Financial Crime World

Palau’s Anti-Money Laundering and Combating Financing of Terrorism System Lacks Resources

A recent report has expressed concerns that Palau’s Anti-Money Launderling (AML) and Combating Financing of Terrorism (CFT) system lacks the necessary resources to effectively combat financial crime.

Deficiencies in Palau’s AML/CFT System

While Palau has made significant progress in criminalizing money laundering and financing of terrorism, its AML/CFT system remains deficient in several areas. Specifically:

  • The country’s legal framework is largely in line with international standards, but it fails to cover eight out of 20 FATF-designated categories of predicate offenses.
  • The Financial Intelligence Unit (FIU) operates without dedicated full-time resources and lacks standard operating procedures for analyzing and disseminating suspicious transaction reports.

Challenges in Investigating Money Laundering and Terrorist Financing

The report also highlighted that the country’s law enforcement agency, the Division of Criminal Investigation & Drug Enforcement (CID), has not initiated an investigation into money laundering or terrorist financing without a connection to a suspicious transaction report. The CID has been tasked with investigating such cases, but it has not made use of special powers granted by law.

Recommendations

To effectively combat financial crime, the report recommends that Palau:

  • Dedicate additional resources to its AML/CFT system, including staffing the FIU with full-time employees and establishing standardized procedures for analyzing and disseminating suspicious transactions reports.
  • Provide training to reporting entities on their obligations under the AML/CFT regime.
  • Ensure that the CID is adequately equipped to investigate money laundering and terrorist financing cases without a connection to a suspicious transaction report.

Key Takeaways

  • Palau’s failure to adequately address these issues may hinder its ability to effectively combat financial crime, which could have serious consequences for the country’s economy and national security.
  • The country’s AML/CFT system remains deficient in several areas, highlighting the need for additional resources and support.

Palau’s Progress in Combating Financial Crime

Despite the challenges, Palau has made some progress in combating financial crime:

  • Criminalized money laundering and financing of terrorism under Palauan law.
  • Complied with most technical aspects of the Vienna and Palermo Conventions.
  • Established an FIU in 2001, which has processed 71 suspicious transaction reports.
  • Enacted a Counter-Terrorism Act in April 2007.

However, more needs to be done to ensure that Palau’s AML/CFT system is effective in combating financial crime.