## _cr07221

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### Executive Summary — Overview and context
- Samoa implemented key legal and institutional changes since 2002 to strengthen supervision of offshore (international) and domestic banks:
  - Samoa International Finance Authority (SIFA) established in 2005 (SIFA Act 2005) to supervise entities providing financial services to nonresidents.
  - International Banking Act 2005 (IBA) enacted in May 2005 replacing the Offshore Banking Act 1987 and revising supervisory and licensing framework for international banks.
  - Money Laundering Prevention Act 2007, Mutual Legal Assistance on Criminal Matters Act 2007, and Proceeds of Crime Act 2007 enacted; supporting regulations and guidance being prepared and expected to be issued later this year.

### Economic background and financial sector significance
- Main contributors: manufacturing, construction, tourism; heavy dependence on remittances.
- Remittances: about 24 percent of GDP in 2004.
- Population and income:
  - Samoa’s population: estimated at about 179,186 in 2006.
  - Per capita GDP: US$ 2,300 in 2005/06.
  - Real per capita income growth: about 3 percent per annum over the past decade and a half.
- Financial conditions and exposures:
  - Private sector credit growth: accelerated to about 30 percent year-on-year (end-September 2006).
  - Official reserves at end September 2006: declined to just below four months of import cover.
- Offshore and financial sector contributions (2005 and 2005/06):
  - Offshore financial sector contributed roughly 1.1 percent of GDP in 2005.
  - Total financial sector (domestic and offshore) contributed 9.5 percent of GDP in 2005.
  - Offshore sector contributed 3.9 percent of fiscal revenue in 2005/06.
  - Personnel directly employed in the offshore sector: 36 persons at end February 2007.
  - Total employment in the financial sector: 1,142 persons in 2005.

### International banking — structure, size, and supervision
- Structure and scale:
  - Number of international banks at end-2006: six.
  - Peak number: 18 in 1997; declined after tighter regulatory controls in 1998 and 2005.
  - Total assets of offshore banks at end-2005: $112 million.
  - All six international banks: restricted operations providing services only to persons/entities listed in license application; none accepts deposits from the nonresident public.
  - Licensing vintages: 2 licensed in 1993-94, 2 in 1996, 2 in 2004-05.
  - License types: three hold a B1 license and three a B2 license; B2 is most restrictive and does not allow deposit taking from the nonresident public.
- Regulatory and supervisory arrangements:
  - Under IBA, regulation and supervision responsibility shared between the Minister of Finance and the Inspector of International Banks (Inspector is chief executive of SIFA).
  - Licensing and operational requirements:
    - All licensees must establish a physical presence in Samoa: a place of business at a fixed address (not a post office box or electronic address) employing one or more individuals full-time and maintaining operations and banking related records.
    - An international bank must have not less than two directors, at least one of whom must be a resident of Samoa; no requirement that mind and management reside in Samoa.
    - IBA assigns exclusive legal powers to the Minister of Finance to grant licenses, impose additional license conditions, revoke licenses, impose corrective measures, and apply to the court for an international bank to be wound up.
- Observations and implications:
  - Compliance with the Basel Core Principles (BCPs) has improved considerably since the previous assessment.
  - Current supervisory arrangements considered adequate given the limited scale of international banking, but additional measures needed to fully align with international standards to counter reputation risk.
  - Consider enhancing operational independence of SIFA and address potential conflict between SIFA’s promotional and supervisory roles.
  - SIFA should put in place a comprehensive business continuity plan.

### Domestic banking — performance and supervision
- Sector structure and activity:
  - Domestic financial sector dominated by banking industry; assets of the four commercial banks at end-2006 equaled almost 50 percent of total assets of the sector (including the central bank).
  - Ownership: two commercial banks foreign owned and two locally owned.
  - Loans and advances comprised 80.3 percent of banks’ assets at end-September 2006.
  - Main lending areas: construction, mortgages, transportation; increase in lending for consumption mirrored in imports.
  - Foreign currency exposure limited; lending in foreign currency requires prior approval of the central bank.
- Soundness indicators (end-September 2006):
  - All banks comply with minimum risk-weighted capital adequacy ratio of 15 percent.
  - Total capital to risk-weighted assets: 23.8 percent.
  - Tier-one capital to risk-weighted assets: 17.7 percent.
  - Non-performing loans to total loans: 3.1 percent (edged down from 5.4 percent a year earlier).
  - Total provisions to total loans: 3 percent.
- Supervisory needs for domestic banks:
  - Strengthen supervision through issuance of additional guidance on banks’ risk taking activities and corporate governance.
  - Issue more detailed guidance on banks’ credit policies.
  - Strengthen monitoring and compliance on connected lending and large exposures.
  - Require banks to have comprehensive risk management policies to control non-credit risks (interest rate, market, operational, and country risks).
  - Provide guidance on corporate governance policies and procedures.
  - Amend legislation to provide the central bank authority to effect change in banks’ Boards of Directors and senior management.

### Offshore nonbank activity
- International business companies (IBCs) and trustee / company service providers (TCSPs):
  - Formation of IBCs is the most significant aspect of the offshore sector.
  - Registered companies as of end-2006: 20,806.
  - Average registrations over 2004-06: about 4,700 companies annually.
  - TCSPs: seven; all seven are wholly owned subsidiaries of foreign groups; services include company formation, registered office provision, nominee corporate director/secretary, and in some cases asset protection and tax planning.
- Offshore insurance:
  - Offshore insurance activity limited: three offshore insurance companies at end-2005 (compared with five in 2002).
  - One nonlife insurer engaged in general insurance assuming risk from countries in Asia; two captives insure their own group risks.

### AML/CFT framework and implementation
- Legislative updates:
  - Money Laundering Prevention Act 2007, Mutual Legal Assistance on Criminal Matters Act 2007, and Proceeds of Crime Act 2007 enacted.
  - Supporting regulations and guidance to implement these Acts are being prepared and expected to be issued later this year.
- Implementation responsibilities:
  - Agencies include Central Bank of Samoa (CBS), SIFA, Financial Intelligence Unit (FIU) within the CBS, police, customs, attorney general’s office and judiciary.
- Recommendation:
  - Central bank should implement the new AML/CFT legislation by issuing expeditiously the supporting regulations and guidelines.

### Compliance with Basel Core Principles and supervisory recommendations
- Compliance status:
  - Compliance with the BCPs has improved considerably since the 2002 assessment, but further measures needed to fully align with international standards and mitigate reputation risk.
- Key supervisory recommendations:
  - Continue and expand monitoring of banks’ activities and risk exposures through on-site examinations (particularly for international banks).
  - Introduce minimum capital requirements for each bank based on its risk profile.
  - Issue guidance on banks’ policies, procedures, and systems related to risk management and corporate governance.
  - Consider disseminating aggregate data on offshore sector activities.

### Priority recommendations (summarized)
- General:
  - Enhance operational independence of SIFA in supervising international banks.
  - Address potential conflict between SIFA’s promotional and supervisory roles.
  - Consider disseminating aggregate data on offshore sector activities.
  - SIFA to develop a comprehensive business continuity plan.
- International banking:
  - Continue and expand on-site examinations.
  - Introduce minimum capital requirements tailored to each international bank’s risk profile.
  - Issue regulatory guidance on risk management and corporate governance.
- Domestic banking:
  - Issue detailed guidance on credit policies.
  - Strengthen monitoring of connected lending and large exposures.
  - Require comprehensive risk management policies for non-credit risks.
  - Provide corporate governance guidance.
  - Amend legislation to allow CBS authority to effect changes in banks’ Boards and senior management.
  - Implement new AML/CFT regulations and guidelines expeditiously.

