## sipea2025061

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---

### 2. Remittances Cost (% of Total Funds) — Overview and macro-critical role
- Remittances are macro-critical for Samoa:
  - Averaged about 25 percent of GDP before the pandemic and rose to almost 35 percent of GDP in 2022.
  - Peaked at over 30 percent of GDP during the pandemic.
- Recipients and uses:
  - Around 80 percent of the recipients in FY2023/2024 are households.
  - Reported increase to 87 percent of recipients being households in October 2024.
  - Annual remittances inflows to families and households accounted for SAT 696.6 million out of the total of SAT 877.0 million in June 2024 and increased by 5.4 percent compared to June 2023.
  - SAT 77.69 million in June 2024 went to non-profit institutions (predominantly churches), which increased by 140.5 percent compared to 2023.
  - In 2020-21, the average value of a remittance transfer received by a Samoan household was approximately US $200, representing nearly a quarter of monthly household income.
- Counter-cyclicality:
  - Remittances increased in 2020–2021 when GDP declined, offsetting the absence of tourism earnings and supporting the external position.

### 2. Remittances Cost — Costs, drivers, and implications
- Average remittance costs (Q2/2024 and June 2024 data):
  - Cost of sending USD 200 to Samoa: 9.1 percent from New Zealand and 8.3 percent from Australia (June 2024).
  - Global average in the same period: 6.6 percent.
  - G20 targets: limit costs to 5 percent as a maximum in a single corridor and 3 percent on average.
- Factors contributing to elevated costs:
  - Limited economies of scale in the Pacific.
  - AML/CFT compliance costs, including excessive or incorrect application of the risk-based approach.
  - De-banking and correspondent banking relationship (CBR) pressures increasing operational costs for MTOs.
- Implications:
  - Excessive AML/CFT measures may reduce timeliness of remittances and increase costs, harming households that rely on rapid transfers.
  - Correct application of the risk-based approach, including simplified measures in low-risk scenarios, could reduce costs and supervisory burden.
  - Examples: fee waivers and new Fintech remittance products with low/no fees in early COVID-19 contributed to strong remittance inflows in 2020.

### Remittances by country of origin and scale
- 2023–2024 country flows and shares:
  - Samoa received SAT 334 million from New Zealand and SAT 299 million from Australia, amounting to 15 and 13 percent of Samoan GDP, respectively.
  - Remittances from New Zealand and Australia accounted for 72 percent of total inward remittances in 2023.
- Demographic and labor mobility context:
  - As of 2018, 182,721 people of Samoan ethnicity resided in New Zealand.
  - Samoa’s population is 205,557.
  - As of 2021, Australia had 28,107 Samoan-born residents (including non-citizens and temporary workers).
  - Under the Pacific Australia Labour Mobility (PALM) Scheme, as of September 2024, 2,745 Samoans participated (mainly in agriculture and meat processing industries).

### Financial sector structure, providers, and CBR pressures
- Size and composition:
  - Financial sector: four commercial banks and 13 MTOs.
  - Share of commercial banks in remittances varied between 9 and 31 percent; share decreasing with the rest transferred by MTOs.
  - Providers reported: 17 MTOs, 1 Money Changer, 78 MTO branches and 57 MTO agents (as reported by the Central Bank of Samoa).
- CBR and MTO challenges:
  - Samoa has lost around half of its CBRs since 2011.
  - Approximately 80 percent of inward remittances to Samoa are sent through MTOs.
  - MTOs face de-banking, difficulty maintaining/establishing accounts in New Zealand and Australia, fragility in corridor connectivity, and concentration risks (one bank providing CBRs to several MTOs).
  - Access to USD correspondent services is limited; share of USD in remittances is around 10 percent and decreasing.
- Consequences and alternatives:
  - Some smaller MTOs closed, became agents of larger businesses, or used unregulated channels (goods-for-cash exchanges, cash couriers), which may increase ML/TF risks.
  - Competition among MTOs and growth of online/digital platforms have resulted in a decline in remittance costs and increased outlets in Samoa, despite CBR pressures.

### Currency composition (reported table data)
- Currency composition (rows as presented):
  - Total: 1,178,274      1,100,232      809,694
  - NZD: 483,425         206,586         159,706
  - USD: 131,060         123,002         85,734
- Share percentages (as presented):
  - NZD: 41.0% 39.3% 41.1%
  - AUD: 18.9% 18.8% 19.7%
  - USD: 11.1% 11.2% 10.6%
- Note: Source listed as Samoan Authorities; table header includes "Number of transactions" and "Share percentage."

### ML/TF threat environment for main remittance corridors
- Overall assessment:
  - Analysis indicates low ML/TF risks in the main remittance corridors to Samoa for most transactions.
- Supporting findings:
  - Overall low level of economic crime.
  - Limited generation of criminal proceeds, mostly in cash and goods that rarely enter the financial sector.
  - No ML/TF typologies identified in the main remittance corridors to Samoa.
- Domestic crime and drug offences:
  - Samoa’s 2024 National ML/TF Risk Assessment (NRA) finds main domestic proceeds-generating crimes (embezzlement, fraud, theft and drug-related offences) present low ML threat.
  - Drug offences pose the most significant ML threat but mostly consist of personal cultivation, possession and consumption.
  - The vast majority of drug cases do not involve cross-border elements; only 3.5 percent of cases involve foreign jurisdictions.
- Implication: low corridor risk supports scope for simplified AML/CFT measures for low-value family remittances.

