Financial Crime World

Palau’s Anti-Money Laundering and Combating Terrorism Systems: A Report

Money Laundering

Money laundering is a serious issue that affects many countries around the world. Palau, like other nations, has laws in place to prevent money laundering, but its effectiveness can be improved.

Deficiencies in the Offense

  • Incomplete coverage of predicate offenses: The offense does not cover eight out of twenty FATF-designated categories of predicate offenses.
  • Lack of prosecution: Although six cases have been prosecuted by the Office of the Attorney General (OAG), more efforts are needed to combat money laundering.

Terrorist Financing

The financing of terrorism is a serious concern that requires effective laws and regulations to prevent it. Palau’s Combating Terrorism Act (CTA) criminalizes terrorist financing, but its implementation has been limited.

Limited Investigations and Prosecutions

  • No investigations or prosecutions: Despite the enactment of the CTA in 2007, there have been no investigations or prosecutions related to terrorist financing.
  • Lack of court testing: The CTA has not yet been tested before the courts, which hinders its effectiveness.

Confiscation

Palauan law allows for the confiscation of proceeds of money laundering offenses and civil forfeiture or criminal confiscation of any property related to terrorism financing. However, there are some limitations to this provision.

Limited Property Confiscation

  • No confiscation of predicate offense property: Neither property relating to predicate offenses nor property corresponding in value to property laundered can be confiscated.
  • Limited application of provisional measures: Provisional measures such as seizing evidence and property, freezing capital and financial transactions, and identifying and tracing property are subject to approval by the Supreme Court.

Freezing of Terrorist Assets

The freezing of terrorist assets under UNSCRs 1267 and 1373 is not adequately addressed in Palau. There are hardly any procedural aspects covered to ensure effective compliance with the Resolutions.

Lack of Procedural Guidance

  • Unclear authority: It is unclear which authority is responsible for receiving, issuing, and disseminating designations.
  • Limited procedural guidance: Hardly any procedural aspects are covered to ensure effective compliance with the Resolutions.

Financial Intelligence Unit (FIU)

The FIU has been operating without dedicated full-time resources since its inception. Despite this, the FIU has processed 71 suspicious transaction reports (STRs), including dissemination to the Division of Criminal Investigation & Drug Enforcement (CID) for investigation.

Enhanced Effectiveness

  • Dedicated staffing: The FIU’s effectiveness would be enhanced if it had dedicated staffing resources.
  • Documented standard operating procedures: Documented standard operating procedures on STR analysis and dissemination are also needed to enhance the FIU’s effectiveness.

Law Enforcement

The CID of the Bureau of Public Safety has been tasked with investigating money laundering and terrorist financing cases. However, its investigations are limited to those initiated by suspicious transaction reports (STRs).

Limited Special Powers

  • No use of special powers: Although the law provides the CID with adequate special powers, these have not been used in investigations.

Overall, Palau’s anti-money laundering and combating terrorism systems require improvement. Addressing the deficiencies in the offense, enhancing the effectiveness of the FIU, and improving law enforcement efforts are crucial to preventing money laundering and terrorist financing.