### Nonbank sector — National Provident Fund, Development Bank, and other providers
- National Provident Fund: sole pension fund; participation mandatory for all public and registered private sector entities.
- Development Bank of Samoa: fully state-owned; finances projects in priority sectors such as fishing and tourism.
- Money transfer agents: increased from 5 to 15 since last assessment due to CBS promotion of remittances through formal channels.
- Counts as of end-2006:
  - Credit unions: 18
  - Insurance companies: 4
  - Insurance agents: 4
  - Money changers: 6
  - Money lenders: 6

### Domestic vs. offshore separation and governance
- Domestic and offshore sectors are legally separated; offshore entities not permitted to transact business with Samoan residents unless permission obtained (none has applied).
- All international banks are foreign owned and not owned by financial institutions.
- Domestic commercial banks may conduct offshore business but none has pursued aggressively; some provide limited services to IBCs and international banks for local fee payments.
- Governance concerns:
  - Potential compromise to SIFA operational independence because supervision/regulation shared with Minister of Finance; recommendation to consider transferring Minister’s licensing and other powers to SIFA (or Inspector) at an opportune time.
  - SIFA’s dual mandate (supervision and promotion) creates potential conflict; consider mechanisms to resolve or transfer promotional function.

### Cross-border cooperation and information exchange
- Samoa’s memberships and observers:
  - Member of Association of Supervisors of Pacific Countries
  - Observer in the Offshore Group of Banking Supervisors
  - Member of the Offshore Group of Insurance Supervisors
  - Member of the International Association of Insurance Supervisors
- Samoa does not have Memorandums of Understanding with other supervisors but cooperation reported timely; CBS exchanges information with Australian Prudential Regulation Authority for two Samoan-licensed subsidiary banks.
- Legal provisions (FIA and IBA) authorize disclosure of confidential supervisory information to foreign supervisors performing corresponding functions.

### Business continuity and data dissemination
- SIFA provided most minimum requested data to IMF’s Information Dissemination and Monitoring Framework initiative but does not publish or disseminate offshore sector data.
- Recommendation: SIFA strongly encouraged to consider disseminating aggregate offshore sector data.
- Business continuity: SIFA has basic plans for natural shocks (e.g., cyclone); recommendation to develop comprehensive business continuity plan and procedures (e.g., for avian flu).

### Findings and recommended supervisory measures — Selected CP-focused actions
- CP1 (Objectives, autonomy, powers and resources):
  - Introduce legal definition of a large exposure for reporting purposes.
  - Strengthen CBS powers to control banks’ investments in non-financial enterprises.
  - Consider granting CBS authority for consolidated supervision.
  - Increase human resources for Financial Institutions Department (FID) to support increased on-site examinations.
- CP5 (Investment Criteria):
  - Amend FIA to limit proportion of equity of an individual non-financial enterprise a bank may acquire (within existing aggregate limit of 10 percent of its capital plus unimpaired reserves); limit such investments to a maximum of 15 percent of share capital or voting rights.
  - For international banks, amend IBA to limit proportion within existing aggregate limit of 60 percent of capital plus unimpaired reserves and cap each investment at 15 percent.
- CP6 (Capital Adequacy):
  - Introduce specific capital charges for market price risk and foreign exchange risk.
  - Subject each international bank to minimum capital requirements reflecting individual risk profile.
- CP7–CP10 (Credit, Loan Evaluation, Large Exposures, Connected Lending):
  - Issue detailed guidance on credit policies and loan evaluation; require regular valuation of collateral; collect information on connected lending; require reporting of all single exposures exceeding 10 percent of capital; prohibit single exposures exceeding 25 percent of capital for international banks without prior permission.
- CP13–CP14 (Other Risks; Internal Controls and Audit):
  - Issue guidance on operational risk, interest rate risk, liquidity risk, market risk, internal controls, audit and corporate governance.
  - Amend FIA to enable CBS to effect changes in a bank’s board and senior management where appropriate.
- CP15 (Money Laundering):
  - CBS (as Money Laundering Authority) should expeditiously complete drafting and issue required regulations and guidance under MLPA 2007.
- CP16–CP19 (Supervisory Methods and Information Validation):
  - Pursue full implementation and expansion of on-site examination program; validate supervisory information; expand off-site reporting to include classified assets, connected lending, country exposures, liquidity, and interest rate risk.
- CP21 (Accounting Standards):
  - Issue standards on corporate governance; international banks not required to make public disclosures unless accepting deposits from general public.
- CP22 (Remedial Measures):
  - Consider amending FIA to limit court involvement for certain administrative remedial measures.

### AML/CFT, FIU, and legal measures — operational details and recommendations
- MLPA 2007 Part III (Obligations To Keep Records and Verify Identity) outlines customer identification, verification, record keeping, maintenance, and suspicious transaction reporting requirements (referenced sections 16–22).
- Mandatory STR obligations where reasonable grounds exist that a transaction may relate to a serious offence, money laundering, terrorist financing, or preparatory to such offences.
- Anti tipping-off provisions (Section 27) and strengthened protections for reporting parties and supervisory authority personnel; privileged lawyer-client communications remain protected.
- FIU establishment and powers:
  - FIU physically established with dedicated staff; awaited AML/CFT mentor seconded under PALP initiative.
  - AUSTRAC assisted with specialized data-based computer system (FIU-in–the box) for STR storage and analysis.
  - FIU operational manuals and guidelines developed.
  - FIU powers include receiving foreign and domestic reports, accessing public and commercial databases, analysing reports, requesting information from agencies, entering MOUs with national authorities (Police, Customs, Immigration, CBS, SIFA), spontaneous sharing with foreign agencies, providing reports to law enforcement and supervisory authorities, requesting license review for alleged breaches, and destroying an STR 5 years after receipt if no further activity.
- Forfeiture and mutual assistance:
  - Two Acts enacted on 7 February 2007: Proceeds of Crime Act and Mutual Legal Assistance in Criminal Matters Act 2007.
  - Proceeds of Crime Act definitions:
    - “proceeds of crime” (section 6): “any property wholly or partly derived or realised whether directly or indirectly from a serious offence whether situated within or outside Samoa. Property can be proceeds of crime even if no person has been convicted of an offence.”
    - “Serious offence” (section 2): means an offence a. against any law of Samoa that would constitute unlawful activity or b. against the law of a foreign state that if the relevant act or omission occurred in Samoa would be an offence that constitutes unlawful activity.
    - “Unlawful activity” means any act or omission that constitutes an offence that is punishable under the laws of Samoa for a maximum period of not less than 12 months.
- Trustee companies and company service providers:
  - Trustee companies are “financial institutions” under MLPA 2007 (section 16) and must identify/verify customers in specified circumstances; unable to obtain satisfactory evidence must report to FIU (section 17); must keep records for 5 years (section 18); must monitor unusual or large transactions and those involving jurisdictions with inadequate AML/CFT systems.
  - Draft Trustee Companies Bill 2005 and a Draft Regulatory Code (compiled May 2006) include fit and proper criteria and regulator duties for AML reviews.
  - Recommendation: conduct regular on-site visits to trustee companies and consider specific exchange-of-information agreements with host-country supervisors.
  - Responses: SIFA implemented preparatory training and conducted onsite visits with MLPA personnel in late 2005/early 2006; one trustee company lost its license in 2006 following on-site inspections.
- Other legislative and supervisory developments:
  - Insurance Bill 2007 in Parliament (second reading in early February; at Parliamentary Committee stage for final review before seeking Parliament approval around end June 2007).
  - Policy adopted to require future international insurance applicants to comply with other countries’ laws where products are sold; license application form to be amended.
  - SIFA’s membership of OGIS and IAIS supports communication with other insurance regulators; International Insurance Act 1988 provides for information sharing.
  - Amendments to Financial Institutions Act prepared to regulate investment and securities business under the CBS.
  - International Mutual Funds Bill drafted in 2004 at Attorney General’s Office awaiting approval.

