Financial Crime World

Palau’s Due Diligence Procedures Receive International Review

A recent evaluation by the Financial Action Task Force (FATF) has assessed Palau’s implementation of anti-money laundering and combating the financing of terrorism (AML/CFT) regulations. The country received a mixed bag of ratings, with some areas requiring improvement.

Compliance Status

Palau is partially compliant in several key areas, including:

  • Assessing risk and applying a risk-based approach
  • Customer due diligence

However, the country is largely compliant when it comes to:

  • National cooperation and coordination
  • Money laundering offences
  • Confiscation and provisional measures
  • Terrorist financing offence
  • Targeted financial sanctions related to terrorism and terrorist financing
  • Reporting of suspicious transactions

Non-Compliance Areas

Palau is non-compliant in a few areas, including:

  • Financial institution secrecy laws
  • Transparency and beneficial ownership of legal arrangements

The country also received a partially compliant rating for:

  • Regulation and supervision of financial institutions
  • Powers of supervisors

Weaknesses Identified

The FATF report highlighted several weaknesses in Palau’s AML/CFT regime, including:

  • Lack of effective implementation of customer due diligence requirements
  • Inadequate monitoring of high-risk customers
  • Lack of transparency in beneficial ownership
  • Limited cooperation with foreign jurisdictions

Positive Steps Forward

Despite these challenges, Palau has made some positive steps forward, including:

  • Establishment of a financial intelligence unit
  • Implementation of targeted financial sanctions related to terrorism and terrorist financing

FATF Recommendations

The FATF recommendations provide guidance to countries on how to prevent money laundering and combat the financing of terrorism. The organization’s evaluations are designed to help countries improve their AML/CFT regimes and bring them into line with international standards.

Timeline for Improvement

Palau has been given a timeline to address the weaknesses identified in the report and improve its compliance with the FATF recommendations. Failure to do so could result in the country being placed on a watchlist or subject to other sanctions.