Financial Crime World

Palau’s Anti-Money Laundering and Counter-Terrorist Financing Efforts Face Challenges

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Palau, a Pacific island nation, is facing significant challenges in its efforts to combat money laundering (ML) and terrorist financing (TF), particularly in cash-intensive industries and sectors with high-level risks.

Vulnerabilities Identified

According to a recent report by the Asia-Pacific Group on Money Laundering (APG), Palau’s ML/TF vulnerabilities include:

  • Reliance on cash transactions
  • Limited expertise among relevant agencies
  • Lack of oversight over non-bank sectors

Exposure to Terrorist Financing

While Palau is considered to have low exposure to TF due to its limited links to terrorism, the report highlights the country’s vulnerability to TF.

Gaps in Anti-Money Laundering and Counter-Terrorist Financing Measures

The APG assessment found that while Palau has made some progress in implementing anti-money laundering (AML) and counter-terrorist financing (CFT) measures, there are still significant gaps to be addressed. These include:

  • Lack of a comprehensive policy framework for addressing ML/TF risks
  • AML/CFT strategy not informed by risk assessments
  • Limited use of financial intelligence

Areas for Improvement

The APG identified several areas where Palau needs to improve its AML/CFT regime, including:

  • More effective use of financial intelligence
  • Enhanced cooperation between competent authorities
  • Increased resources and capacity to investigate and prosecute ML/TF cases

High-Risk Sectors

The report highlighted that real estate agents, lawyers, and dealers in high-value assets are considered high-risk areas due to their potential involvement in cash-intensive transactions.

Positive Steps Taken

Despite these challenges, Palau has made some positive steps in recent years, including:

  • Formation of a National Economic and Anti-Corruption Agency (NEA)
  • Establishment of a Financial Intelligence Unit (FIU)

Key Findings

  • Palau faces significant challenges in combating ML and TF
  • The country’s AML/CFT strategy is not informed by risk assessments
  • Real estate agents, lawyers, and dealers in high-value assets are considered high-risk areas
  • Palau’s FIU has improved the quality and quantity of suspicious transaction reports (STRs) received from foreign banks
  • The country needs to improve its use of financial intelligence, enhance cooperation between competent authorities, and increase resources and capacity to investigate and prosecute ML/TF cases