Financial Crime World

Palau’s Anti-Money Laundering and Combating Financing of Terrorism Efforts Evaluated by FATF

The Financial Action Task Force (FATF), a global standard-setting body, has evaluated Palau’s anti-money laundering (aML) and combating the financing of terrorism (CFT) regulatory requirements. The country received ratings reflecting its compliance with the 40 technical recommendations of the FATF.

Progress and Challenges

According to the Mutual Evaluation Report for Palau, released in 2018, the country has made progress in implementing some of the recommended measures. However, there are still areas that require improvement.

Key Strengths

Palau’s commitment to national cooperation and coordination has been rated “Largely Compliant”. The country has also established a money laundering offence and implemented targeted financial sanctions related to terrorism and terrorist financing, both receiving a rating of “Largely Compliant”.

Areas for Improvement

Despite these strengths, Palau faces challenges in several areas. Specifically:

  • Non-profit organisations: Palau is non-compliant with recommendations on their role in preventing money laundering and terrorist financing.
  • Financial institution secrecy laws: These laws have been identified as a weakness.
  • Customer due diligence requirements:
    • Politically exposed persons
    • Correspondent banking relationships
  • Reliance on third parties for certain checks and verifications
  • Internal controls and foreign branches and subsidiaries require strengthening

Transparency and Beneficial Ownership

Palau is partially compliant with recommendations on transparency and beneficial ownership of legal persons and arrangements. Additionally, the country requires improvement in its regulation and supervision of financial institutions and designated non-financial businesses and professions (DNFBPs).

Action Needed

To address these deficiencies, Palau needs to take action in several areas:

  • Strengthening its legal framework
  • Improving customer due diligence requirements
  • Enhancing international cooperation

Conclusion

While Palau has made progress in implementing some of the FATF recommendations, there is still much work to be done to ensure that the country’s aML/CFT regime is fully effective.