Financial Crime World

Palau’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Framework: Room for Improvement

Introduction

Palau has taken steps to strengthen its AML/CFT framework, but there are still significant deficiencies in various areas. This article highlights key points that need attention.

Legislative Framework

  • Palau has amended its Money Laundering and Proceeds of Crime Act of 2001 (MLPCA) and enacted new laws, including the Counter-Terrorism Act of 2007 (CTA) and the Cash Courier Disclosure Act of 2007 (CCDA).
  • However, there is a need for expedited implementation.

Criminalization of Money Laundering

  • While Palauan law criminalizes money laundering, only half of the FATF-designated predicate offenses are covered by the offense.
  • The financing of terrorism has been criminalized, but the freezing of terrorist assets under UN Security Council Resolutions (UNSCRs) 1267 and 1373 is not adequately addressed.

Provisional Measures

  • Palauan law provides for seizing evidence and property as well as freezing capital and financial transactions.
  • However, these measures are subject to approval by the Supreme Court. Freezing measures may only be applied with respect to capital or transactions suspected to involve money laundering but not terrorism financing.

Financial Intelligence Unit (FIU)

  • The FIU has been relocated from the Office of the Attorney General (OAG) to the Financial Institutions Commission (FIC).
  • However, it still lacks dedicated full-time resources. The FIU should have documented standard operating procedures on STR analysis and dissemination.
  • Additionally, the FIU should be able to obtain additional information from reporting entities without a court order.

Law Enforcement

  • The Division of Criminal Investigation & Drug Enforcement (CID) has been tasked with investigating money laundering and terrorist financing cases.
  • However, it has not initiated any investigations that were not related to an STR.

Conclusion

While Palau has made progress in strengthening its AML/CFT framework, there are still significant deficiencies that need to be addressed. The government should take steps to expedite implementation of the legislative framework and ensure the FIU is properly resourced and equipped to carry out its functions effectively.