Risk-Based Approach to Anti-Money Laundering in Palau: A Mixed Bag, Says FATF Report

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The Financial Action Task Force (FATF) has released a report assessing Palau’s progress in implementing anti-money laundering (AML) measures. The report highlights Palau’s mixed performance, with the country receiving an overall rating of “partially compliant”.

Strengths and Weaknesses

Positive Developments

• Palau has adopted a risk-based approach to AML, focusing on identifying and mitigating high-risk activities.
• Efforts have been made to prevent the misuse of shell companies and other opaque structures.

Areas for Improvement

• Inadequate national cooperation and coordination among authorities.
• Weaknesses in confiscation and provisional measures.
• Laws and regulations regarding financial institutions secrecy and customer due diligence require improvement.

Compliance with FATF Recommendations

Palau was found to be:

• Largely compliant with several FATF Recommendations, including those related to:
  • Money laundering offenses
  • Terrorist financing
  • Targeted financial sanctions
• Non-compliant in certain areas, such as the regulation and supervision of designated non-financial businesses and professions (DNFBPs)

Challenges and Gaps

• Palau’s financial intelligence unit is still developing its capabilities.
• There are gaps in the country’s laws and regulations regarding AML/CFT.
• Concerns about the effectiveness of Palau’s powers to supervise and enforce compliance with AML/CFT requirements.

Conclusion

Despite challenges, the FATF report acknowledges Palau’s commitment to improving its AML/CFT regime. The country is encouraged to continue implementing measures to address its weaknesses and ensure that it remains a strong partner in the global fight against money laundering and terrorist financing.