---

### 13. Samoa appears to be isolated from the influence of transnational organized crime — Transnational organized crime and drug trafficking
- Regional context:
  - UNODC (2024) notes the Pacific Islands region has increasingly become an attractive drug trafficking corridor for cocaine and methamphetamine to New Zealand and Australia from foreign criminal entities.
  - Samoa is identified as one of the PICs that have considerably lower levels of drug trafficking and is not one of the PICs used as a transit hub.
  - Samoan authorities note Samoa is less vulnerable to being used as a transit hub due to its less attractive shipping and logistics infrastructure.
- Specific observations:
  - Outlaw motorcycle gangs active in the Pacific region do not seem to have chapters or charters in Samoa; members who visit Samoa generally do so for personal reasons.
  - UNODC highlights risks related to deportees returning to Samoa, some of whom may maintain connections to criminal networks.
  - Global Organized Crime Index ranks Samoa 188 out of 194 analyzed countries by the level of criminality.
  - LEA seizures of methamphetamine included a largest seizure of 950 grams and SAT 21,000 in cash.
  - During 2015-2020 the FIU disseminated 4 drug-related ML cases to Law Enforcement Agencies; main typology involved depositing large cash via third parties and ATM withdrawals abroad.

### Property-related offences, theft, embezzlement and fraud
- Characteristics:
  - Identified offences are mostly of low value and proceeds rarely enter the financial sector.
  - Proceeds mostly comprise cash and goods rather than financial assets; laundering typically supports current consumption.
  - Fraud does not pose the highest ML threat; a small number of fraud and scamming cases identified have originated from abroad and Samoans are the victims.
  - Authorities consider a large proportion of proceeds from fraud is being sent and laundered abroad, including through foreign ATM withdrawals from Samoan accounts.

### Corruption
- Assessment:
  - Corruption is not identified as a major predicate and is reported to be below regional averages.
  - Control of corruption in Samoa has improved in the last decade and is currently in the top quartile globally.
  - The NRA concludes corruption does not constitute a major predicate offence generating large amounts of criminal proceeds; the ML threat from corruption and bribery is assessed as medium.
- Survey and case data:
  - In 2021, around half of surveyed Samoans considered corruption a significant problem, lower than the regional average of 61 percent.
  - Incidence of voter and public services bribery is 11 and 17 percent respectively, around half of the regional averages of 26 and 32 percent.
  - A case of large-scale corruption detected in 2018 amounted to SAT 1.5 million (approximately USD 590,000) and involved multiple jurisdictions.

### ML risk from crimes committed outside Samoa and international services sector
- NRA conclusions:
  - ML threat from proceeds of crimes committed outside Samoa is medium-low.
  - Non-resident services in Samoa’s international financial sector are the main driver of the medium-low risk rating of foreign ML risk.
- International cooperation and sector activity:
  - Samoa received 37 requests for information and assistance from other jurisdictions between 2015 and 2020 (32 incoming to SFIU through Egmont Group and 5 requests for Mutual Legal Assistance to Attorney-General’s Office), mainly related to fraud from Australia, New Zealand and United States.
  - International sector activity mostly company formation services to non-residents; almost all activity is company registration and administration.
  - Trust and Company Service Providers (TCSPs) are required to conduct CDD, including BO identification; SFIU received 7 STRs from TCSPs in 2015-2020 (1.9 percent of overall STRs).
  - SIFA inspected 4,810 international companies, representing 16.9 percent of active international companies as of December 31, 2023.
  - Between 2015-20, SIFA identified onsite non-compliance: 27 violations for statutory reporting obligations, 1 violation for failure to obtain prior approval for change of shareholder, and 42 violations for failure to make BO or accounting information available on IBCs; sanctions were imposed.

### International Business Companies (IBCs) and transactional risk to remittance corridors
- Company formation and risk:
  - Company formation mostly on basis of introduction agreements; introducer conducts due diligence and Samoan TCSPs incorporate using due diligence materials from foreign TCSPs.
  - Customers concentrated: Taiwan Province of China (77 percent), Hong Kong SAR PRC (13 percent), China PRC (6 percent), Singapore (3 percent) and others (1 percent).
  - Only 4,277 out of 34,972 registered IBCs have bank accounts, lowering direct risk to the financial sector.
  - IBCs with accounts bank abroad and do not hold accounts or other linkages to the Samoan financial sector.
  - IBC incorporation services pose limited transactional ML risk to Samoa, especially to remittance corridors.
  - Samoa listed by the EU as a non-cooperative jurisdiction for tax purposes since 2017; designation does not have direct implications on Samoa’s transactional ML risks regarding remittances.
  - Authorities developing legislative amendments to implement the EU standards’ principle of fair taxation, adding an economic substance requirement.
  - SIFA strengthening efforts to continue implementation of the Automatic Exchange of Information Standard.

### Terrorism financing (TF) and remittance misuse for TF
- Assessment:
  - Samoa’s TF risks and risks of misuse of remittance corridors for TF are assessed as low.
  - 2024 NRA assesses terrorism and terrorism financing threats as low, with no instances of terrorism cases and STRs, investigations and MLAs pertaining to TF.
  - AUSTRAC (2019) assesses the threat of TF through remittance providers to the Pacific, including Samoa, as very low.
  - In the 2016-17 sample period, there were no SMRs regarding suspected TF, and no customers remitting funds to PICs through remittance providers were identified in AUSTRAC databases as TF high-risk.

### Remittance subsector risk assessments by main remittance source countries
- AUSTRAC (Australia) assessment (2016–2017):
  - Concluded remittances sent via MTOs to PICs pose low risk.
  - Median value of remittances in Australia–Samoa corridor was AUD 200; vast majority of suspected ML reports amounted to less than AUD 5,000.
  - Assessed: criminal threat environment (low risk); profile of customers sending funds (low risk); profile of transactions being sent (medium risk); purpose of remittances (low risk); detection and mitigation by remittance providers (medium risk).
- New Zealand Department of Internal Affairs assessment (2021):
  - Concluded overall inherent ML/TF risk for the New Zealand-to-PICs remittance sub-sector is medium, but low value (under NZD 1000) remittance transactions to PICs for family support, familial or cultural events are assessed as low inherent ML/TF risk.
  - Key findings include predominately low-risk customer base and lower-value family remittances; most customers use lower-risk face-to-face remittance methods; heavy reliance on cash is common.
- Conclusion: targeted corridor assessments confirm low ML/TF risk specific to low-value PIC remittance corridors and provide analytical basis for simplifying AML/CFT measures in line with identified low risks.