### Key statistics — Structure of the Domestic Financial System, 2002–06 (In millions of tala; end of period)
- Total assets: 2002 1,018.3; 2003 1,107.3; 2004 1,247.3; 2005 1,345.7; 2006 1,463.5
- Central Bank of Samoa: 2002 147.2; 2003 145.5; 2004 196.3; 2005 196.9; 2006 184.5
- Commercial Banks total: 2002 449.9; 2003 502.0; 2004 571.6; 2005 636.3; 2006 729.6
  - ANZ: 2002 276.1; 2003 305.4; 2004 314.4; 2005 316.2; 2006 380.1
  - Westpac Bank Samoa Ltd: 2002 127.8; 2003 133.3; 2004 147.9; 2005 170.1; 2006 175.1
  - National Bank of Samoa: 2002 46.0; 2003 51.1; 2004 64.6; 2005 88.4; 2006 100.7
  - Samoa Commercial Bank: 2002 0.0; 2003 12.2; 2004 44.7; 2005 61.6; 2006 73.7
- Nonbank financial institutions total: 2002 421.2; 2003 459.8; 2004 479.3; 2005 512.5; 2006 549.4
  - Insurance sector: 2002 58.3; 2003 62.2; 2004 68.0; 2005 70.4; 2006 70.5
    - Samoa Life Assurance Corporation: 2002 27.6; 2003 30.0; 2004 29.8; 2005 30.8; 2006 31.9
    - National Pacific Insurance Corporation: 2002 30.7; 2003 32.2; 2004 31.1; 2005 30.8; 2006 33.8
    - Colonial Life Insurance: 2002 0.0; 2003 0.0; 2004 2.1; 2005 3.6; 2006 4.8
    - Progressive Insurance 1/: 2002 0.0; 2003 0.0; 2004 5.0; 2005 5.0; 2006 5.2
  - National Provident Fund: 2002 261.7; 2003 284.3; 2004 300.7; 2005 320.2; 2006 328.8
  - Development Bank of Samoa: 2002 74.6; 2003 84.4; 2004 83.3; 2005 92.4; 2006 118.9
  - Public Trust Office: 2002 10.2; 2003 11.1; 2004 9.9; 2005 9.4; 2006 9.4
  - Housing Corporation: 2002 16.4; 2003 17.8; 2004 17.4; 2005 20.1; 2006 21.8

### Coordination, legal gateways, and preconditions for effective supervision
- Coordination between CBS and SIFA:
  - Ensured through ex officio membership of Chief Executive Officer of Ministry of Finance on CBS board and SIFA’s board chaired by Governor of CBS.
  - Legal gateways permit CBS and SIFA to disclose confidential information to each other and to foreign bank supervisors.
- Financial Institutions Department (FID) role:
  - Functions as Central Bank’s supervisory unit and as country’s Financial Intelligence Unit (FIU) responsible for collecting and processing AML/CFT reports.
- Publications and transparency:
  - CBS publishes a Statistical Bulletin and an Annual Report.
  - No legal requirements for CBS or SIFA to review performance or report publicly on supervisory responsibilities.
- Legal and market preconditions:
  - Freehold land: about four percent of total land.
  - Customary land: about eighty percent.
  - Courts regarded as sound; system exists for registration of ownership interests in motor vehicles.
  - Nascent credit information and debt collection service established.
  - Active professional body of accountants; international accounting and auditing standards generally the norm.
  - No deposit insurance; depositors treated as general creditors.

*Source: Executive Summary and selected sections of the IMF assessment document (Samoa) contained in the supplied content.*

### Executive Summary ......................................................................................................

### Executive Summary

### Overview and context
- Samoa has taken steps to address many of the recommendations of the 2002 assessment for strengthening the supervision of both offshore (international) and domestic banks.
- Key legal and institutional changes:
  - The Samoa International Finance Authority (SIFA) was established in 2005 as an autonomous agency (SIFA Act 2005) to supervise entities providing financial services to nonresidents.
  - The International Banking Act 2005 (IBA) enacted in May 2005 replaced the Offshore Banking Act 1987 and revised the supervisory and licensing framework for international banks.
  - The AML/CFT legislative framework was updated with the Money Laundering Prevention Act 2007, the Mutual Legal Assistance on Criminal Matters Act 2007, and the Proceeds of Crime Act 2007; supporting regulations and guidance are being prepared and are expected to be issued later this year.

### Economic background and financial sector significance
- Main contributors to Samoa’s economy: the manufacturing, construction, and tourism sectors; heavy dependence on remittances.
- Remittances amounted to about 24 percent of GDP in 2004.
- Samoa’s population was estimated at about 179,186 in 2006 with per capita GDP of US$ 2,300 in 2005/06.
- Real per capita income increased by about 3 percent per annum over the past decade and a half.
- Private sector credit growth accelerated to about 30 percent year-on-year (end-September 2006).
- Official reserves at end September 2006 declined to just below four months of import cover.
- Offshore sector contributions (2005 and 2005/06):
  - Offshore financial sector contributed roughly 1.1 percent of GDP in 2005.
  - The total financial sector (domestic and offshore) contributed 9.5 percent of GDP in 2005.
  - Offshore sector contributed 3.9 percent of fiscal revenue in 2005/06.
  - Personnel directly employed in the offshore sector: 36 persons at end February 2007.
  - Total employment in the financial sector: 1,142 persons in 2005.

