Financial Crime World

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APG Endorses Report on Palau’s Anti-Money Laundering and Combating the Financing of Terrorism Efforts

Bali, Indonesia - July 11, 2008

The Asia-Pacific Group on Money Laundering (APG) has endorsed a report highlighting key findings on Palau’s anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts. The report was presented during the APG’s plenary meeting held in Bali, Indonesia from July 7-11, 2008.

Key Findings

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  • Palau has strengthened its AML/CFT legislative framework with recent amendments, but implementation remains insufficient.
  • The offense of money laundering is criminalized, but only about half of the FATF-designated predicate offenses are covered, and there are deficiencies in freezing terrorist assets under UN Security Council Resolutions (UNSCRs) 1267 and 1373.
  • The amended Money Laundering and Proceeds of Crime Act does not adequately cover preventive measures, including customer due diligence, record keeping, and monitoring transactions.
  • The Financial Intelligence Unit has been relocated to the Financial Institutions Commission but lacks dedicated resources to effectively carry out its tasks.

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  • Palau’s crime rate is relatively low, with prostitution, consumer marijuana sales, and illegal fishing posing major sources of criminal proceeds.
  • Money laundering is criminalized broadly in line with international standards, but eight FATF-designated predicate offenses are not covered.
  • The Counter-Terrorism Act criminalizes the financing of terrorism largely in line with international standards, but no investigations or prosecutions have been conducted to date.

Confiscation and Provisional Measures

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  • Palauan law allows for confiscation of proceeds from money laundering and terrorist financing, but there are limitations on freezing property related to predicate offenses.
  • Seizing evidence and property is available for both money laundering and terrorism financing offenses, while freezing measures can only be applied in cases suspected of involving money laundering.

Financial Intelligence Unit

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  • The FIU has been operating without dedicated resources since its inception, but it has processed 71 suspicious transaction reports (STRs) and disseminated them to the Division of Criminal Investigation & Drug Enforcement.
  • The FIU’s effectiveness would be enhanced with dedicated staffing resources, documented standard operating procedures on STR analysis and dissemination, and the ability to obtain additional information from reporting entities without a court order.

Next Steps

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  • The APG recommends that Palau addresses the deficiencies identified in this report by strengthening its AML/CFT legislative framework, enhancing the FIU’s operational capacity, and improving its confiscation and provisional measures.
  • The APG also encourages Palau to continue its efforts to improve its AML/CFT regime and to enhance international cooperation in combating money laundering and terrorist financing.

Conclusion

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The APG looks forward to working with Palau to address these recommendations and to strengthening the country’s efforts against money laundering and terrorist financing.