Money Laundering And Financial Crimes Report 2000

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U.S. DEPARTMENT OF STATE Washington, D.C.

PALAU

Palau (Concern).

Palau has sought assistance from US officials, the Pacific community, the United Nations, and the International Monetary Fund in its effort to develop an anti-money laundering regime. In addition, Palau participated in international meetings and conferences on financial crime in 2000, including a US-sponsored conference in Fiji and the UN Offshore Forum conference in the Cayman Islands. Palau has become a signatory to Pacific Island Forum anti-money laundering initiatives and has made significant advances to abide by the Honiara Declaration, which calls for Forum countries to implement the FATF 40 Recommendations.

After a few international banks restricted financial transactions with Palau in late 1999, the Government of Palau began its own investigation into alleged money laundering activities involving Palau-registered offshore banks. Palauan officials discovered that a few shell banks had been established through a mechanism in which entities in Palau applied for certificates of incorporation and business licenses in a local-in lieu of national-level jurisdiction. None of these so-called banks was ever given foreign investment approval or any approval to do business in Palau. Nonetheless, a few of these shell banks reportedly gained access to the international financial community and carried out almost $2 billion in suspicious transactions during the past two years.

The Government of Palau needs to enact and implement comprehensive anti-money laundering legislation that meets international standards and establish a financial intelligence unit to work with foreign counterparts to combat financial crime. It should pay special attention to supervising its offshore financial and gambling sector to prevent abuse by criminal entities.

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