### International banking: structure, size, and supervision
- Size and nature:
  - There were six international (offshore) banks at end-2006.
  - The number of international banks peaked at 18 in 1997 and declined following tighter regulatory controls in 1998 and 2005.
  - Total assets of offshore banks amounted to $112 million at end-2005.
  - All six international banks are restricted operations limited to providing services to those persons or entities listed in the license application; none accepts deposits from the nonresident public.
  - Of the six banks, 2 were first licensed in 1993-94, 2 in 1996, and 2 in 2004-05.
  - Three hold a B1 license and three a B2 license; a B2 license is the most restrictive and does not allow deposit taking from the nonresident public.
- Regulatory and supervisory arrangements:
  - Under the IBA, responsibility for regulation and supervision of international banks is shared between the Minister of Finance and the Inspector of International Banks (the Inspector is also the chief executive of SIFA).
  - All licensees must establish a physical presence in Samoa: a place of business at a fixed address (not a post office box or electronic address) that employs one or more individuals full-time and maintains operations and banking related records.
  - An international bank must have not less than two directors, at least one of whom must be a resident of Samoa; there is no requirement that mind and management must reside in Samoa.
  - The IBA assigns exclusive legal powers to the Minister of Finance to grant licenses and to impose additional license conditions, revoke licenses, impose corrective measures, and apply to the court for an international bank to be wound up.
- Observations and implications:
  - Compliance with the Basel Core Principles (BCPs) for supervision of international and domestic banks has improved considerably since the previous assessment.
  - Current supervisory arrangements are considered adequate given the limited scale of international banking, but additional measures are needed to bring them fully into line with international standards to counter reputation risk.
  - Consideration should be given to enhancing the operational independence of SIFA in supervising international banks and addressing the potential for conflict between SIFA’s promotional and supervisory roles.
  - SIFA should put in place a comprehensive business continuity plan.

### Domestic banking: performance and supervision
- Sector structure and activity:
  - The domestic financial sector is dominated by the banking industry; the assets of the four commercial banks, at end-2006, equaled almost 50 percent of total assets of the sector (including the central bank).
  - Two commercial banks are foreign owned and two are locally owned.
  - Loans and advances comprised 80.3 percent of banks’ assets at end-September 2006.
  - Main lending areas: construction, mortgages, transportation; increase in lending for consumption mirrored in imports.
  - Foreign currency exposure is limited; lending in foreign currency requires prior approval of the central bank.
- Soundness indicators (end-September 2006):
  - All banks comply with the minimum risk-weighted capital adequacy ratio of 15 percent.
  - Total capital to risk-weighted assets: 23.8 percent.
  - Tier-one capital to risk-weighted assets: 17.7 percent.
  - Non-performing loans to total loans: 3.1 percent (edged down from 5.4 percent a year earlier).
  - Total provisions to total loans: 3 percent.
- Supervisory needs for domestic banks:
  - Strengthen supervision further through issuance of additional guidance on banks’ risk taking activities and corporate governance.
  - Issue more detailed guidance on banks’ credit policies.
  - Strengthen monitoring and compliance on connected lending and large exposures.
  - Introduce a requirement that banks have in place comprehensive risk management policies to control their non-credit risks (e.g., interest rate, market, operational, and country risks).
  - Provide guidance to banks on establishment of corporate governance policies and procedures.
  - Amend legislation to provide the central bank with the authority to effect change in banks’ Boards of Directors and senior management.

### Offshore nonbank activity
- International business companies (IBCs) and trust and company service providers (TCSPs):
  - Formation of IBCs is the most significant aspect of the offshore sector.
  - As of end-2006, 20,806 companies were registered.
  - On average, over 2004-06, about 4,700 companies were registered annually.
  - There were seven TCSPs; all seven are wholly owned subsidiaries of foreign groups; services include company formation, registered office provision, nominee corporate director/secretary, and in some cases asset protection and tax planning.
- Offshore insurance:
  - Offshore insurance activity is limited: three offshore insurance companies at end-2005 (compared with five in 2002).
  - One nonlife insurer engaged in general insurance assuming risk from countries in Asia; two captives insure their own group risks.

### AML/CFT framework and implementation
- Legislative updates:
  - The Money Laundering Prevention Act 2007, the Mutual Legal Assistance on Criminal Matters Act 2007, and the Proceeds of Crime Act 2007 have been enacted.
  - Supporting regulations and guidance to implement these Acts are being prepared and are expected to be issued later this year.
- Implementation responsibilities:
  - Relevant agencies for implementing the AML/CFT regime include the Central Bank of Samoa (CBS), SIFA, the Financial Intelligence Unit (FIU) which was established within the CBS, the police, customs, the attorney general’s office and the judiciary.
- Recommendation:
  - The central bank should implement the new AML/CFT legislation by issuing expeditiously the supporting regulations and guidelines.

### Compliance with Basel Core Principles and supervisory recommendations
- Compliance status:
  - Compliance with the BCPs has improved considerably since the 2002 assessment.
  - Further measures are needed to fully align supervisory arrangements with international standards, especially to mitigate reputation risk.
- Key operational recommendations for supervision:
  - Continue and expand monitoring of banks’ activities and risk exposures through on-site examinations (particularly for international banks).
  - Introduce minimum capital requirements for each bank based on its risk profile.
  - Issue guidance on banks’ policies, procedures, and systems related to risk management, as well as on their corporate governance.
  - Consider disseminating aggregate data on the activities of the offshore sector.

### Priority recommendations (Box 1)
- General issues:
  - Consideration should be given to enhancing the operational independence of SIFA in supervising international banks.
  - Address the potential for conflict between the promotional and supervisory roles of SIFA.
  - Consider disseminating aggregate data on the activities of the offshore sector.
  - SIFA should put in place a comprehensive business continuity plan.
- International banking:
  - Continue and expand monitoring of banks’ activities and risk exposures through on-site examinations.
  - Introduce minimum capital requirements for each bank based on its risk profile.
  - Issue guidance on banks’ policies, procedures, and systems related to risk management, as well as on their corporate governance.
- Domestic banking:
  - Issue more detailed guidance on banks’ credit policies.
  - Strengthen monitoring and compliance on connected lending and large exposures.
  - Introduce a requirement that banks have in place comprehensive risk management polices to control their non-credit risks (e.g., interest rate, market, operational, and country risks).
  - Provide guidance to banks on establishment of corporate governance policies and procedures.
  - Amend legislation to provide the central bank with the authority to effect change in banks’ Boards of Directors and senior management.
  - Implement the new AML/CFT legislative framework by issuing the supporting regulations and guidelines.

*Source: Executive Summary of the IMF assessment document (Samoa) contained in the supplied content.*

### 19.      In the nonbank sector the National Provident Fund and the Development Bank

### 19. In the nonbank sector the National Provident Fund and the Development Bank

### Nonbank sector structure and developments
- The National Provident Fund is the sole pension fund and participation is mandatory for all public and registered private sector entities.
- The Development Bank of Samoa is fully state-owned and provides financing for projects in priority sectors, such as fishing and tourism.
- The number of money transfer agents increased from 5 to 15 since the last assessment as a result of CBS promoting remittances into Samoa through formal channels by licensed remitters while minimizing transaction costs.
- As of end-2006, counts of nonbank financial service providers were:
  - 18 credit unions
  - 4 insurance companies
  - 4 insurance agents
  - 6 money changers
  - 6 money lenders

### Domestic vs. offshore separation
- The domestic financial sector in Samoa is separated from the offshore sector.
- Offshore entities are not permitted to transact business with Samoan residents.
- The IBA contains provision for international banks to apply to the Minister of Finance for permission to conduct banking business with residents; to date none has applied.
- All international banks are foreign owned and are not owned, either directly or indirectly, by any financial institutions.
- Domestic commercial banks are permitted to conduct offshore business but none has pursued this aggressively; some domestic banks provide limited banking services to some of the IBCs and international banks to enable payment of local fees.

