REPUBLIC OF PALAU

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Office Of The President
December 24, 1999

REPUBLIC OF PALAU ESTABLISHES BANKING REVIEW COMMISSION

After meeting with his Cabinet, Council of Chiefs and the leadership of the Olbiil Era Kelulau (Palau’s national congress) this morning, President Kuniwo Nakamura today signed an Executive Order creating a new National Banking Review Commission.

The Executive Order gives the commission broad authority to examine existing banking operations in Palau, evaluate existing laws, regulations, and enforcement mechanisms concerning banking in the nation.

The commission is also required to identify and recommend changes in banking controls and specific actions to be taken to prevent Palau from becoming a haven for illicit financial activities and to stop any such activities, which the commission might discover.

The Executive Order, signed less than a day after the President returned to Palau from his official visit to Japan, follows on the heels of the President’s earlier veto of legislation, which might have allowed foreign interests to hide illegal activities in operations in Palau.

In reporting his veto to Palau's legislators, the President proposed establishing the commission in order to ensure that the Republic of Palau could develop its potential as a legitimate financial center without becoming a sanctuary for criminal elements.

The creation of the commission also follows bilateral discussions with the United States earlier this month where the President reaffirmed Palau's goal of maintaining a safe, sound, and legally responsible banking environment and its commitment to cooperating with other nations and international organizations to combat money-laundering and other international financial crimes.

In signing the Executive Order, President Nakamura noted the broad support for the measure among the national leaders and stated, "This is only the most recent example of how seriously Palau takes its responsibilities in combating international crimes such as money laundering. We have consistently taken steps to make sure that the Republic of Palau offers no safe harbor for illicit and illegal activities, starting with the repeal of certain secrecy laws early in the Republic's history, continuing with my veto of legislation which might have weakened our ability to prevent improprieties and now, with the signing of this Executive Order, going forward through the operations of the National Banking Review Commission."

In a related matter, the President described the recent reports of a ban on transactions in U.S. dollars passing through Palau by some banks as "extremely surprising and extremely troubling. We are trying to determine the specific reasons for the actions of those banks and the validity of those reasons. If there is any improper banking activity going on in Palau which has been officially sanctioned, we need to know that and we will take steps to put an end to it. Of course, if the actions of the banks are based merely on the fraudulent scheme of some individuals, as I suspect, rather than any climate of official support for illicit financial operations, that is another matter. Those individuals will still be prosecuted to the extent our laws provide, but their private crimes should not serve as the basis for punishing and tarnishing the reputation of the entire system."

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