Financial Crime World

Palau: Cracking Down on Money Laundering and Terrorist Financing - IMF Report

Date: November 15, 2008

The Republic of Palau, an island nation located in the Pacific Ocean, is making progress in strengthening its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime, according to a recent report by the International Monetary Fund (IMF).

Title: Palau: Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

Progress and Challenges

Since 2001, Palau has had legislation in place to combat money laundering and terrorist financing through financial institutions and designated non-financial businesses and professions (DNFBPs). However, the implementation of the laws has been slow. Following recent amendments, Palau is now positioning itself to beef up its efforts against financial crimes.

New Legislation

  • Money Laundering and Proceeds of Crime Act of 2001 (MLPCA) and Financial Institutions Act of 2001 (FIA): Amended for more effective AML/CFT regulation.
  • Counter-Terrorism Act of 2007 (CTA): Enacted to address terrorist financing.
  • Cash Courier Disclosure Act of 2007 (CCDA): Regulates cash transactions to prevent money laundering.

Deficiencies in the Legislative Framework

  • Criminalization of money laundering and terrorist financing: Yes, but covers only half of the FATF-designated categories of predicate offenses for money laundering. Lacks addressing terrorism financing adequately.
  • Freezing of terrorist assets under UNSCRs 1267 and 1373: Not satisfactorily addressed in Palauan law.

Preventive Measures

  • Financial Institutions Commission (FIC): In charge of AML/CFT supervision for financial institutions, but lacks resources and ability to issue regulations or guidelines.
  • Financial Intelligence Unit (FIU): Dedicated to AML/CFT intelligence and analysis, has limited resources and no dedicated full-time staff.

Concerns and Recommendations

  • Low crime rate and lack of known organized crime or terrorist financing situations: Believed that criminal proceeds stem from ongoing activities such as prostitution, consumer marijuana sales, and illegal fishing by unlicensed foreign vessels.

Conclusion

Palau’s progress in strengthening its AML/CFT regime is commendable, but more resources and dedication are required to effectively implement the legislation. The IMF encourages Palau to allocate the necessary budget and human capital to address the identified shortcomings and enhance the overall effectiveness of the financial crime fighting system.

IMF Website for the official report.