Financial Crime World

Palau Falls Short in Combating Financial Crime, Says FATF

The Financial Action Task Force (FATF) has released a report highlighting Palau’s significant gaps in its banking regulations aimed at combating financial crime. The country received ratings reflecting the extent to which it has implemented the technical requirements of the FATF Recommendations.

Weaknesses Identified

  • Risk Assessment and Risk-Based Approach: Palau scored poorly in this area, indicating a lack of effective risk assessment and application of a risk-based approach.
  • National Cooperation and Coordination: The country was found to be lacking in its efforts to coordinate with other agencies to combat financial crime.
  • Money Laundering Offence: Palau’s laws and regulations governing money laundering were found to be inadequate.
  • Prevention of Terrorist Financing: The country was found to be lacking in its efforts to prevent terrorist financing.
  • Targeted Financial Sanctions: Palau was also found to be lacking in its imposition of targeted financial sanctions related to terrorism and terrorist financing.

Compliance Areas

  • Customer Due Diligence: Palau’s banking regulations were found to be compliant in this area, ensuring that customers are properly identified and verified.
  • Record Keeping: The country was found to be compliant in maintaining accurate records of transactions and other financial activities.
  • Internal Controls and Foreign Branches and Subsidiaries: Palau’s banking regulations were found to be compliant in ensuring effective internal controls and monitoring of foreign branches and subsidiaries.

Recommendations

The FATF has called on Palau to address the identified weaknesses and implement effective measures to combat financial crime. Failure to do so may result in the country being placed on the FATF’s list of high-risk jurisdictions, which could have serious consequences for its economy and international reputation.

Government Response

Palau’s government has pledged to work closely with the FATF and other international organizations to strengthen its banking regulations and prevent financial crimes such as money laundering and terrorist financing.