By Nazario Rodriquez Jr.
Horizon news staff

AS early as a year ago, friends in the banking industry told us about Palau as a potential transit area for the worldwide problem of money laundering. A few months thereafter, this issue has surmised again as speculators linked a recent controversy in the local banking business to money laundering and the same speculators involved big fish, so and so. We personally dismissed such speculation.
Last week, we were able to download the 446-page report released by the United States Bureau of International Narcotics and Law Enforcement Affairs (BINL), wherein it put Palau on the "Countries of Concern" watch-list along with three other Pacific Islands, Cook Islands, Samoa and Vanuatu.
The US is pressuring on the four Pacific Islands to strengthen their money laundering laws.
The BINL makes regular reports to the President of the United States, the Secretary of State regarding policies to combat international narcotics and crime.
The 24th BINL Strategy Report for 2007 was released last month noted that Palau along with other countries under the category believed carrying a number of serious and systematic weaknesses that could international money laundering, drug trafficking and terrorist financing, thus endangering the lives of American citizens.
"Palau is not a major financial center. Nor does it offer offshore financial services. There are no offshore banks, securities brokers/dealers or casinos in Palau. The Authorities report that within the last year at least one trust company has been registered, though the scope and size of its business is unknown. Palauan authorities believe that drug trafficking and prostitution are the primary sources of illegal proceeds that are laundered."
However, the BINL traced government efforts to combat this problem including several legislation by the Olbiil Era Kelulau.
It said that amid reports in 1999 and 2000 that offshore banks in Palau had carried out large-scale money laundering activities, a few international banks banned financial transactions with Palau. In response, Palau established a Banking Law Review Task Force that recommended financial control legislation to the OEK, Palau took several steps toward addressing financial security through banking regulation and supervision and putting in place a legal framework for an anti-money laundering regime.
The report noted that the Money Laundering and Proceeds of Crimes Act (MLPCA) of 2001 criminalized money laundering and created a financial intelligence unit. "This legislation imposes suspicious transactions reporting (for suspicious transactions over $10,000) and record keeping requirements for five years from the date of the transaction. Credit and financial institutions are required to keep regular reports of all transactions made in cash or bearer securities in excess of $10,000 or its equivalent in foreign cash or bearer securities."
"The Financial Institutions Act of 2001 established the Financial Institutions Commission, an independent regulatory agency, which is responsible for licensing, supervising and regulating financial institutions, defined as banks and security brokers and dealers in Palau. The insurance industry is not currently regulated by the FIC and insurance companies in Palau are primarily agents for companies registered in the U.S. or out of the U.S. Territory of Guam."
The BINL said that the lack of both human and fiscal resources has hampered the development of a viable anti-money laundering regime in Palau.
The BINL advised that "Palau should enact legislation and promulgate implementing regulations to the MLPCA, as recommended by the APG, including but not limited to establishing funding for the FIU, eliminating the threshold for reporting suspicious transactions and beginning a broad-based implementation of the legal reforms already put in place."
We hope that the ongoing power struggle in both Houses of Congress will finally come to its end and work seriously in putting into proper perspective the tarnished image (in this money laundering issue) of the country in the international financial community.