### Findings from earlier assessments and authorities’ response
- The 2002 assessment identified significant weaknesses in supervision of both offshore and domestic banks, including:
  - Offshore: require physical presence with mind and management; permit supervisors adequate access to customer information; apply “fit and proper” criteria; implement on-site supervision; apply same supervisory standards as domestic banks.
  - Domestic: develop capacity for on-site examinations and deeper off-site analysis; strengthen legislative powers related to licensing and supervision; introduce prudential regulation covering lending and other risks; establish closer links with other supervisors.
- Actions taken by authorities since 2002:
  - Prohibition of shell banks and introduction of physical presence requirements for international banks.
  - Requirement that all records of international banks be maintained in Samoa with supervisor access to those records, including individual customer accounts, and enforcement powers.
  - Fit and proper vetting required for new applications and ongoing supervision (no requirement that decision-making management be located in Samoa).
  - On-site examinations of international banks initiated, scope initially focused on physical presence and AML/CFT compliance; prudential guidelines not yet issued.
  - For domestic banks, capacity development for on-site examinations (technical assistance and training) and adoption of a risk-based approach combining off-site surveillance and qualitative judgment.
  - Strengthened relationships with banks’ external auditors and developing communications with other supervisory agencies; CBS considering expanding supervisory guidelines and legislative changes.

### Governance and institutional issues
- Potential compromise to SIFA operational independence exists because responsibility for supervision and regulation of international banks is shared with the Minister of Finance; in practice no significant governmental interference has been observed.
- Recommendation: authorities should keep institutional arrangements under review and consider transferring the Minister’s licensing and other powers under the IBA to SIFA (or the Inspector of International Banks) at an opportune time.
- Potential conflict of interest: SIFA’s dual functions include “to monitor and supervise the conduct of international financial services provided within Samoa” and “to promote Samoa as a center for international financial services.”
  - Recommendation: consider mechanisms to resolve potential conflicts or transfer promotional function to another body.

### Cross-border cooperation and information exchange
- Samoa participates in international groups facilitating cooperation and information exchange:
  - Member of the regional Association of Supervisors of Pacific Countries
  - Observer in the Offshore Group of Banking Supervisors
  - Member of the Offshore Group of Insurance Supervisors
  - Member of the International Association of Insurance Supervisors
- Samoa does not have Memorandums of Understanding with supervisors in other countries, but this has not hindered cooperation; sample foreign supervisors indicated timely information sharing.
- CBS communicates and exchanges information with Australian Prudential Regulation Authority for two Samoan-licensed subsidiary banks.
- FIA and IBA authorize disclosure of confidential supervisory information to foreign supervisors performing corresponding functions.

### Other issues and recommendations
- SIFA participation in IMF’s Information Dissemination and Monitoring Framework initiative: SIFA has provided most minimum requested data but does not publish or otherwise disseminate data on the offshore sector.
  - Recommendation: SIFA is strongly encouraged to consider disseminating aggregate data on offshore sector activities.
- Business continuity: SIFA has some basic plans for natural shocks (e.g., cyclone).
  - Recommendation: SIFA, in consultation with other agencies and the finance industry, should develop a comprehensive business continuity plan and procedures for natural shocks or similar events (e.g., an avian flu outbreak).

### Banking supervision — Offshore banks (findings and recommendations)
- Compliance with the BCPs for supervision of international banks has improved considerably since the previous assessment.
- International Banking Act 2005 provides powers to supervise and regulate international banking operations; legal protection and information sharing provisions are now fully compliant.
- Physical presence requirement enables on-site examinations; a working draft on-site examination manual prepared.
- On-site examinations of AML/CFT and physical presence requirements have been conducted in all international banks; examinations of other risk areas are being considered.
- Given current size and scope, depositor-protection supervision of international banks is largely unnecessary; risk of adverse developments in international banks impacting domestic or international financial systems is not material. Samoa remains exposed to reputation risk.
- Recommendations to strengthen supervision in line with international standards:
  - continue to use on-site examinations to better understand operations, owner risks, effectiveness of risk controls, and reputation risks;
  - introduce a minimum capital requirement for each international bank (based on Basel standards) reflecting its individual risk profile;
  - issue a regulatory code providing guidance on minimum standards for banks’ policies, procedures, and systems covering counterparty evaluation, loan review and provisioning, large exposures, connected lending, country risk, market risk, liquidity risk, operational risk, interest rate risk, internal controls and accounting systems, and corporate governance;
  - amend the IBA to control more effectively banks’ transactions with connected parties.

### Banking supervision — Domestic banks (findings and recommendations)
- Supervision of domestic banks shows considerable improvement compared with the previous assessment.
- Introduction of an on-site-examination program complements off-site surveillance; a comprehensive on-site examination manual with a risk-based approach has been adopted.
- On-site examinations conducted in all banks on credit risk management and AML/CFT; targeted examinations of other significant risk areas planned on a two-year cycle.
- Recommended steps for CBS to further strengthen supervision of domestic banks:
  - issue more detailed guidance to banks on expected standards in their individual credit policies and use these to evaluate systems and controls for managing credit risk;
  - collect information on connected lending; use off-site surveillance and examinations to monitor compliance with restrictions on such exposures; seek legal power to rule on specific instances of connected lending as needed;
  - introduce a requirement for banks to have comprehensive risk management policies, approved at Board level, to identify, evaluate, monitor and control all material non-credit risks (interest rate, market, country, operational risks); assess adequacy of these policies during ongoing supervision;
  - seek amendment of the FIA to have authority to control the establishment of subsidiary companies by banks within the existing aggregate ceiling of 60 percent of capital and reserves;
  - require banks to report all single exposures which exceed 10 percent of capital (the present quarterly return of each bank’s 10 largest borrowers may not capture all significant large exposures and does not provide sufficient information for effective monitoring of concentration risk);
  - seek amendment of the FIA to have authority to effect changes in banks’ Boards of Directors and senior management;
  - provide guidance to banks on establishing corporate governance policies and procedures;
  - expeditiously complete and gain approval of new regulations and guidance to implement the new AML/CFT legislative framework.

### Key statistics — Structure of the Domestic Financial System, 2002-06 (In millions of tala; end of period)
- Total assets: 2002 1,018.3; 2003 1,107.3; 2004 1,247.3; 2005 1,345.7; 2006 1,463.5
- Central Bank of Samoa: 2002 147.2; 2003 145.5; 2004 196.3; 2005 196.9; 2006 184.5
- Commercial Banks total: 2002 449.9; 2003 502.0; 2004 571.6; 2005 636.3; 2006 729.6
  - ANZ: 2002 276.1; 2003 305.4; 2004 314.4; 2005 316.2; 2006 380.1
  - Westpac Bank Samoa Ltd: 2002 127.8; 2003 133.3; 2004 147.9; 2005 170.1; 2006 175.1
  - National Bank of Samoa: 2002 46.0; 2003 51.1; 2004 64.6; 2005 88.4; 2006 100.7
  - Samoa Commercial Bank: 2002 0.0; 2003 12.2; 2004 44.7; 2005 61.6; 2006 73.7
- Nonbank financial institutions total: 2002 421.2; 2003 459.8; 2004 479.3; 2005 512.5; 2006 549.4
  - Insurance sector: 2002 58.3; 2003 62.2; 2004 68.0; 2005 70.4; 2006 70.5
    - Samoa Life Assurance Corporation: 2002 27.6; 2003 30.0; 2004 29.8; 2005 30.8; 2006 31.9
    - National Pacific Insurance Corporation: 2002 30.7; 2003 32.2; 2004 31.1; 2005 30.8; 2006 33.8
    - Colonial Life Insurance: 2002 0.0; 2003 0.0; 2004 2.1; 2005 3.6; 2006 4.8
    - Progressive Insurance 1/: 2002 0.0; 2003 0.0; 2004 5.0; 2005 5.0; 2006 5.2
  - National Provident Fund: 2002 261.7; 2003 284.3; 2004 300.7; 2005 320.2; 2006 328.8
  - Development Bank of Samoa: 2002 74.6; 2003 84.4; 2004 83.3; 2005 92.4; 2006 118.9
  - Public Trust Office: 2002 10.2; 2003 11.1; 2004 9.9; 2005 9.4; 2006 9.4
  - Housing Corporation: 2002 16.4; 2003 17.8; 2004 17.4; 2005 20.1; 2006 21.8

