The global watchdog group on illegal financing has removed Nauru from its blacklist of countries which are deemed non-cooperative, in response to efforts to stop money-laundering.
The move is likely to lead to a relaxation in restrictions on the use of funds from donor countries.
Nauru has already modified its laws to shut down up to 400 offshore banks which had been operating from a virtual base on the island.
The Financial Action Group has already removed the Cook Islands from its money-laundering blacklist.
The group has been holding a meeting in Paris, where delegates heard of the symbiotic relationship between corruption, money-laundering and financing of terrorist activities.