Financial Crime World

Palau Falls Short in Bank Compliance Procedures

In a recent assessment, Palau’s financial system was found to have several shortcomings in its compliance with international standards aimed at preventing money laundering and terrorist financing. The country’s Mutual Evaluation 2018 report highlights areas where Palau needs to improve its bank compliance procedures.

Assessment Against FATF Recommendations

The report assesses Palau against the Financial Action Task Force (FATF) Recommendations, which are a set of global standards designed to combat money laundering and terrorist financing. While Palau has made progress in some areas, it still lags behind in others.

Areas for Improvement

  • Risk Assessment and Risk-Based Approach: Palau was found to be partially compliant in the assessment of risk and application of a risk-based approach (R.1). The report notes that while Palau has taken steps to implement a risk-based approach, there are still gaps in its risk assessment processes.
  • National Cooperation and Coordination: Palau’s national cooperation and coordination efforts (R.2) were found to be largely compliant, but the country needs to improve its communication with other agencies and stakeholders to ensure effective coordination.

Areas of Non-Compliance

  • Correspondent Banking Relationships: Palau is non-compliant in area R.13.
  • Transparency and Beneficial Ownership of Legal Persons: Palau is non-compliant in area R.24.
  • Financial Institution Secrecy Laws: While Palau’s financial institution secrecy laws (R.9) were found to be compliant, the report notes that there are still concerns about the lack of transparency in Palau’s financial system.

Key Findings

  • Palau was found to be partially compliant in several areas, including R.1, R.10, R.12, R.13, R.15, R.16, R.17, and R.26.
  • The country was found to be largely compliant in area R.2.
  • Palau was non-compliant in areas R.9, R.24, and R.14.

Recommendations

  • Improve risk assessment processes and implement a more effective risk-based approach.
  • Enhance national cooperation and coordination efforts to ensure effective communication with other agencies and stakeholders.
  • Address non-compliance in areas R.9, R.24, and R.14 by implementing new regulations and strengthening supervisory powers.
  • Improve transparency and beneficial ownership of legal persons and arrangements.

Conclusion

By addressing these shortcomings, Palau can ensure that its financial system is secure, transparent, and compliant with international standards.