sought for many years to establish itself as an offshore financial hub.

Other Pacific islands have also tried to diversify their tiny economies by becoming tax havens but have begun to feel the heat from developed nations keen to slam the doors on the billions of dollars laundered by crime syndicates.

This year's FATF list of "uncooperative jurisdictions" included the Cook Islands, Marshall Islands and Niue.

Recently, Cook Islands Prime Minister Terepai Maoate summoned the South Pacific to present a united front against the developed nations' bid to close down the region's financial centers.

Maoate said his nation received considerable income from the financial services sector and could not afford to lose it.

Reuters contributed to this report.