### Samoa’s ML/TF vulnerabilities and mitigating factors
- Vulnerabilities:
  - AML/CFT regime vulnerabilities mostly related to capacity and resource constraints.
- Mitigating factors:
  - Small population facilitating CDD.
  - Low ML/TF threat environment.
  - Regional cooperation, information exchange and capacity building.
  - Two subsidiaries of foreign banks, accounting for around 61 percent of banking sector assets, apply group-wide AML/CFT programs and are under AML/CFT supervision of home jurisdictions (Australia and Papua New Guinea).
  - Two local banks have high awareness of AML/CFT requirements due to continuous CBR challenges.
  - Most financial activity is conducted by banks with developed group-level AML/CFT systems and controls and supervision by higher-capacity advanced countries.

---

### 25. While MTOs’ AML/CFT controls are less robust, they have improved — Status and operational vulnerabilities
- Findings:
  - MTOs’ AML/CFT controls have improved but remain less robust, with primary challenges related to the large number of customers and limited time allocated for CDD.
  - All inspected MTOs have AML/CFT policies, procedures and systems in place, but with weaknesses in CDD measures, on-going monitoring, and record keeping.
  - No significant cases of non-compliance found during on-site inspections, although number of inspections constrained by SFIU staffing (6 staff conducting both supervisory and financial intelligence work).
  - UNODC has not identified significant involvement by serious and organized crime groups in remitting funds through money remitters in the New Zealand-to-Pacific remittance corridor.
- Risk-mitigating factors:
  - Low ML/TF risks from low-value remittances and the customer base ameliorate vulnerabilities.
  - All customers of MTOs are subject to customer identification / CDD measures, regardless of transaction level.

### Customer base, geography, and transaction patterns
- Client composition and corridors:
  - Physical persons residents of Samoa account for between 90 and 99 per cent of financial institutions’ clients.
  - Non-residents’ citizenship: New Zealand (40 percent), Australia (30 percent), Fiji (10 percent), United States (10 percent) and China (10 percent).
  - A subsidiary of the regional bank noted that 80 percent of non-resident customers (or 7.4 percent of total customers) are classified as low risk.
  - The share of PEPs in the customer base is 10 percent.
  - Most cross-border transactions: New Zealand and Australia (40 percent each), China (10 percent), Fiji and the United States (5 percent each).
  - Samoa’s two local banks do not have subsidiaries and branches in other countries and do not conduct any material activity abroad.
- Transaction values and thresholds:
  - Low average transaction level for incoming remittances of USD 200.
  - International standards threshold reference for cross-border wire transfers of USD 1,000.

### Delivery channels and practical AML/CFT implications
- Observations:
  - Heavy use of cash (95 percent for MTOs) is an AML/CFT vulnerability.
  - Many MTOs leverage technology to facilitate cashless remittances via mobile cash and online wallets linked to bank accounts.
  - In-person delivery in bank branches and MTO agents facilitates customer identification and lowers ML/TF risks.
  - Due to CBR challenges, most local MTOs have partnered with global MTOs, providing additional AML/CFT scrutiny for remittance flows.

### Regional cooperation, capacity building, and investigative environment
- Findings:
  - Vulnerabilities mitigated by supervisory, law enforcement and financial intelligence regional cooperation, information exchange and capacity development.
  - Samoa hosts the Pacific Transnational Crime Network focused on countering drug and small arms smuggling and related money laundering.
  - In the latest mutual evaluation report, Samoa was rated as substantially effective in international cooperation.
  - Samoa received and responded to 37 requests for information and assistance between 2015 and 2020 (32 incoming to SFIU through Egmont Group and 5 requests for MLA), mainly related to fraud from Australia, New Zealand, and the United States.
  - No ML investigations and prosecutions have been achieved to date; proceeds in most investigated cases may not warrant parallel financial investigations.
- Recommendation emphasis:
  - Building up law enforcement and financial intelligence capacity would allow proactive identification of emerging threats and better response to potential high-value predicate cases.

### Legal and regulatory deficiencies and planned amendments
- Identified gaps:
  - MLPA should be amended to add powers for supervisory authorities to enable implementation of a risk-based AML/CFT supervision, including sanctioning powers.
  - Definition of PEPs should cover domestic PEPs in addition to foreign PEPs.
  - Beneficial ownership (BO) definition should be brought in line with international standards.
- Status:
  - Authorities are working on amendments to the MLPA with help from IMF TA.

### Streamlining AML/CFT requirements in remittance corridors — Objectives and high-level recommendations
- Objective:
  - Promote a risk-based approach to CBRs for remittances by operationalizing existing risk assessments and streamlining AML/CFT requirements in cooperation with New Zealand and Australia.
- High-level recommendations:
  - Operationalize regional risk assessments (AUSTRAC and DIA) into supervisory expectations and regulatory certainty to address MTO de-banking.
  - Promote a risk-based approach through prescriptive regulations rather than guidance alone, providing legally binding definitions of low-risk remittance markets and MTO transaction types.
  - Encourage supervisory guidance and regulatory certainty from Australian and New Zealand supervisors to shape regional supervisory expectations.

### Specific product and account-level measures proposed
- Two regulatory approvals suggested:
  - (i) Low-risk remittance transfer to PICs.
  - (ii) Specific bank account for an MTO that operates in a low-risk corridor.

- Low-risk/low-value remittance product (design elements and limits):
  - Prescribed simplified core CDD requirements, including exemptions from certain AML/CFT obligations for low-risk/low-value remittances to Samoa; simplified CDD not permitted if suspicion of ML/TF.
  - In line with DIA sub-sector risk assessment, limited to person-to-person transfers of low value (e.g. 1 000 NZD or an equivalent).
  - Product design could include caps on annual or monthly limits on overall value of remittances sent by a single customer to prevent structuring.
  - Broad set of reliable documentation could be listed for customer identification; low-risk transfers should not require secondary identification documents or source of funds/source of wealth checks.
  - Regulations should provide certainty on acceptable alternative documents (e.g., expired foreign ID, consular document, bills, tax certificates, healthcare documents).
  - Low-risk product design should not include additional requirements in excess of FATF Standards (e.g., address when other information is available, income, occupation).
  - Consider measures to promote non face-to-face identification where remittance source is a bank account.
  - Intended usage can be assumed to be family/community support, with no need for source of funds/source of wealth checks.

