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Banks
Despite its history as a tax-haven and off-shore banking centre, Nauru has very few financial services and no formal financial sector remaining; the Bank of Nauru and the Republic of Nauru Finance Corporation went bankrupt and ceased operations in the early 2000s and all offshore banks had their licences revoked by the Nauru government in 2004. The country essentially operates as a cash economy.
Regulation of Financial Services
Nauru formerly acted as a tax free offshore financial sector where foreigners could set up banks without needing to go to the island. In addition, Nauruan citizenship was for sale, removing any possibility of extradition. The banking and financial sector as a whole was sparsely regulated; no financial statements have been filed since 2005 and banks were not obliged to keep formal records. This means that depositors with the now collapsed banking system are hard to trace. In 2011 it was estimated that 3, 500 depositors are likely to be owed money. Nauru also failed to convince the G7 leaders that they were serious about combating money laundering in the country. It is hoped however that the overhaul of the financial system will allow room for a new economic framework.
Development of Financial Services
Currently assistance in financial management and restructuring of the sector is provided by the Asian Development Bank (ADB), which aims to balance current deficits and impose an investment and management plan for future government revenue. In 2011 an official insolvency partner from Deloitte was appointed by the Nauruan government to act as liquidator of the Central Bank. Nauru receives aid packages from various sources, some of which are intended to help rebuild the economic and financial sectors, including microfinance projects.
