Palau’s Anti-Money Laundering and Counter-Terrorist Financing Efforts Receive Mixed Review
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Washington D.C., USA - A recent report by the National Risk Assessment (NRA) has concluded that while Palau’s efforts to combat money laundering and terrorist financing are reasonable, there is still room for improvement.
Limited Understanding of Anti-Money Laundering and Counter-Terrorism Financing Risks
According to the report, Palau’s private sector entities have limited understanding of anti-money laundering and counter-terrorism financing risks, which may hinder effective implementation of measures. This lack of understanding may lead to inadequate risk assessments and ineffective strategies for combating money laundering and terrorist financing.
High-Risk Predicate Offenses in Palau
The report identified two high-risk predicate offenses in Palau:
- Illicit trafficking in narcotic drugs and psychotropic substances
- Human trafficking and sexual exploitation
These predicate offenses pose significant risks to Palau’s financial system and require robust measures to combat them.
Corruption Risks and Cash-Based Economy
Corruption risks are not being given sufficient focus, and the country’s cash-based economy poses a significant risk. The lack of transparency in financial transactions makes it difficult to track suspicious activity and identify money laundering schemes.
Positive Steps Taken by Palau
Despite these challenges, Palau has made positive steps to address ML/TF risks:
- Formation of the National Enforcement Agency (NEA)
- Human Trafficking Task Force
However, there is no documented anti-money laundering and counter-terrorism financing strategy or policy informed by risk assessments.
Gaps in Coordination and Risk-Based Approach
The report highlighted gaps in coordination between competent authorities and the lack of a risk-based approach for exemptions from anti-money laundering and counter-terrorism financing requirements. This lack of coordination may lead to inefficiencies and inadequate measures to combat money laundering and terrorist financing.
Financial Intelligence Unit (FIU)
Palau’s FIU provides decent-quality financial intelligence, but disseminated reports are based mainly on Suspicious Transaction Reports (STRs). The report noted that while law enforcement agencies do not undertake a proactive approach to carrying out parallel financial investigations, the formation of the FIU has improved coordination between authorities.
Limited ML Prosecutions and Confiscation
Palau’s ML prosecutions have been limited, with most sentences involving suspended sentences and fines. Confiscation is not prioritized in the country’s criminal justice regime, despite having a generally comprehensive legal framework.
Conclusion
Despite these challenges, the report concluded that Palau’s efforts to combat money laundering and terrorist financing are reasonable, but further analysis is required.