- Bank accounts for MTOs operating in low-risk corridors (design elements):
  - Establish regulatorily prescribed streamlined AML/CFT requirements for opening and maintaining correspondent-type bank accounts providing settlement services for MTOs, applying only to remittance transfers in low-risk corridors.
  - Low-risk measures might be allowed only for inflows to Samoa, with outflows held separate due to higher risk.
  - Initially impose caps on account balance and overall turnover in this type of MTO account to limit potential for material ML risks.
  - Onboarding risk assessment should confirm MTO operates only in low-risk corridor(s), that customer base and transaction values align with the low-risk remittance product, and that MTO can operate strictly within the product parameters.
  - Banks’ scrutiny should focus on core CDD requirements: customer identification, record keeping, transaction screening to prevent structuring.
  - Limit remittances by MTOs to natural persons, excluding legal persons and arrangements, to simplify regulatory requirements (e.g., no BO requirements).
  - Allow explicit use of existing regional risk assessments by banks and MTOs in their own risk assessments to reduce resource burdens.
  - As part of CDD, information on nature and purpose of business relationship should not require collecting specific additional information for the low-risk MTO account.
  - Banks can limit ongoing monitoring frequency and intensity compared to standard correspondent accounts, focusing on ensuring MTO activity remains within the low-risk product.

### Supervisory cooperation and institutional mechanisms
- Recommendations:
  - AML/CFT supervisors might conduct special on-site inspections for MTOs interested in the low-risk remittance product to assure core controls are in place and confirm management fit and proper tests.
  - On-site inspections could be conducted jointly by Samoan, New Zealand and Australian supervisors of MTOs and banks.
  - Consider establishing or deepening AML/CFT supervisory colleges for banks and MTOs providing the low-risk remittance product to facilitate information exchange and reduce onboarding friction.

### Regulatory harmonization and broader policy context
- Observations:
  - Legal differences across jurisdictions create frictions for cross-border payments including remittances.
  - Project example: Tonga Development Bank remittance-sending mechanism significantly cut remittance costs and is used by more than 95 percent of Tongan seasonal workers in New Zealand.
- Broader considerations:
  - Addressing CBR pressures should be considered in the context of social, labor, and foreign policy objectives given remittances’ critical role.
  - Unintended consequences of excessive de-risking:
    - Higher barriers to entry for MTOs reduce competition and increase costs, making informal remittance channels more attractive.
    - Shift to informal mechanisms increases ML/TF risks, undermines AML/CFT effectiveness, and complicates detection, tracing, and confiscation.
    - New Zealand’s 2019 NRA noted de-risking may force remittance businesses underground and displace customers to higher-risk operators.

### Notable contextual examples and references
- AUSTRAC imposed AUD 1.3 billion penalty on a prominent bank for compliance failings related to International Funds Transfer (transfers above AUD 10 000), correspondent account fund movement risk assessments, and suspicious transactions associated with possible child exploitation.
- FATF-related guidance cited: FATF Guidance on PEPs (2012) and FATF Guidance on Financial Inclusion (2017).

*sipea2025061 - Extracts from “2. Remittances Cost (% of Total Funds)”, “13. Samoa appears to be isolated from the influence of transnational organized crime”, and “25. While MTOs’ AML/CFT controls are less robust, they have improved.”*

### 2. Remittances Cost (% of Total Funds) _________________________________________________ 7

### 2. Remittances Cost (% of Total Funds)

### Overview and macro-critical role
- Remittances are macro-critical for Samoa:
  - Averaged about 25 percent of GDP before the pandemic and rose to almost 35 percent of GDP in 2022.
  - Peaked at over 30 percent of GDP during the pandemic.
- Recipients and uses:
  - Around 80 percent of the recipients in FY2023/2024 are households.
  - Reported increase to 87 percent of recipients being households in October 2024.
  - Annual remittances inflows to families and households accounted for SAT 696.6 million out of the total of SAT 877.0 million in June 2024 and increased by 5.4 percent compared to June 2023.
  - SAT 77.69 million in June 2024 went to non-profit institutions (predominantly churches), which increased by 140.5 percent compared to 2023.
  - In 2020-21, the average value of a remittance transfer received by a Samoan household was approximately US $200, representing nearly a quarter of monthly household income.
- Counter-cyclicality:
  - Remittances increased in 2020–2021 when GDP declined, offsetting the absence of tourism earnings and supporting the external position.

### Remittance costs and drivers
- Average remittance costs (Q2/2024 and June 2024 data):
  - Cost of sending USD 200 to Samoa: 9.1 percent from New Zealand and 8.3 percent from Australia (June 2024).
  - Global average in the same period: 6.6 percent.
  - G20 targets: limit costs to 5 percent as a maximum in a single corridor and 3 percent on average.
- Factors contributing to elevated costs:
  - Limited economies of scale in the Pacific.
  - AML/CFT compliance costs, including excessive or incorrect application of the risk-based approach.
  - De-banking and correspondent banking relationship (CBR) pressures increasing operational costs for MTOs.
- Implications:
  - Excessive AML/CFT measures may reduce timeliness of remittances and increase costs, harming households that rely on rapid transfers.
  - Correct application of the risk-based approach, including simplified measures in low-risk scenarios, could reduce costs and supervisory burden.
  - Examples: fee waivers and new Fintech remittance products with low/no fees in early COVID-19 contributed to strong remittance inflows in 2020.

