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Palau’s Financial System Faces Moderate Risks, Says NRA Report
A recent report by the National Risk Assessment (NRA) has highlighted moderate risks in Palau’s financial system, despite efforts to improve anti-money laundering and counter-terrorist financing measures.
High-Risk Predicate Offenses
According to the report, Palau identifies two high-risk predicate offenses: illicit trafficking in narcotic drugs and psychotropic substances, and trafficking in human beings and sexual exploitation. These offenses pose significant risks to the country’s financial system.
Limited Understanding of AML/CFT Risks
The NRA found that the private sector’s understanding of AML/CFT (Anti-Money Laundering/Counter-Terrorist Financing) risks facing Palau was limited and, in some cases, negligible. This highlights the need for further analysis and consideration to address these risks effectively.
Challenges in Implementing Anti-Money Laundering Measures
The report noted that Palau does not have a documented AML/CFT strategy or policy informed by risk assessments, although positive steps have been taken over the past few years. The country has formed the National Enforcement Agency (NEA) and developed a Human Trafficking Task Force, but more work is needed to address ML/TF risks.
- Issues with application of enhanced or simplified preventative measures
- Limited cooperation between competent authorities
- Need for improvement in financial intelligence
Financial Intelligence
The report found that some use has been made of financial intelligence and information by competent authorities investigating ML (Money Laundering) or predicate offenses. However, LEAs have limited understanding of the benefits and use of financial intelligence, and lack resources and capacity to act on it.
Recommendations for Improvement
Despite these challenges, the report acknowledged positive developments in Palau’s efforts to combat ML and TF. The country has had five successful ML prosecutions since 2011, and has established a multi-agency task force focused on investigating STR-generated ML cases.
The NRA’s findings and recommendations will inform Palau’s future efforts to strengthen its AML/CFT regime and address the moderate risks faced by its financial system.