This article is more than 4 years old

This article is more than 4 years old

Westpac is ending all association with the government of Nauru and its entities, and has informed those affected to close their accounts by the end of the month.

The ABC’s Pacific Beat program reported on Thursday that the bank had acted after concerns were raised by internal anti-money-laundering and counter-terrorism financing experts.

A spokeswoman for Westpac was unable to confirm or deny the report due to customer confidentiality.

Guardian Australia has independently confirmed the story.

Nauru election: former presidents say moves to 'rig' result under way Read more

Guardian Australia understands the decision relates to the Nauruan government and its specific entities, and will not affect regular customers who make banking transactions to Nauru. The bank has no physical presence on the island nation.

The bank has scaled back its operations in the Pacific region over recent years, but the decision to break ties with the Nauruan government appears to have taken the country by surprise.

A former president, Marcus Stephen, told Pacific Beat he had asked the government to explain the situation to its citizens.

The Nauruan government has been contacted for comment.

Sprent Dabwido, former president of Nauru, said the news was not unexpected.

“It’s ... not a total surprise when you have a government that is reckless in handling the finances of a nation,” he told Guardian Australia.

“I can’t blame them because most of the dealings of this government are never straightforward, never black and white,” he said.

Dabwido said the news was hard to reconcile with recent legal changes.

“It is not only embarrassing, it is a big shame that this news pops up now. How do we explain it to our people, when we have the anti-money-laundering act, we’ve closed our offshore banking, and then suddenly this shows up again,” he said.

“I really feel the government has a lot of explaining to do to the people.”

In 2014 the Nauru government’s Westpac accounts were temporarily frozen while a US hedge fund, Firebrand, chased it for about $31m related to bonds it had defaulted on. The high court later dismissed the company’s case and found Nauru’s accounts could not be garnisheed.

More recently the government has faced allegations of attempting to rig the coming election, with public concerns raised by two former presidents.

Since the end of the Firebrand court case, the Nauruan government has repeatedly trumpeted an improving economic outlook for the country.

This week it announced the establishment of a “sustainable sovereign trust fund”, to be chaired by the minister for finance and justice, David Adeang, and funded by a one-off grant from the Asian Development Bank, annual contributions from the Australian and Taiwanese governments, and “ongoing establishment support from valued partners”.

The Nauruan government said it expects the fund to reach $32m by the end of this financial year.

On Wednesday the country became the 189th member of the International Monetary Fund. Adeang was in Washington to formally sign on for his country.

“This shows just how far my administration has come in showing the world we are a fiscally mature and responsible economy, free of the burden of past governments,” the president, Baron Waqa, said.