### Remittances by country of origin and scale
- 2023–2024 country flows and shares:
  - Samoa received SAT 334 million from New Zealand and SAT 299 million from Australia, amounting to 15 and 13 percent of Samoan GDP, respectively.
  - Remittances from New Zealand and Australia accounted for 72 percent of total inward remittances in 2023.
- Demographic and labor mobility context:
  - As of 2018, 182,721 people of Samoan ethnicity resided in New Zealand.
  - Samoa’s population is 205,557.
  - As of 2021, Australia had 28,107 Samoan-born residents (including non-citizens and temporary workers).
  - Under the Pacific Australia Labour Mobility (PALM) Scheme, as of September 2024, 2,745 Samoans participated (mainly in agriculture and meat processing industries).
- Figure referenced: "Remittances by Country of Origin (in percent)"

### Financial sector structure, providers, and CBR pressures
- Size and composition:
  - The financial sector in Samoa is limited in size, with four commercial banks and 13 MTOs.
  - In recent years, the share of commercial banks in remittances varied between 9 and 31 percent, and their share is decreasing, with the rest transferred by MTOs.
  - Providers reported: 17 MTOs, 1 Money Changer, 78 MTO branches and 57 MTO agents (as reported by the Central Bank of Samoa).
- CBR and MTO challenges:
  - Global and regional correspondent banks have been terminating or restricting business relationships with certain client categories, notably affecting PICs.
  - Samoa has lost around half of its CBRs since 2011.
  - Approximately 80 percent of inward remittances to Samoa are sent through MTOs.
  - MTOs face de-banking, difficulty maintaining/establishing accounts in New Zealand and Australia, fragility in corridor connectivity, and concentration risks (one bank providing CBRs to several MTOs).
  - Access to USD correspondent services is limited; share of USD in remittances is around 10 percent and decreasing.
- Consequences and alternative arrangements:
  - Some smaller MTOs were forced to close, become agents of larger businesses, or use unregulated channels (goods-for-cash exchanges, cash couriers), which may increase ML/TF risks.
  - Competition among MTOs and growth of online/digital platforms have resulted in a decline in remittance costs and increased outlets in Samoa, despite CBR pressures.

### Currency composition (table data as reported)
- Currency composition (rows as presented):
  - Total: 1,178,274      1,100,232      809,694
  - NZD: 483,425         206,586         159,706
  - USD: 131,060         123,002         85,734
- Share percentages (as presented):
  - NZD: 41.0% 39.3% 41.1%
  - AUD: 18.9% 18.8% 19.7%
  - USD: 11.1% 11.2% 10.6%
- Note: Source listed as Samoan Authorities; table header includes "Number of transactions" and "Share percentage."

### ML/TF threat environment for main remittance corridors
- Overall assessment:
  - Analysis indicates low ML/TF risks in the main remittance corridors to Samoa for most transactions.
  - Findings supporting low risk:
    - Overall low level of economic crime.
    - Limited generation of criminal proceeds, mostly in cash and goods that rarely enter the financial sector.
    - No ML/TF typologies identified in the main remittance corridors to Samoa.
- Domestic crime and proceeds:
  - Samoa’s 2024 National ML/TF Risk Assessment (NRA) finds that the main domestic proceeds-generating crimes (embezzlement, fraud, theft and drug-related offences) present low ML threat to Samoa.
  - Samoa is relatively free from cross-border organized crime; complexity and cross-border impact of economic crimes are limited.
- Drug offences:
  - Drug offences pose the most significant ML threat but mostly consist of personal cultivation, possession and consumption.
  - The vast majority of drug cases do not involve cross-border elements; only 3.5 percent of cases involve foreign jurisdictions.

*Source: sipea2025061 - 2. Remittances Cost (% of Total Funds) (Samoa), December 18, 2024, International Monetary Fund*

### 13.     Samoa appears to be isolated from the influence of transnational organized crime

### 13.     Samoa appears to be isolated from the influence of transnational organized crime

### Transnational organized crime and drug trafficking
- The UNODC (2024) notes the Pacific Islands region has increasingly become an attractive drug trafficking corridor for cocaine and methamphetamine to New Zealand and Australia, from foreign criminal entities such as organized crime groups from Asia and drug cartels from Latin America.
- Samoa is identified as one of the PICs that have considerably lower levels of drug trafficking and is not one of the PICs used as a transit hub.
- Samoan authorities note Samoa is less vulnerable to being used as a transit hub due to its less attractive shipping and logistics infrastructure.
- Outlaw motorcycle gangs active in the Pacific region do not seem to have chapters or charters in Samoa; members who visit Samoa generally do so for personal reasons.
- UNODC highlights risks related to deportees returning to Samoa, some of whom may maintain connections to criminal networks.
- The Global Organized Crime Index ranks Samoa 188 out of 194 analyzed countries by the level of criminality, noting the existence of small criminal markets in human trafficking and counterfeit and excise goods.
- Samoan LEA seizures of methamphetamine included a largest seizure of 950 grams and SAT 21,000 in cash, consistent with import of limited amounts for domestic sale and consumption.
- During 2015-2020 the FIU disseminated 4 drug-related ML cases to Law Enforcement Agencies—the main typology was depositing a large amount of cash into bank accounts using third parties, and withdrawal of cash in the ATMs abroad (the same method was observed for fraud-related ML).

### Property-related offences, theft, embezzlement and fraud
- Identified property-related offences, theft, embezzlement and fraud are mostly of low value and their proceeds rarely enter the financial sector.
- Proceeds generated by these crimes mostly comprise cash and goods rather than financial assets; laundering typically supports current consumption.
- Fraud does not pose the highest ML threat to Samoa; the small number of fraud and scamming cases identified have originated from abroad and S amoans are the victims.
- Authorities consider a large proportion of proceeds from fraud is being sent and laundered abroad, including through foreign ATM withdrawals from Samoan accounts rather than using remittances, and not in New Zealand and Australia.