*Source: Central Bank of Samoa; assessment and findings as presented in the provided content.*

### 37.      Co-ordination between the CBS and SIFA is ensured through the ex officio

### _cr07221 - 37.      Co-ordination between the CBS and SIFA is ensured through the ex officio

### Coordination and information sharing
- Co-ordination between the CBS and SIFA is ensured through the ex officio membership of the Chief Executive Officer of the Ministry of Finance on the board of the CBS, while SIFA’s operations are directed by a board chaired by the Governor of the CBS.
- Both the CBS and SIFA have legal gateways permitting them to disclose confidential information to each other and to foreign bank supervisors.
- The Financial Institutions Department (FID) of the CBS functions both as the Central Bank’s supervisory unit and as the country’s Financial Intelligence Unit (FIU) responsible for collecting and processing AML/CFT reports.
- The CBS publishes a Statistical Bulletin and an Annual Report.
- There are no legal requirements for the CBS or SIFA to review their performance or to report publicly on the discharge of their supervisory responsibilities.

### General preconditions for effective banking supervision
- Land tenure constraint:
  - Freehold land accounts for only about four percent of total land.
  - Customary land accounts for about eighty percent.
  - The remainder is government-owned.
- Banks can promptly take possession of real property security on defaulting loans, except customary land which is inalienable.
- A system exists for registration of banks’ ownership interests in motor vehicles.
- A nascent credit information and debt collection service has been established.
- The court system is regarded as sound with legal firms of sufficient quality.
- Financial data availability and reliability varies; the new Companies Act encourages timely preparation of financial statements.
- Active professional body of accountants; international accounting and auditing standards generally the norm.
- There is no deposit insurance in Samoa; depositors are treated as general creditors.

### Main findings (overall)
- Considerable improvement in compliance with the Basel Core Principles since the 2002 assessment; in no case has compliance deteriorated.
- The International Banking Act 2005 brought the legal framework for supervising both domestic and international banks into full compliance.
- Substantial improvements in supervisory techniques, including:
  - Introduction of on-site bank examinations for both domestic and international banks.
  - Moves towards greater analysis of banking risks.
- Remaining weaknesses:
  - Need for strengthening supervision of banks’ risk management.
  - Need for improved monitoring of the financial condition of international banks.

### Objectives, autonomy, powers and resources (CP1)
- Legal framework complies with international standards.
- Recommended improvements:
  - Introduce a legal definition of a large exposure for reporting purposes.
  - Strengthen CBS powers to control banks’ investments in non-financial enterprises.
  - Consider granting CBS legal authority for consolidated supervision (not currently required in practice).
- Staffing:
  - Present FID staff resources appear adequate.
  - More frequent on-site examinations and a more risk-based approach will likely necessitate increased staff numbers.

### Licensing and structure (CPs 2-5)
- Robust criteria and procedures exist for licensing domestic and international banks, permitted activities and investments, and controlling changes of ownership.

### Prudential regulations and requirements (CPs 6-15)
- Domestic banks:
  - Prudential requirements generally aligned with international standards.
  - Lacking comprehensive standards for banks’ risk management.
  - Specific areas needing new or improved supervisory requirements: credit risk policies, connected lending, operating risk, interest rate risk, and (currently immaterial) market and country risks.
- International banks:
  - Prudential requirements for international banks are largely lacking.
  - Authorities recommended to analyze international banks’ risk activities thoroughly and introduce appropriate requirements.
- AML/CFT:
  - Supervision of AML procedures is in line with international standards.
  - Authorities recommended to expedite issuance of regulations and guidelines to implement the Money Laundering Prevention Act 2007.

### Methods of ongoing supervision (CPs 16-20)
- Supervisory methods for domestic and international banks are generally satisfactory.
- CBS and SIFA need to further develop examination programs and use them more systematically to:
  - Verify supervisory reports.
  - Obtain more information on classified assets, connected lending and country exposures.

### Information requirements (CP21)
- Accounting and auditing requirements for domestic and international banks are sound.
- International banks are not required to make any public disclosure of performance or financial condition.
- CBS and SIFA should issue standards on corporate governance.

### Formal powers of supervisors (CP22)
- Supervisors’ powers to take remedial measures are generally adequate.
- Recommendation: CBS should initiate amendment to the FIA to limit court involvement in certain administrative remedial measures.
  - Currently the FIA requires a court order before the CBS may take complete control of a bank’s business, appoint another person to advise a bank, take control of a bank, liquidate a bank, or place a bank in receivership; the court must approve specific powers of the CBS or appointed persons.

### Cross-border banking (CPs 23-25)
- CPs 23 and 24 not applicable: none of the domestic or international banks has any subsidiary inside or outside Samoa.
- Two of the four domestic banks are subsidiaries of foreign banks; supervision follows same practice as for Samoan-owned banks and uses gateway to cooperate with home country supervisor.
- None of the international banks is an affiliate of a foreign bank.

### Domestic Banking Sector: Key recommended actions (selected, by reference)
- CP 1(2) Adequate Resources:
  - CBS should increase human resources available to the FID in view of increased on-site examinations.
- CP 5 Investment Criteria:
  - Amend FIA to limit proportion of equity of an individual non-financial enterprise a bank may acquire (within existing aggregate limit of 10 percent of its capital plus unimpaired reserves).
  - Limit such investments to a maximum of 15 percent of the share capital or voting rights in a non-financial enterprise.
- CP6 Capital Adequacy:
  - CBS should consider introducing straightforward specific capital charges for market price risk and foreign exchange risk.
- CP8 Loan Evaluation and Provisions:
  - CBS should require banks to have mechanisms for regularly valuing collateral and assessing strength of guarantees.
- CP7 Credit Policies:
  - CBS should issue more detailed guidance to banks on expected standards in individual credit policies and use these to evaluate effectiveness of banks’ control of credit risk.
- CP9 Large Exposures:
  - During examinations CBS should strengthen assessment of banks’ systems for identifying groups of related borrowers and controlling concentrations.
  - Banks should be required to report all single exposures which exceed 10 percent of capital.
- CP10 Connected Lending:
  - CBS should have specific discretionary power to make judgments on connected lending and validate compliance via off-site surveillance and on-site examination.
  - CBS should periodically collect information on connected lending exposures.
- CP11 Country Risk:
  - PS should be amended to address country and transfer risk.
  - CBS should periodically collect information on country and transfer risk exposures.
- CP13 Other Risks:
  - CBS should issue PS guidance on Operational Risk and Interest Rate Risk.
- CP14 Internal Controls and Audit:
  - FIA should be amended to include authority for CBS to change a bank’s board and/or senior management in appropriate circumstances and require specific prior approval of proposed changes.
  - CBS should issue guidelines on corporate governance.
- CP15 Money Laundering:
  - CBS, as Money Laundering Authority, should expeditiously complete drafting of required new regulations and guidance.
- CP16 On-Site and Off-Site Supervision:
  - CBS should pursue full implementation of its on-site examination program.
- CP17 Bank Management Contact:
  - CBS should formalize requirement for timely notification of substantive changes and material developments.
- CP18 Off-Site Supervision:
  - CBS should expand periodic reporting requirements to include detailed information on classified assets, connected lending, and country exposures.
- CP19 Validation of Supervisory Information:
  - CBS should expand on-site examination program to include validation of supervisory information.
- CP21 Accounting Standards:
  - CBS should issue guidelines on corporate governance.
- CP22 Remedial Measures:
  - CBS should consider amendments to the FIA to limit court involvement in taking remedial actions.

