Financial Crime World

Palau Fails to Meet International Anti-Money Laundering and Combating the Financing of Terrorism Standards

A recent assessment by the international community has revealed that Palau, a small island nation in the Pacific Ocean, has failed to meet several key standards for combating money laundering and the financing of terrorism (AML/CFT).

Deficiencies in AML/CFT Framework

The report highlights several deficiencies in Palau’s AML/CFT framework, including:

  • Lack of Effective Supervision: There is no effective supervision of non-financial businesses and professions (NFBPs) to ensure compliance with AML/CFT obligations.
  • Inadequate Powers of Supervisory Bodies: The supervisory bodies lack the necessary powers to effectively supervise NFBPs.
  • Insufficient Measures to Prevent Criminal Accreditation: There are insufficient measures in place to prevent criminals from being professionally accredited.

Monitoring System Deficiencies

One of the most significant concerns is the lack of a monitoring system to ensure compliance with AML/CFT obligations by all NFBPs. This has led to a situation where some of these entities may be at risk of being used for illicit activities.

Sector-Specific Concerns

The report also notes that Palau lacks fit and proper measures for several high-risk sectors, including:

  • Dealers in Precious Metals and Stones
  • Real Estate Agents

These sectors are considered high-risk areas for money laundering and terrorist financing.

Financial Intelligence Unit (FIU) Limitations

While Palau has made progress in establishing a supervisory body, the FIU, it still lacks the necessary powers to effectively supervise NFBPs. The FIU is responsible for conducting compliance audits of NFBPs, but its powers are limited, making it difficult for the agency to carry out its mandate.

The report highlights the need for Palau to strengthen its legal and judicial framework to prevent criminals from being professionally accredited. While the Supreme Court of Palau has rules in place to ensure that attorneys are of good character, there is no similar mechanism in place for other professions.

Government Response

Palau’s government has been urged to take immediate action to address these deficiencies and bring its AML/CFT framework in line with international standards. In response to the report, Palau’s Minister of Finance said that the government was committed to strengthening its AML/CFT framework and would take immediate action to address the deficiencies highlighted in the report.

International Community Urges Action

The international community has urged Palau to provide a detailed action plan outlining the steps it will take to address these deficiencies by the end of the year. Failure to do so may result in further action being taken against the country.

Consequences of Inaction

Failure to address these deficiencies may result in severe economic consequences, including being blacklisted by the international community. Palau must take immediate action to strengthen its AML/CFT framework and prevent its financial sector from being used for illicit activities.