### Corruption
- Corruption is not identified as a major predicate and is reported to be below regional averages.
- Control of corruption in Samoa has improved in the last decade and is currently in the top quartile globally.
- The NRA concludes corruption does not constitute a major predicate offence generating large amounts of criminal proceeds; the ML threat from corruption and bribery is assessed as medium (relative to other predicates, in the context of overall low ML threat).
- In 2021, around half of surveyed Samoans considered corruption a significant problem, lower than the regional average of 61 percent.
- Incidence of voter and public services bribery is 11 and 17 percent respectively, around half of the regional averages of 26 and 32 percent.
- A case of large-scale corruption detected and investigated in 2018 amounted to SAT 1.5 million (approximately USD 590,000) and involved multiple jurisdictions.

### ML risk from crimes committed outside Samoa and international services sector
- The NRA concluded the ML threat coming from proceeds of crimes committed outside Samoa is medium-low.
- Non-resident services in Samoa’s international financial sector are the main driver of the medium-low risk rating of foreign ML risk.
- While authorities are not aware of any IBC misuse domestically or abroad, the NRA concluded the international services sector poses a high inherent ML threat.
- Samoa received a total of 37 requests for information and assistance from other jurisdictions between 2015 and 2020 (including 32 incoming requests to SFIU through Egmont Group and 5 requests for Mutual Legal Assistance to Attorney-General’s Office), mainly related to fraud and coming from Australia, New Zealand and United States.
- The activity in Samoa’s international sector mostly consists of company formation services to non-residents; almost all activity is company registration and administration, with few offshore financial institutions reported to be mostly inactive captive financial institutions (1 bank, 7 mutual funds, 4 insurance companies and managers).
- Trust and Company Service Providers (TCSPs) are required to conduct customer due diligence (CDD), including identification of beneficial ownership (BO) information; the SFIU received 7 STRs from TCSPs in 2015-2020, representing 1.9 percent of overall STRs.
- SIFA has inspected 4,810 international companies, representing 16.9 percent of active international companies as of December 31, 2023.
- Between 2015-20, SIFA identified, through onsite inspections, non-compliance with statutory reporting obligations (27 violations), failure to obtain prior approval for change of shareholder (1 violation), and failure to make available BO information or accounting information on IBCs (42 violations) and imposed sanctions.

### International Business Companies (IBCs) and transactional risk to remittance corridors
- Company formation in Samoa is mostly conducted on the basis of introduction agreements: the introducer (a foreign company service provider) conducts due diligence and Samoan TCSPs are responsible for incorporation while receiving due diligence materials from the foreign TCSPs.
- Customers for Samoa’s company formation services are focused in Taiwan Province of China (77 percent), Hong Kong SAR PRC (13 percent), China PRC (6 percent), Singapore (3 percent) and others (1 percent).
- Only 4,277 out of 34,972 registered IBCs have bank accounts, lowering the direct risk to the financial sector.
- IBCs that have accounts are banking abroad and do not hold accounts or have other linkages to the Samoan financial sector due to the limited risk appetite of banks operating in Samoa.
- As a result, IBC incorporation services pose limited transactional ML risk to Samoa, especially to the remittance corridors; transactional ML risk should not be conflated with potential reputational risk related to misuse of IBCs abroad for tax evasion or other predicates.
- Samoa has been listed by the EU as a non-cooperative jurisdiction for tax purposes since 2017 due to preferential tax treatment of offshore companies; the designation does not have direct implications on Samoa’s transactional ML risks regarding remittances.
- Authorities are developing legislative amendments to implement the EU standards’ principle of fair taxation, adding an economic substance requirement.
- SIFA is strengthening efforts to continue implementation of the Automatic Exchange of Information Standard.

### Terrorism financing (TF) and remittance misuse for TF
- Samoa’s TF risks and the risks of misuse of remittance corridors for TF are assessed as low.
- The 2024 NRA assesses terrorism and terrorism financing threats as low, with no instances of terrorism cases and STRs, investigations and MLAs pertaining to TF.
- Samoa’s demographic composition is not seen as susceptible to raising funds for TF purposes and no threats of inflows to finance terrorist activity in Samoa were identified.
- Samoa’s financial sector does not facilitate financial flows between other countries, limiting risk from transit of funds for TF purposes.
- AUSTRAC (2019) assesses the threat of TF through remittance providers to the Pacific, including Samoa, as very low.
- In the 2016-17 sample period, there were no Suspicious Matter Reports (SMRs) regarding suspected TF, and no customers remitting funds to PICs through remittance providers were identified in AUSTRAC databases as TF high-risk.

### Remittance subsector risk assessments by main remittance source countries
- AUSTRAC (Australia) assessment (2016–2017):
  - Concluded remittances sent via MTOs to PICs pose low risk.
  - Noted it is unlikely ML is occurring on a large scale through the Australia–Samoa corridor, given the median value of remittances in this corridor was AUD 200, and that the vast majority of suspected ML reports amounted to less than AUD 5,000.
  - Assessed: criminal threat environment (low risk); profile of customers sending funds (low risk); profile of transactions being sent (medium risk); purpose of remittances (low risk); detection and mitigation by remittance providers (medium risk).
  - Found low likelihood and limited scale of illicit proceeds passing through the assessed corridors.
- New Zealand Department of Internal Affairs assessment (2021):
  - Concluded overall inherent ML/TF risk for the New Zealand-to-PICs remittance sub-sector is medium, but low value (under NZD 1000) remittance transactions to PICs for family support, familial or cultural events are assessed as low inherent ML/TF risk.
  - Key findings:
    - Nature, size and complexity: A small number of single-country-focused money remitters with simple business arrangements; agents have ongoing seasonal relationships with Pacific Island diaspora and seasonal workers.
    - Products and services: High-risk factors (international payments, use of cash, new payment technologies) present but in the corridor amounts are typically lower value and lower risk for family support/familial events.
    - Methods of delivery: Most customers use lower-risk face-to-face remittance methods; heavy reliance on cash is common due to low penetration of payment instruments in PICs.
    - Customer base: Mostly lower-risk New Zealand-based individuals representing diaspora and seasonal workers.
    - Country risk: Generally, PICs were low risk jurisdictions; no significant trends or patterns of misuse of the remittance sector were detected.
    - Counterparty institutions: Apart from banks, MTOs in the corridor had limited exposure to other financial institutions or DNFBPs; overall risk associated with these institutions was assessed as low compared to the wider remittance sector.
- These targeted remittance corridor assessments confirm low ML/TF risk specific to low-value PIC remittance corridors and provide analytical basis for simplifying AML/CFT measures in line with identified low risks, as required by international standards.
- Australia’s 2024 NRA and New Zealand’s prior NRAs present higher overall sectoral concerns for MTOs (e.g., Australia rated registered MTOs as ‘high’ and unregistered MTOs as ‘high’ and ‘increasing’), but these broader concerns are less applicable to the PIC corridors.

