Palau’s Anti-Money Laundering and Counter-Terrorism Financing Efforts Hampered by Lack of Resources
A recent assessment of Palau’s efforts to combat money laundering and terrorist financing has revealed significant shortcomings due to a lack of resources.
Crime Rate and Sources of Criminal Proceeds
According to the assessment, Palau’s crime rate is relatively low, with prostitution, consumer marijuana sales, and illegal fishing being the main sources of criminal proceeds. However, this does not excuse the country’s deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) systems.
Shortcomings in AML/CFT Systems
The report notes that money laundering is criminalized under Palauan law, but there are eight categories of predicate offenses not covered by the offense, which is a significant shortcoming. Additionally, while the country has enacted legislation to criminalize terrorism financing, it has yet to conduct any investigations or prosecutions related to this issue.
Confiscation Laws
Confiscation laws in Palau also have limitations, as they only allow for the confiscation of proceeds from money laundering and terrorist financing offenses, but not property related to predicate offenses. Provisional measures such as seizing evidence and freezing assets are available, but these require approval by the Supreme Court.
Financial Intelligence Unit (FIU)
The FIU plays a crucial role in Palau’s AML/CFT efforts, but it has been operating without dedicated full-time resources since its inception. The FIU has processed 71 suspicious transaction reports, but lacks:
- Documented standard operating procedures
- Ability to obtain additional information from reporting entities without a court order
Investigation and Prosecution of Money Laundering and Terrorist Financing Cases
The CID of the Bureau of Public Safety has been tasked with investigating money laundering and terrorist financing cases, but it has not initiated an investigation into these crimes that was not related to a suspicious transaction report.
Recommendations for Improvement
To effectively combat these threats, Palau’s authorities must:
- Dedicate additional resources to enhance the FIU’s effectiveness, including providing dedicated staffing and documented standard operating procedures
- Address the limitations in its confiscation laws and ensure that terrorist assets are frozen immediately and without undue delay
Risks and Consequences of Inaction
Without significant improvements, Palau’s AML/CFT systems will remain deficient, putting the country at risk of being used as a hub for illicit activities. It is essential for Palau to address these shortcomings to prevent its financial system from being exploited by criminals and terrorists.
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