Palau’s Financial Sector Still Lacking in Anti-Money Laundering Measures

Despite Progress Made, Palau’s Financial Sector Falls Short of International Standards

In its latest report, Palau’s financial sector has been found lacking in its anti-money laundering (AML) measures. Despite some progress made in recent years, the country’s authorities have failed to implement a monitoring system to ensure compliance with AML/Counter-Terrorism Financing (CFT) obligations by all designated non-financial businesses and professions (DNFBPs).

Lack of Monitoring System Raises Concerns

• The lack of a monitoring system has raised concerns about the effectiveness of Palau’s AML/CFT regime.
• The report highlights that Palau’s authorities have failed to implement a system to ensure compliance with AML/CFT obligations by all DNFBPs.

Insufficient Resources and Capacity for Supervision

• The Financial Intelligence Unit (FIU) has been designated as the competent authority for DNFBP supervision, but it still lacks the necessary resources and capacity to effectively supervise all DNFBPs.
• The FIU has not yet commenced DNFBP supervision, which is a major concern.

Vulnerable Sectors Lacking Fit and Proper Measures

• There are no fit and proper measures in place for dealers in precious metals and stones and real estate agents, despite these sectors being small but potentially vulnerable to money laundering and terrorist financing activities.
• The report notes that these sectors require specific measures to prevent money laundering and terrorist financing.

Positive Developments

• Palau’s authorities have introduced the FIU Rulebook, which outlines a procedure for handling administrative violations of the Money Laundering and Proceeds of Crime Act (MLPCA) and DNFBP regulations.
• The rulebook empowers the FIU to issue administrative enforcement and sanctions measures.

Adequate Powers but Room for Improvement

• Supervising authorities, including the FIU, have adequate powers to perform their functions under the MLPCA.
• The Supreme Court of Palau governs the administration of the legal and judicial professions, which includes measures to prevent criminals from being professionally accredited.

Accountants’ Registration Requirements

• Accountants are required to register for a practicing certificate with the Office of the Public Auditor and the Palau Board of Accountancy.
• However, it is unclear if the Board has additional internal guidelines or procedures for applying the “good character” threshold, particularly in regards to criminal association.

Conclusion

While Palau’s authorities have made some progress in implementing AML/CFT measures, there is still much work to be done to ensure the country’s financial sector is fully compliant with international standards. The report highlights areas of concern and provides recommendations for improvement to strengthen Palau’s AML/CFT regime.