Financial Crime World

Palau’s AML/CFT Systems Struggle Due to Lack of Resources

Despite efforts to combat money laundering and terrorist financing, Palau’s systems remain deficient due to a lack of resources, according to an evaluation by the relevant authorities.

Crime Situation in Palau

The crime rate in Palau is relatively low, with prostitution and consumer marijuana sales being major sources of criminal proceeds. However, illegal fishing by unlicensed foreign vessels poses a significant problem. There are no known organized crime or terrorist financing situations in the country.

Money Laundering Laws

Palau’s money laundering laws are broadly compliant with international standards, but a serious shortcoming exists as eight out of twenty FATF-designated categories of predicate offenses are not covered. The country has prosecuted six cases of money laundering offenses, but more needs to be done to address this issue.

Combating Terrorism Act

The recently enacted Combating Terrorism Act criminalizes the financing of terrorism in line with international standards. However, no investigations or prosecutions have been conducted under this act, and it remains unclear how effective it will be in combating terrorist financing.

Confiscation Laws

Confiscation laws are also lacking, as property related to predicate offenses cannot be seized. Provisional measures such as seizing evidence and freezing capital transactions are available, but these must be approved by the Supreme Court.

Financial Intelligence Unit (FIU)

The FIU is responsible for receiving and analyzing suspicious transaction reports (STRs). However, it operates without dedicated full-time resources and lacks a documented standard operating procedure. The FIU has processed 71 STRs, but its effectiveness would be enhanced with dedicated staffing and improved procedures.

Division of Criminal Investigation & Drug Enforcement (CID)

The CID is tasked with investigating money laundering and terrorist financing cases, but it has not initiated any investigations unrelated to an STR. The CID also lacks the resources to effectively investigate these crimes.

Conclusion

In conclusion, Palau’s AML/CFT systems are struggling due to a lack of resources. Without additional funding and personnel, the country will continue to face challenges in combating money laundering and terrorist financing.

  • Key challenges:
    • Lack of resources for the FIU and CID
    • Inadequate confiscation laws
    • Limited investigations and prosecutions of money laundering and terrorist financing cases
  • Recommendations:
    • Provide dedicated full-time resources for the FIU and CID
    • Strengthen confiscation laws to allow for seizure of property related to predicate offenses
    • Increase funding and personnel for investigations and prosecutions of money laundering and terrorist financing cases