Executive Summary: Anti-Money Laundering and Counter-Terrorist Financing Report on Palau
Key Findings and Recommendations
The Asia-Pacific Group on Money Laundering (APG) conducted a review of Palau’s anti-money laundering (AML) and counter-terrorist financing (CFT) framework. This report summarizes the key findings and areas for improvement.
1. Risk Assessment Palau is considered to have a low risk for money laundering, but it faces high and moderate risks related to specific predicate offenses such as drug trafficking, human trafficking, and corruption.
2. Private Sector Engagement The process of preparing Palau’s first National Risk Assessment (NRA) was not optimal from a private sector perspective, with many reporting entities lacking understanding of AML/CFT risks facing Palau.
Areas for Improvement
- Enhance private sector engagement in the development and implementation of AML/CFT policies.
- Develop a risk-informed strategy to address money laundering and terrorist financing risks in Palau.
3. AML/CFT Strategy There is no documented AML/CFT strategy or policy informed by risk to address ML/TF risks in Palau, although positive steps have been taken based on risk such as the formation of the National Enforcement Agency (NEA) and the Human Trafficking Task Force.
Implementation Challenges
- Establish a clear and comprehensive AML/CFT strategy that addresses the unique risks facing Palau.
- Ensure that all stakeholders are aware of their roles and responsibilities in implementing the strategy.
4. Risk-Based Approach Palau has not fully adopted a risk-based approach for exemptions from AML/CFT requirements and has only recently enacted regulations that include enhanced or simplified preventative measures.
Regulatory Framework
- Review and revise the regulatory framework to ensure it is based on a risk-based approach.
- Ensure that all reporting entities are aware of their obligations under the revised framework.
5. Financial Intelligence The Financial Intelligence Unit (FIU) provides decent-quality financial intelligence, but disseminated reports are predominantly based on Suspicious Transaction Reports (STRs), with Limited use of Customer Transaction Reports (CTRs).
Improving Financial Intelligence
- Enhance the use of Customer Transaction Reports (CTRs) to improve the quality and relevance of financial intelligence.
- Ensure that all reporting entities understand the importance of submitting high-quality reports.
6. LEA Effectiveness Law Enforcement Agencies (LEAs) have limited understanding of the benefits and use of financial intelligence and lack resources and capacity to act on it.
Strengthening Law Enforcement Capacity
- Provide training and support to LEAs to enhance their understanding of financial intelligence.
- Ensure that LEAs have the necessary resources and capacity to investigate and prosecute money laundering cases effectively.
7. Proceeds-Generating Crimes Palau has prosecuted five successful ML cases since 2011, but these convictions do not align with Palau’s higher-risk predicate offenses and have not always resulted in proportionate and dissuasive sanctions.
Improving Prosecution Outcomes
- Ensure that all prosecutions are based on solid evidence and are pursued in a timely manner.
- Ensure that sanctions are proportionate and dissuasive to deter future money laundering activity.
8. Confiscation Confiscation is not a key priority in Palau’s criminal justice regime, although there has been effective confiscation of vehicles and cash related to drug trafficking.
Enhancing Confiscation Efforts
- Ensure that confiscation is a key priority in Palau’s criminal justice regime.
- Develop a comprehensive strategy for confiscating assets linked to money laundering activity.