### Samoa’s ML/TF vulnerabilities and mitigating factors
- The AML/CFT regime in Samoa contains vulnerabilities, mostly related to capacity and resource constraints.
- Vulnerabilities are alleviated by:
  - Small population facilitating customer due diligence (CDD).
  - Low ML/TF threat environment.
  - Regional cooperation, information exchange and capacity building.
- Banking sector vulnerabilities are reduced by group-wide policies of prominent regional banks and AML/CFT supervisory efforts:
  - Two subsidiaries of foreign banks, accounting for around 61 percent of banking sector assets, apply group-wide AML/CFT programs and are under AML/CFT supervision of home jurisdictions (Australia and Papua New Guinea).
  - Two local banks have high awareness of AML/CFT requirements due to continuous CBR challenges and the need to demonstrate effective AML/CFT programs to Australian and New Zealand correspondent banks.
  - While capacity and effectiveness of AML/CFT supervision in Samoa can be further strengthened, most financial activity is conducted by banks with developed group-level AML/CFT systems and controls and supervision by higher-capacity advanced countries.

_Italicized source attribution: sipea2025061 - 13.     Samoa appears to be isolated from the influence of transnational organized crime_

### 25.     While MTOs’ AML/CFT controls are less robust, they have improved. The remaining

### sipea2025061 - 25. While MTOs’ AML/CFT controls are less robust, they have improved. The remaining

### MTOs’ AML/CFT controls — status and operational vulnerabilities
- Findings:
  - MTOs’ AML/CFT controls have improved but remain less robust, with primary challenges related to the large number of customers and limited time allocated for customer due diligence (CDD).
  - All inspected MTOs have AML/CFT policies, procedures and systems in place, but with weaknesses in CDD measures, on-going monitoring, and record keeping.
  - No significant cases of non-compliance have been found during on-site inspections, although the number of inspections is constrained by the SFIU staffing (6 staff conducting both supervisory and financial intelligence work).
  - UNODC has not identified significant involvement by serious and organized crime groups in remitting funds through money remitters in the New Zealand-to-Pacific remittance corridor.
- Risk-mitigating factors:
  - Low money laundering/terrorist financing (ML/TF) risks from low-value remittances and the customer base (remitters) ameliorate vulnerabilities arising from remaining operational challenges.
  - All customers of MTOs are subject to customer identification / CDD measures, regardless of transaction level.

### Customer base, geography, and transaction patterns
- Key statistics on client composition and corridors:
  - Physical persons residents of Samoa account for between 90 and 99 per cent of financial institutions’ clients.
  - The small share of non-residents mostly comprises foreign citizens of Samoan descent. Countries of non-residents’ citizenship: New Zealand (40 percent), Australia (30 percent), Fiji (10 percent), United States (10 percent) and China (10 percent).
  - A subsidiary of the regional bank noted that 80 percent of non-resident customers (or 7.4 percent of total customers) are classified as low risk.
  - The share of PEPs in the customer base is 10 percent.
  - Most cross-border transactions are with New Zealand and Australia (40 percent each), China (10 percent), Fiji and the United States (5 percent each).
  - Samoa’s two local banks do not have subsidiaries and branches in other countries and do not conduct any material activity abroad.
- Transaction values and thresholds:
  - Low average transaction level for incoming remittances of USD 200.
  - International standards threshold reference for cross-border wire transfers of USD 1,000.

### Delivery channels and practical AML/CFT implications
- Observations:
  - Delivery channels are characterized by a high share of cash and face-to-face transactions: heavy use of cash (95 percent for MTOs) is an AML/CFT vulnerability.
  - Many MTOs leverage technology to facilitate cashless remittances via mobile cash and online wallets linked to bank accounts.
  - In-person delivery in bank branches and MTO agents facilitates customer identification and lowers ML/TF risks.
  - Due to CBR challenges, most local MTOs have partnered with global MTOs, providing an additional layer of AML/CFT scrutiny for remittance flows.

### Regional cooperation, capacity building, and investigative environment
- Findings:
  - Vulnerabilities in domestic AML/CFT capacity are mitigated by supervisory, law enforcement and financial intelligence regional cooperation, information exchange and capacity development.
  - Samoa hosts the Pacific Transnational Crime Network focused on countering drug and small arms smuggling and related money laundering.
  - In the latest mutual evaluation report, Samoa was rated as substantially effective in international cooperation.
  - Samoa received and responded to a total of 37 requests for information and assistance from other jurisdictions including 32 incoming requests to SFIU through Egmont Group and 5 requests for MLA to Attorney-General’s Office between 2015 and 2020, mainly related to fraud and coming from Australia, New Zealand, and the United States.
  - No ML investigations and prosecutions have been achieved to date; proceeds in most investigated cases may not warrant parallel financial investigations.
- Recommendation emphasis:
  - Building up law enforcement and financial intelligence capacity would allow for proactive identification of emerging threats and better response to potential high-value predicate cases.

