Financial Crime World

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Palau’s Financial Sector Faces Scrutiny Over Anti-Money Laundering Measures

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A recent evaluation has found that Palau’s financial sector still has some shortcomings when it comes to anti-money laundering (AML) and combating the financing of terrorism (CFT). While the country has made some progress, it still falls short in certain areas.

Evaluation Highlights

The evaluation, conducted by a global financial watchdog, highlighted several issues. One major concern is the lack of fit and proper requirements for high-risk countries. Additionally, there are no monitoring systems in place to ensure compliance with AML/CFT obligations by all designated non-financial businesses and professionals (DNFBPs).

Positive Strides

Despite these shortcomings, Palau has made some positive strides. The country has introduced a Gaming Business Act, which allows for the issuance of licenses to virtual pachinko concessions and internet virtual lottery game concessions. However, there are no fit and proper requirements for potential casinos.

Financial Intelligence Unit (FIU)

The evaluation also noted that Palau’s Financial Intelligence Unit (FIU) is responsible for monitoring and supervising DNFBPs, but it lacks a system to ensure compliance with AML/CFT obligations by all DNFBPs. The FIU has issued a rulebook outlining a procedure for handling administrative violations of the Money Laundering and Proceeds of Crime Act and DNFBP regulations.

Palau’s legal and judicial professions are also under scrutiny. While the Supreme Court governs the administration of these professions, there is no designated self-regulatory body (SRB) for AML/CFT purposes. However, the Bar Association has measures in place to prevent criminals from being professionally accredited.

Accounting Profession

Accountants are required to register with the Office of the Public Auditor and the Palau Board of Accountancy, which can refuse granting a practicing certificate on the basis of “good character.” However, it is unclear if the board has additional internal guidelines or procedures for applying this thresholding, particularly in regard to criminal association.

Conclusion

The evaluation concluded that Palau’s AML/CFT framework remains largely compliant, but with some minor shortcomings. The country is recommended to address these issues to strengthen its financial sector and prevent money laundering and terrorist financing.

Recommendations

  • Improve the monitoring system to ensure compliance with AML/CFT obligations by all DNFBPs.
  • Introduce fit and proper requirements for high-risk countries.
  • Establish a self-regulatory body (SRB) for AML/CFT purposes in the legal and judicial professions.
  • Develop additional internal guidelines or procedures for applying the “good character” thresholding for accountants.

By addressing these recommendations, Palau can strengthen its financial sector and better protect against money laundering and terrorist financing.