Financial Crime World

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Palau’s Financial Institution Due Diligence Under Scrutiny

A recent report has shed light on Palau’s efforts to combat financial crimes and terrorist financing, highlighting areas of strength and weakness in its due diligence practices.

Implementation of FATF Recommendations

According to the assessment, Palau has made significant progress in implementing the technical requirements of the FATF Recommendations. While some ratings indicate “largely compliant” or “partially compliant” in various aspects, other areas require improvement.

National Cooperation and Coordination Mechanisms

The report highlights that Palau’s risk-based approach is effective, but its national cooperation and coordination mechanisms need strengthening. Additionally, the country needs to improve its laws regarding money laundering and terrorist financing offenses.

Targeted Financial Sanctions

Palau has also made progress in implementing targeted financial sanctions related to terrorism and terrorist financing, as well as those related to proliferation. However, it lags behind in its efforts to regulate and supervise non-profit organizations and DNFBPs (designated non-financial businesses and professions).

Areas for Improvement

The report notes that Palau’s financial institution secrecy laws need reform, and customer due diligence practices require improvement. Moreover, the country’s internal controls and foreign branches and subsidiaries need strengthening.

Progress in Preventing Money Laundering and Terrorist Financing

On a positive note, Palau has made significant progress in implementing measures to prevent money laundering and terrorist financing through its financial intelligence unit, law enforcement agencies, and investigative authorities.

Conclusion

The report concludes that while Palau has made progress, there are still areas where improvement is needed. The country’s financial institution due diligence practices will need to be strengthened to meet international standards.

Palau’s Ratings

  • R.1 - Assessing risk & applying risk-based approach: Partially Compliant
  • R.2 - National cooperation and coordination: Largely Compliant
  • R.3 - Money laundering offence: Largely Compliant
  • …and so on, up to…
  • R.40 - Other forms of international cooperation: Largely Compliant

Note: + C = Compliant + LC = Largely Compliant + PC = Partially Compliant + NC = Non-Compliant