### Legal and regulatory deficiencies and planned amendments
- Identified legal/regulatory gaps:
  - Money Laundering Prevention Act (MLPA) should be amended to add powers for supervisory authorities to enable implementation of a risk-based AML/CFT supervision, including sanctioning powers.
  - The definition of PEPs should cover domestic PEPs in addition to foreign PEPs; banks currently conduct EDD for both domestic and foreign PEPs in practice.
  - The beneficial ownership (BO) definition should be brought in line with international standards.
- Status:
  - Authorities are working on amendments to the MLPA with help from IMF TA.

### Streamlining AML/CFT requirements in remittance corridors — objectives and general recommendations
- Objective:
  - Promote a risk-based approach to correspondent banking relationships (CBRs) for remittances by operationalizing existing risk assessments and streamlining AML/CFT requirements in cooperation with remittance source countries New Zealand and Australia.
- High-level recommendations:
  - Operationalize regional risk assessments (AUSTRAC and DIA) into supervisory expectations and regulatory certainty to address MTO de-banking driven by banks’ low-risk appetite.
  - Promote a risk-based approach through prescriptive regulations rather than guidance alone, to provide banks with legally binding definitions of low-risk remittance markets and MTO transaction types.
  - Encourage supervisory guidance and regulatory certainty from Australian and New Zealand supervisors to shape regional supervisory expectations.

### Specific product and account-level measures proposed
- Two regulatory approvals suggested:
  - (i) Low-risk remittance transfer to PICs.
  - (ii) Specific bank account for an MTO that operates in a low-risk corridor.

- Low-risk/low-value remittance product (design elements and limits):
  - Prescribed set of simplified, core CDD requirements, including exemptions from certain AML/CFT obligations for low-risk/low-value remittances to Samoa, as set out by AML/CFT supervisory authorities for banks and MTOs from both sides of the corridor. Simplified CDD should not be permitted in case of suspicion of ML/TF.
  - In line with DIA sub-sector risk assessment, limited to person-to-person transfers of low value (e.g. 1 000 NZD or an equivalent).
  - Product design could include caps on annual or monthly limits on overall value of remittances sent by a single customer to prevent structuring.
  - Broad set of reliable documentation could be listed for customer identification; low-risk transfers should not require secondary identification documents or source of funds/source of wealth checks.
  - Regulations should provide certainty on acceptable alternative documents (e.g., expired foreign ID, consular document, bills, tax certificates, healthcare documents) to accommodate low-income migrant workers.
  - The low-risk product design should not include additional requirements in excess of FATF Standards (e.g., address when other information is available, income, occupation).
  - Consider measures to promote non face-to-face identification where remittance source is a bank account.
  - Intended usage can be assumed to be family/community support, with no need for source of funds/source of wealth checks.

- Bank accounts for MTOs operating in low-risk corridors (design elements):
  - Establish regulatorily prescribed streamlined AML/CFT requirements for opening and maintaining correspondent-type bank accounts providing settlement services for MTOs, applying only to remittance transfers in low-risk corridors.
  - Low-risk measures might be allowed only for inflows to Samoa, with outflows held separate due to higher risk.
  - Initially impose caps on account balance and overall turnover in this type of MTO account to limit potential for material ML risks.
  - Onboarding risk assessment should confirm MTO operates only in low-risk corridor(s), that customer base and transaction values align with the low-risk remittance product, and that MTO can operate strictly within the product parameters.
  - Banks’ scrutiny should focus on core CDD requirements: customer identification, record keeping, transaction screening to prevent structuring.
  - Limit remittances by MTOs to natural persons, excluding legal persons and arrangements, to simplify regulatory requirements (e.g., no beneficial ownership requirements).
  - Allow explicit use of existing regional risk assessments by banks and MTOs in their own risk assessments to reduce resource burdens and provide regulatory certainty.
  - As part of CDD, information on nature and purpose of business relationship should not require collecting specific additional information for the low-risk MTO account.
  - Banks can limit ongoing monitoring frequency and intensity compared to standard correspondent accounts, focusing on ensuring MTO activity remains within the low-risk product.

### Supervisory cooperation and institutional mechanisms
- Recommendations:
  - AML/CFT supervisors might conduct special on-site inspections for MTOs interested in the low-risk remittance product to assure core controls are in place, ensure activity is low risk, and confirm management fit and proper tests.
  - On-site inspections could be conducted jointly by Samoan, New Zealand and Australian supervisors of MTOs and banks.
  - Consider establishing or deepening AML/CFT supervisory colleges for banks and MTOs providing the low-risk remittance product to facilitate information exchange and reduce onboarding friction.

### Regulatory harmonization and broader policy context
- Observations:
  - Legal differences (definitions, reporting thresholds, preventive measures) across jurisdictions create frictions for cross-border payments including remittances.
  - Project experience: Tonga Development Bank remittance-sending mechanism significantly cut remittance costs and is used by more than 95 percent of Tongan seasonal workers in New Zealand.
- Broader considerations:
  - Addressing CBR pressures should be considered in the context of social, labor, and foreign policy objectives given remittances’ critical role.
  - Unintended consequences of excessive de-risking:
    - Higher barriers to entry for MTOs reduce competition and increase costs, making informal remittance channels (hawala-type networks, cash couriers, barter exchanges) more attractive.
    - Shift to informal mechanisms increases ML/TF risks, undermines AML/CFT effectiveness, and complicates detection, tracing, and confiscation of proceeds of crime and terrorist financing.
    - New Zealand’s 2019 NRA noted that de-risking may force remittance businesses underground and displace customers to higher-risk operators, increasing size/value of non-regulated channels.

### Notable contextual examples and references
- AUSTRAC imposed AUD 1.3 billion penalty on a prominent bank for compliance failings related to International Funds Transfer (transfers above AUD 10 000), correspondent account fund movement risk assessments, and suspicious transactions associated with possible child exploitation.
- FATF-related guidance cited: FATF Guidance on PEPs (2012) and FATF Guidance on Financial Inclusion (2017).

*Source: sipea2025061 - 25. While MTOs’ AML/CFT controls are less robust, they have improved. The remaining — extract from provided IMF content.*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025061.pdf_