Executive Summary: Assessment of Palau’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Systems

Palau has made significant strides in strengthening its AML/CFT legislative framework, but implementation remains a challenge. This executive summary highlights key findings from an assessment report on Palau’s AML/CFT systems, identifying areas for improvement and recommendations for enhancement.

Key Findings:

1. Incomplete Criminalization of Money Laundering

• The offense of money laundering is not fully criminalized, as only half of the FATF designated categories of predicate offenses are covered by the law.
• This gap in legislation hinders the effective implementation of AML/CFT measures.

2. Deficiencies in Terrorism Financing Provisions

• The financing of terrorism is criminalized, but there are deficiencies in the provisional measures for seizing evidence and property and freezing capital and financial transactions.
• These gaps compromise Palau’s ability to prevent and respond to terrorist financing activities.

3. Insufficient Resources for the Financial Intelligence Unit (FIU)

• The FIU lacks dedicated resources to carry out its functions effectively, hindering its ability to analyze and disseminate financial intelligence.
• This limitation undermines the FIU’s capacity to support AML/CFT efforts in Palau.

4. Limitations on Confiscation of Proceeds

• Palauan law allows for the confiscation of proceeds of money laundering offenses and civil forfeiture or criminal confiscation of property related to terrorism financing.
• However, there are limitations on what can be confiscated, which may impact the effectiveness of these measures.

Overall Deficiencies:

Palau’s AML/CFT systems remain deficient in several areas, including:

• Lacking dedicated resources for the FIU
• Inadequate implementation of legislation
• Deficiencies in provisional measures and confiscation laws
• Limited capacity for investigating money laundering and terrorist financing cases

Recommendations:

To enhance Palau’s AML/CFT systems, it is recommended that:

1. Additional resources be dedicated to implementing the AML/CFT legislative framework.
2. The FIU’s capacity be strengthened to enable effective analysis and dissemination of financial intelligence.
3. The ability to investigate and prosecute money laundering and terrorist financing cases be improved.

By addressing these areas for improvement, Palau can strengthen its AML/CFT systems and contribute to the global fight against money laundering and terrorism financing.