That’s actually not the Curaçao flag, but good eye!

The butt of many jokes in the financial services sector, Nauru is a husk of what it once was.

And thank goodness for that.

When people think about offshore jurisdictions like Cayman Islands, Bermuda, and even the less upstanding ones like Panama, they think that what’s going on there is as bad and as utterly reckless as they used to be in Nauru. For that reason, it is good that Nauru has all but shut down.

While some jurisdictions are known as international financial services centres (a fancy way of saying tax havens, really), Nauru was a money laundering centre.

History and Today

Nauru was populated as early as 3000 BC. The name comes from a Naurean word meaning “I go to the beach”. Allegedly. If you’ve ever seen a Naurean beach, you would understand my skepticism.

Would you name an island after that?

Europeans

The first Europeans to arrive in Nauru was a British whale hunter in 1798, who dubbed the island Pleasant Island. (He probably looked up to Erik the Red, who gave Greenland its name.)

By 1830, relations were established with whale hunters, primarily British. Over the following years, these British sailors (or in many cases, ex-sailors) settled down in Nauru. These new arrivals inadvertently armed some of the local tribes which in 1878 lead to a bloody civil war between tribes.

This was quelled in 1888 when Germany took over the island. (Some readers will remember that Samoa belonged to Germany for a while.)

However, with World War I, Germany lost Nauru to Australia. It was around this time that Nauru’s phosphate riches were discovered and mined. Nauru effectively became a quasi-independent vassal state of the British Crown. Almost full autonomy was granted as long as the crown could pilfer all of the phosphate.

In 1923, Australia was assigned primary caretaker (trustee) of Nauru, with UK and New Zealand being co-trustees.

In 1942, the Japanese took Nauru and held it until liberated in 1945 by American troops. After World War II, a new trustee agreement was set up between Australia, New Zealand, and the UK.

Nauru became fully autonomous in 1966 and fully independent in 1968, after in 1967 having purchased all the phosphate mines from the British crown and instead established the Nauru Phosphate Corporation.

This made Nauru one of the wealthiest and financially strongest nations in the entire Pacific region. Employment was essentially 100%. Those who could but didn’t work, did so entirely by choice.

The phosphate resources were being rapidly depleted (for a while around 2005, it looked to be completely empty), and desperate for cash, Nauru found a stellar solution: institutionalised money laundering and tax evasion.

Nauru Offshore

The laws were passed in the late 1990s and early 2000s. Many were carbon copies of laws in other respectable jurisdictions, but with entire paragraphs removed to make things as easy as possible. Up until 2005, it was possible to form a bank in Nauru with no physical presence at all.

When this was finally changed, over 400 banks’ licenses were revoked.

Many of these banks had strong ties to Russia, with over 70 billion USD belonging to Russian criminals being held in Nauru.

In return for the strong ties and Russian aid, Nauru has been kind enough to recognize Abkhazia and South Ossetia, being the fourth sovereign nation to do so. Tiny Nauru’s interest in far-eastern European politics is curious, to say the least.

Nauru Today

As if the razor sharp, inhospitable rocky beaches weren’t enough — today, Nauru is mostly known as being that little island off the cost of Australia used by Australia as a detention centre for immigrants and asylum seekers. This practice has been highly criticized with reports – scant though they are – of misery among the people in the detention centre.

Several high-profile cases have emerged of abuse, violence, and suicides in the Nauru Regional Processing Centre, as it’s called. Australia typically claims it isn’t aware of the issue but in all likelihood is using Nauru as a deterrent. Detainees with serious medical problems have the right to treatment in Australia but are usually sent back once treated.

Geography and Demography

Map from Wikipedia.