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law, related US sanctioning mechanisms give it hard power in solving international
cooperation problems and thus a unique and unusual role in globa l governance.
Paper three goes further than paper two in that it shows what can happen to a state
that fights back against overwhelming US pressure. Through the FATF’s Recom-
mendations, Nauru presented an early o ppor tunity for the US to test the extraterri-
toriality of the USA PATRIOT Act, and its sanctioning mechanisms, which was
enacted in the wake of 9/11. This approach made an example of Nauru to the in-
ternat ional community and economically isolated the tiny P acific isla nd from in-
ternat ional markets.
Whilst these sanctions have been lifted, the persistent reputational damage in-
flicted on Nauru thr ough its association with money laundering and interna tiona l
sanct ions is one of the most significant issues fac ing the ‘faile d state’ today (Con-
nell 2006). In this way, paper three raises serious que stions about the legitimacy
of the FATF’s approach, c oncerns shared by the International Monetary Fund
(IMF) who argued that it abused norms around legitimacy and state consent. The
IMF forced its suspension in November 2002 for a year whilst the IMF piloted a
more cooperative approach, that did not succeed (IMF 2002). Vlcek ( 2012) further
argues that the FA TF’s Recomm end a tions are produced by a limited subset of de-
veloped sta tes and their im position has limited the choices available to developing
states.
Also in line with paper two, paper three complements power-based approaches
that emphasize control over market access to s olving cooperation problems. Both
papers highlight how the threat of legal a ction a gainst a state’s banking system
forced the hand of the government to comply with international demands as banks
can be prosecuted more ea sily than states. As such, paper three reinforces the role
that powerful stat es play in economic and political governance in a globalized
world. Rather than underm in ing their state capacity, growing economic interde-
pendence endows the most powerful sta tes with additional means to exercise exercise
