It has been revealed that Australia agreed to pay 29 million US dollars for Nauru to clean up corruption in its administration in return for Nauru accepting asylum seekers who arrive in Australia by boat.
The two-year memorandum of understanding was signed by the two countries last September and tabled in a Senate hearing in November, but it has only just been made public.
The reforms agreed to by Nauru included the end of passport sales, and the Bank of Nauru's practice of allowing money laundering by issuing bank cheques without scrutiny of the source of deposits.
Nauru was also required to appoint an Australian police chief, co-operate in tax information exchange, permit Australian scrutiny of all Nauru government accounts and repair its public service.
The Sydney Morning Herald says the terms of agreement have come to light as John Howard faces a challenge from a group of Coalition backbenchers who are resisting his plan to resume the so-called Pacific solution to deal with would be asylum seekers.