Financial Crime World

Assessment Report on Palau’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Framework

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Key Findings

Palau has made significant efforts to strengthen its AML/CFT legislative framework. However, there are areas that require improvement and attention.

Legislative Framework

  • Palau has strengthened its AML/CFT legislative framework through amendments to existing laws.
  • Effective implementation of these laws is crucial for their success.

Predicate Offenses

  • Only half of the twenty FATF designated categories of predicate offenses are covered by the money laundering offense.
  • Eight out of twenty categories are not covered by the financing of terrorism offense.

Provisional Measures

  • Palauan law shows deficiencies in customer due diligence, record keeping, monitoring of transactions and relationships, and supervisory and oversight systems.

Financial Intelligence Unit (FIU)

  • The FIU has recently been relocated to the Financial Institutions Commission (FIC) but lacks dedicated resources, standard operating procedures, and adequate human, technical, or financial resources.

Crime Rate

  • Palau’s crime rate is relatively low.
  • Major sources of criminal proceeds include prostitution, consumer marijuana sales, and illegal fishing by unlicensed foreign vessels.

Money Laundering Offense

  • The offense is criminalized under Palauan law but has some technical deficiencies and sanctions applicable for the money laundering offense.

Financing of Terrorism

  • The financing of terrorism has been criminalized but has only been enacted in April 2007, and no investigations or prosecutions have been conducted.

Confiscation

Criminal Confiscation

  • Palauan law allows for the criminal confiscation of proceeds of the money laundering offense as well as civil forfeiture or criminal confiscation of any property related to terrorism financing.

Freezing Measures

  • Seizing is available both with respect to the money laundering and the terrorism financing offense.
  • However, freezing measures may only be applied with respect to capital or transactions suspected to involve money laundering.

Provisional Measures

Freezing of Terrorist Assets

  • The freezing of terrorist assets under UNSCRs 1267 and 1373 is not adequately addressed.

FIU’s Functions

  • The FIU’s functions are governed primarily by the MLPCA of 2001, as amended in December 2007.

Conclusion

Palau needs to strengthen its AML/CFT framework by addressing the identified deficiencies and improving the effectiveness of the FIU. This will require dedicated staffing resources, documented standard operating procedures, and adequate human, technical, or financial resources.