Financial Crime World

Improving Palau’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Regime

Key Findings and Recommendations

The assessment report highlights several key findings and recommendations for Palau to improve its AML/CFT regime:

Legislative Framework

While Palau has strengthened its AML/CFT legislative framework with recent amendments, implementation is lacking. The authorities should devote resources to expedite implementation.

Criminalization of Money Laundering and Terrorist Financing

  • Only half of the twenty FATF designated categories of predicate offenses are covered by the money laundering offense.
  • The freezing of terrorist assets under UN Security Council Resolutions (UNSCRs) 1267 and 1373 is not adequately addressed.

Preventive Measures

The amended Money Laundering and Proceeds of Crime Act does not cover preventive measures in a satisfactory manner. There are significant deficiencies in:

  • Customer due diligence
  • Record keeping
  • Monitoring of transactions and relationships
  • Supervisory and oversight systems

Financial Intelligence Unit (FIU)

The FIU has recently been moved from the Office of the Attorney General to the Financial Institutions Commission but lacks dedicated human, technical, or financial resources to carry out its additional task effectively.

Crime Rate

Palau’s crime rate is relatively low, with prostitution and consumer marijuana sales being major sources of criminal proceeds. There are no known organized crime or terrorist financing situations.

Recommendations for Improvement

To improve its AML/CFT regime, Palau should:

  • Enhance the FIU’s effectiveness by providing 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.
  • Provide STR forms, guidelines, and feedback to the reporting entities.
  • Task the CID with investigating money laundering and terrorist financing cases effectively, using special powers provided by law, and starting investigations into STRs without prior follow-up on the STRs disseminated by the FIU.
  • Implement procedures for freezing terrorist assets under UNSCRs 1267 and 1373, including ensuring that terrorist funds are frozen immediately and without undue delay.