Financial Crime World

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Summary of Palau’s Anti-Money Laundering and Combating the Financing of Terrorism Report

The report assesses Palau’s implementation of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures. While Palau has strengthened its AML/CFT legislative framework, there are significant deficiencies in its implementation.

Key Areas for Improvement

  • Legislative Coverage: The money laundering offense is not fully covered by the Money Laundering and Proceeds of Crime Act (MLPCA), with only half of the 20 FATF-designated categories of predicate offenses included.
  • Customer Due Diligence: The amended MLPCA does not cover preventive measures in a satisfactory manner, including customer due diligence, record keeping, monitoring of transactions and relationships, and supervisory and oversight systems.
  • Financial Intelligence Unit (FIU): The FIU has been relocated to the Financial Institutions Commission (FIC) but lacks dedicated resources, staffing, and standard operating procedures.
  • Freezing of Terrorist Assets: Palauan law does not adequately address the freezing of terrorist assets under UNSCRs 1267 and 1373.

Key Recommendations

  1. Expedite implementation of the amended MLPCA and provide additional resources to ensure AML/CFT compliance.
  2. Enhance customer due diligence, record keeping, monitoring of transactions and relationships, and supervisory and oversight systems.
  3. Provide dedicated staffing and resources to the FIU, including standard operating procedures on STR analysis and dissemination.
  4. Improve access to information from reporting entities without a court order.
  5. Establish procedures for disseminating designations pursuant to UNSCRs 1267 and 1373.

Overall Assessment

The report concludes that Palau has made efforts to strengthen its AML/CFT legislative framework but faces significant challenges in implementing these measures effectively. To address these deficiencies, Palau must allocate additional resources to ensure compliance with international standards and best practices.