Financial Crime World

Palau Cracks Down on Financial Crime: AML and CFT Legislation Strengthened

According to a detailed assessment report by the International Monetary Fund (IMF) released in 2009, Palau, an island nation located in the Pacific, has taken significant strides in combating financial crime. The following discusses Palau’s legislative framework against money laundering and terrorism financing that has been in place since 2001.

Strengthening of Palau’s Legislative Framework

  • Money Laundering and Proceeds of Crime Act of 2001 and Financial Institutions Act of 2001: These acts were amended.
  • Counter-Terrorism Act of 2007 and Cash Courier Disclosure Act of 2007: These acts were enacted.
  • Criminalization of Money Laundering: The offense of money laundering is now criminalized under the Money Laundering and Proceeds of Crime Act of 2001.

Meeting International Standards

Palau took these measures to meet international standards set by organizations like the Financial Action Task Force (FATF) and the IMF, which require countries to implement robust anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Coverage of Predicate Offenses and Asset Freezing

The amended legislation in Palau covers predicate offenses such as arms trafficking and other serious crimes. The courts in Palau have the power to issue court orders to freeze assets suspected of being derived from criminal activity.

Financial Institution Requirements

Financial institutions are subject to customer due diligence requirements under the Financial Institutions Act.

Enhancements Needed

However, the assessment report also noted the need for Palau to enhance its CFT regime and to establish a Financial Intelligence Unit. In a subsequent follow-up report in 2016, the IMF praised Palau for its progress but also noted areas for improvement, including the need to strengthen supervision and regulation of non-financial sectors and for broader public awareness of AML and CFT issues.

Pacific Island Countries’ Efforts

Palau is not the only Pacific Island country that has taken strong steps to combat financial crime. Other countries in the region, such as Fiji, Samoa, and Tonga, have also strengthened their AML and CFT frameworks in recent years.

Global Trend towards Greater Scrutiny

The IMF’s assessment reflects the global trend towards greater scrutiny of financial transactions to prevent money laundering and terrorism financing. The fight against these crimes is an ongoing one, and countries like Palau must remain vigilant to ensure that their financial systems remain secure and free from criminal activity.

Palauan Government’s Commitment

The Palauan government, in collaboration with international organizations like the IMF, is committed to strengthening the country’s AML and CFT framework and ensuring that it remains effective in the face of evolving threats.