### International Banking Sector: Key recommended actions (selected, by reference)
- CP5 Investment Criteria:
  - IBA should be amended to limit proportion of equity of an individual non-financial enterprise which an international bank may acquire (within existing aggregate limit of 60 percent of its capital plus unimpaired reserves).
  - Each investment should be limited to a maximum of 15 percent of the share capital or voting rights in that enterprise.
- CP6 Capital Adequacy:
  - Each international bank should be subject to minimum capital requirements reflecting its individual risk profile.
- CP7 Credit Policies:
  - Minister and Inspector should develop a regulatory code for standards expected of international banks’ credit policies, potentially in cooperation with CBS.
- CP8 Loan Evaluation and Provisions:
  - Minister and Inspector should require international banks to have internal systems for regular review, classification and provisioning of loans and exposures.
- CP9 Large Exposures:
  - Regulatory code should require international banks to address concentration risk, define closely related groups, require reporting of all individual exposures exceeding 10 percent of capital, and prohibit single exposures exceeding 25 percent of capital without prior permission of the Inspector.
- CP10 Connected Lending:
  - IBAA should be amended to prevent connected lending on more favorable terms and require board approval with exclusion of affected directors from decision-making.
  - Inspector should require independent information systems for such exposures.
- CP11 Country Risk:
  - Inspector should issue guidance on country risk management and periodically collect information on country and transfer risk exposures.
- CP12 Market Risk:
  - Inspector should assess market risk levels in international banks and issue risk management, internal control, and information systems requirements and limitations; collect information on market risk exposures.
- CP13 Other Risks:
  - Inspector should issue guidance on liquidity risk, operational risk, and interest rate risk.
- CP14 Internal Controls and Audit:
  - Inspector should issue guidance on internal controls, audit and corporate governance; fully implement on-site examination program.
- CP15 Money Laundering:
  - Inspector should take part as necessary in drafting required new regulations and guidelines.
- CP16 On-Site and Off-Site Supervision:
  - Inspector should pursue full implementation of on-site examination program and expand it for comprehensive coverage.
- CP17 Bank Management Contact:
  - Inspector should hold more frequent meetings with overseas directors and senior management of international banks.
- CP18 Off-Site Supervision:
  - Inspector should expand periodic reporting to include classified assets, country exposure, liquidity, and interest rate risk.
- CP19 Validation of Supervisory Information:
  - Inspector should expand on-site program to include validation of supervisory information.
- CP21 Accounting Standards:
  - Inspector should provide for public disclosure of information on international banks that accept deposits from the general public, when applicable, and provide guidance on corporate governance.

### Authorities’ response to the assessment
- The OFC Assessment of Samoa’s financial system was undertaken by the IMF from 27 February to 8 March 2007.
- Assessment recognizes considerable improvements in prudential oversight by CBS and SIFA and alignment with the Basel Core Principles compared to the previous IMF assessment.
- Domestic front:
  - Several recommendations noted; future efforts will focus on legislative changes, prudential statements, regulations, guidelines and staff capacity to manage CBS supervisory responsibility.
- International finance sector:
  - SIFA notes the recommended action plan and will review current legislation and prevailing prudential requirements to improve supervision of international banks per international standards.

### Appendix II — Actions taken in response to the 2002 assessment (AML measures, selected)
- Amendment of definition of financial institution:
  - All offshore entities are caught under the Money Laundering Prevention Act 2007 by virtue of activities deemed to be financial institutions under Schedule 1.
  - International banking business as defined in the International Banking Act 2005 (no. 19) is expressly included in the Schedule, in addition to Trustee Company business as defined by the Trustee Companies Act 1987.
  - Activities of Insurance Companies and trusts are also caught under the Act.
- Broadening scope of MLPA for customer identification, record keeping and STRs:
  - MLPA 2007 Part III “Obligations To Keep Records and Verify Identity” explicitly outlines substantive requirements relating to customer identification, verification, record keeping, maintenance, and suspicious transaction reports.
  - Refer to sections 16, 17, 18, 19, 20, 21 and 22 of the Act.
  - Mandatory obligation for all financial institutions to report suspicious transactions where there are reasonable grounds to suspect or information that a transaction or attempted transaction may be:
    - i. relevant to an investigation/prosecution of a person for a serious offence, a money laundering offence or an offence of terrorist financing or
    - ii. of assistance to the enforcement of Proceeds of Crime Act or
    - iii. related to the commission of a serious offence a Money Laundering or terrorist financing offence.
    - iv. preparatory to an offence of terrorist financing.
- Amendments to MLPA on tipping-off and protection:
  - New anti tipping-off provisions under Section 27 clarify prohibitions on disclosure by supervisory authority officers, employees or agents, or auditors regarding:
    - i. that a report to the FIU had been made;
    - ii. that a financial institution, supervisory authority or auditor has formed a suspicion relative to a transaction;
    - iii. any information that can reasonably be expected to form a suspicion.
  - Protection strengthened to include any information that will identify or likely to identify:
    - i. any person who handled a transaction with respect to an STR already made;
    - ii. any person who prepared an STR;
    - iii. any person who made an STR;
    - iv. any information contained in an STR.
  - No person is required to disclose information (except for investigation/prosecution of a serious offence, Money Laundering offence or terrorist financing offence, or enforcement of the Proceeds of Crimes Act) in judicial proceedings unless judge is satisfied disclosure is necessary in the interests of justice.
  - No civil, criminal, administrative or disciplinary proceedings can be taken against a financial institution (including officers, employees or agents), an auditor or supervisory authority for actions taken in good faith or in compliance with FIU directions.
  - Privileged communications between lawyer and client remain protected.

*Source: IMF assessment content as provided in the supplied PDF excerpt.*

### Section 30 of the Act.

### Section 30 of the Act.

### Legal professional privilege / confidential information
- Confidential information which is either oral or written communication is protected when:
  - i. between lawyers in their professional capacity
  - ii. between a lawyer and his client in a professional capacity either directly/indirectly through an agent and either
  - iii. made or brought into existence for the purpose of obtaining legal advise or assistance
  - iv. not made or brought into existence for committing/furthering commission of some illegal or wrongful act.

### Establishment, administration and operations of the FIU
- Putting in place the administrative and operational steps toward establishing the FIU and providing for the governance and oversight structure for the FIU.
- The FIU has been physically established with staff dedicated to receive, analyse and maintain systems. An AML/CFT mentor seconded to the MLA under the auspices of the PALP initiative is awaited.
- The Samoa FIU received assistance from AUSTRAC with respect to a specialized data based computer system (FIU-in–the box) for proper storage and analysis of information it receives from financial institutions, for instance, Suspicious Transaction Report (STR).
- Operational manuals and guidelines for the operation and management of the FIU have been developed.
- Specific FIU operational powers and procedures established in the MLPA 2007 include:
  - a. to receive reports and information by any agency of a foreign state, law enforcement agency, government institution or agency regarding suspicions of a serious offence, money laundering offence or a terrorist financing offence.
  - b. to collect information that is publicly available including commercially available databases or information that is collected or maintained by government that is relevant to a serious offence, money laundering or terrorist financing offence.
  - c. to analyse and assess all reports and information.
  - d. to request information from any law enforcement agency, government agency or supervisory agency for purposes of the Act.
  - e. to enter into an MOU agreement with national authorities including non governmental agencies and authorities including Police, Customs, Immigration, CBS and SIFA to ensure close liaison, cooperation and secure exchange of information.
  - f. can spontaneously provide information on a serious money laundering or terrorist financing offence to foreign agencies concerned with the prevention, investigation of ML/TF.
  - g. provide any report, information to appropriate law enforcement and supervisory authorities if the FIU has reasonable grounds to suspect a suspicious transaction.
  - h. can provide information to a regulatory authority, government, or law enforcement agency of an alleged breach by a financial institution, with a request for a license to be reviewed.
  - i. must destroy an STR received 5 years after the date of its receipt if there has been no further activity since receipt of a report.

### Forfeiture, confiscation and mutual legal assistance
- Recommendation: Amend the MLPA to include comprehensive forfeiture of proceeds of crime and confiscation of benefits provisions, as well as the power to make penalty orders where forfeiture is not possible.
  - Response: Two (2) new pieces of legislation were enacted on 7 February 2007: the Proceeds of Crime Act and the Mutual Legal Assistance in Criminal Matters Act 2007.
- Recommendation: Amend the MLPA to extend the scope of the mutual assistance provisions to cover all criminal offences.
  - Response: The provisions to facilitate Mutual Assistance on ML matters are now contained in the Proceeds of Crimes Act 2007.
- Definitions and scope in the Proceeds of Crime Act 2007:
  - “proceeds of crime” in section 6: “any property wholly or partly derived or realised whether directly or indirectly from a serious offence whether situated within or outside Samoa. Property can be proceeds of crime even if no person has been convicted of an offence.”
  - “Serious offence” in section 2: means an offence
    - a. against any law of Samoa that would constitute unlawful activity or
    - b. against the law of a foreign state that if the relevant act or omission occurred in Samoa would be an offence that constitutes unlawful activity.
  - “Unlawful activity” means any act or omission that constitutes an offence that is punishable under the laws of Samoa for a maximum period of not less than 12 months.
  - A reference in the Act to the law of Samoa or any foreign state includes reference to a written or unwritten law in force in any part of Samoa or a foreign State. The definition is described as all embracing and conceivably covers all criminal offences.

### Company service providers — trustee companies
- Recommendation: Trustee companies should conduct an enhanced level of due diligence, especially with regard to all new business transferring to the jurisdiction under redomiciliation.
  - Response / legal and supervisory requirements:
    - Trustee companies are “financial institutions” under the Money Laundering Prevention Act 2007 (section 16) and must identify and verify the identity of a customer and obtain satisfactory evidence of identity when:
      - a. establishing a business relationship or
      - b. conducting any transaction or
      - c. there is suspicion of a ML/TF offence or
      - d. the financial institution has doubts about the veracity or adequacy of customer identification, verification of documentation or information previously obtained.
    - Under section 17 of the MLPA 2007, if a trustee company is not able to obtain satisfactory evidence of the identity of a customer, it must not proceed any further and must report the attempted transaction to the Financial Intelligence Unit (FIU).
    - Under section 18, a trustee company is obliged to keep records for 5 years of all business transactions and correspondence thereon including identification records of customers, and enquiries to and from the FIU.
    - Trustee companies must monitor transactions and examine the background and purpose of unusual or large transactions, electronic transfers and any transactions with persons in jurisdictions with inadequate AML/CFT systems.
- Regulatory and supervisory framework developments:
  - The draft Trustee Companies Bill 2005 specifies as a statutory duty of the Regulator (Inspector of Trustee Companies) the review of activities of trustee companies which includes AML policies and procedures for “Know Your Customer” and anti Money Laundering.
  - The Authority is empowered under clause 6 of the Bill to make Regulatory Codes for the conduct of trust company business, Know Your Customer and Customer due diligence procedures.
  - A Draft Regulatory Code compiled by an IMF Technical Expert in May 2006 includes Detailed Fit and Proper Criteria for applications from new companies.
- Recommendation: Conduct regular on-site visits to the trustee companies and consider entering into specific exchange of information agreements with the host country supervisors.
  - Response:
    - SIFA has implemented preparatory training sessions, with the assistance of the IMF, for conducting such on-site inspections.
    - In late 2005 and early 2006, SIFA staff jointly with Money Laundering Prevention Authority (MLPA) personnel conducted several onsite visits on trustee companies, banks and money changers.
    - One of the trustee companies lost their license in 2006, as a result of the findings of the on-site inspection visits.

### Other issues — insurance, investment, and collective investment schemes
- Recommendation: Modernize the insurance legislation which will establish the CBS as the licensing and supervisory entity of the domestic insurance companies.
  - Response: The Insurance Bill 2007 has been through its second reading in Parliament in early February. The Bill is now at the Parliamentary Committee stage for final review before seeking Parliament’s approval at its next Sitting around end June 2007.
- Recommendation: In licensing general insurance business, require that international insurance companies be in compliance with other country’s laws where the insurance products are sold.
  - Response: The Samoan authorities have adopted the recommended policy in dealing with all future international insurance applications. The license application form will be amended to reflect this change.
- Recommendation: Establish close communication and information sharing with the insurance regulators in other countries.
  - Response: As a member of the Offshore Group of Insurance Supervisors (OGIS) and the International Association of Insurance Supervisors (IAIS), SIFA has established close communication with other insurance regulators. Provision is made in the International Insurance Act 1988 for sharing of information between regulators.
- Recommendation: Introduce a basic investment business and securities legislation to regulate fraudulent provision of financial advice and product sales to both domestic and international markets.
  - Response: Amendments to the Financial Institutions Act have been prepared to regulate investment and securities business under the CBS.
- Recommendation: Introduce legislation on collective investment schemes while prohibiting the establishment of unlisted collective investment schemes.
  - Response: An International Mutual Funds Bill that had been drafted in 2004 is at the Attorney General’s Office and awaits approval before being referred to Cabinet.

*Source: _cr07221 - Section 30 of the Act.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07221.pdf_