Financial Integrity Monitor

Palau PW

Sources
11
Jurisdiction profile
Largely CompliantTier BRisk: IncreasingMixed

Palau's AML/CFT regime rests on the Money Laundering and Proceeds of Crime Act (MLPCA), Counter-Terrorism Act 2007 and DNFBP Regulations, supervised by the Financial Institutions Commission (prudential) and the Financial Intelligence Unit (AML/CFT supervisor, est.

More2001). Last APG Mutual Evaluation 2018; 5th enhanced follow-up 2023 found persistent gaps in beneficial ownership, proliferation-financing TFS and VASP supervision.

Key deficiencies
  • No requirement for legal persons to maintain beneficial ownership information beyond the direct legal owner of shares
  • No coordination mechanism or targeted financial sanctions regime for proliferation financing (R.7 rated non-compliant since 2018)
  • No licensing, registration or risk-based supervisory regime for virtual asset service providers (R.15 re-rated non-compliant in 2023)
  • Lawyers acting as de facto trust and company service providers are exempt from AML/CFT obligations on legal-privilege grounds
  • Palau International Ship Registry (PISR) screening of flagged vessels is reactive (post-designation deflagging) rather than preventive, enabling sustained use of the Palau flag by Iran- and Russia-sanctions-linked tankers
Recent developments (18m)
  • Sustained series of OFAC Iran-related SDN designations (Apr 2025, Nov 2025, Dec 2025, Jan 2026, Feb 2026) naming dozens of Palau-flagged tankers
  • EU Commission's December 2025 high-risk third-country AML/CFT list update left Palau unlisted while adding Bolivia and the British Virgin Islands
  • UK MLR 2017 reg. 33 amended from 30 June 2026 (S.I. 2026/621) replacing 'high-risk third countries' with 'FATF call-for-action country' as the sole mandatory-EDD trigger; Palau unaffected under either the old or new UK test
  • Palau remains on the EU's non-cooperative tax jurisdictions list (situation as of 17 February 2026), a parallel but distinct transparency-governance signal
Regulatory horizon
No dated horizon items this cycle. 3 items tracked without a confirmed date.
3 pending date · baseline financial-integrity-2026-10-03
Registers

Enforcement actions

  • OFAC added two Palau-flagged chemical/oil tankers to the SDN list under Iran petroleum-sanctions authority (EO 13902), linked to an Iran-oil-trade facilitation network. 10 Apr 2025
  • OFAC designated a Palau-flagged crude oil tanker under Iran-related sanctions authority as part of a wider package including counter-terrorism and Balkans-related designations and removals. 20 Nov 2025
  • OFAC's largest single-tranche designation of Palau-flagged vessels in the window, issued alongside Iran, ICC-related and Russia-related designation removals and general license issuances. 18 Dec 2025
  • OFAC designated four additional Palau-flagged tankers under Iran-related sanctions authority, with one former-Palau-flag vessel (LONGEVITY 7) also named. 23 Jan 2026
  • OFAC designated three Palau-flagged LPG tankers under combined Iran-related and non-proliferation designation authority. 25 Feb 2026

Sanctions changes

  • Sustained monthly-cadence OFAC SDN listings of Palau-flagged tankers under Iran petroleum sanctions (EO 13902) continued through the window (Apr 2025 - Feb 2026), with dozens of vessels newly designated. 25 Feb 2026
  • The European Commission's 3-4 December 2025 Delegated Regulations (EU) 2026/46 and (EU) 2026/83 updated the EU high-risk AML/CFT third-country list, adding Bolivia and the British Virgin Islands and delisting Burkina Faso, Mali, Mozambique, Nigeria, South Africa and Tanzania. Palau was not added or considered for listing in this cycle. 4 Dec 2025
  • From 30 June 2026, S.I. 2026/621 amended MLR 2017 reg. 33(1)(b) and (3)(a) so that mandatory enhanced due diligence applies only to a 'FATF call for action country', removing the UK's separate 'high-risk third countries' list concept; FATF grey-list status is now a risk factor only, not an automatic UK EDD trigger. 30 Jun 2026

Regulatory horizon (register)

  • Palau's next APG mutual evaluation on-site visit
  • Development of Palau VASP licensing and supervision regime
  • Rollout of Gaming Business Act virtual pachinko concessions

Active schemes

  • [HIGH] Iran oil sanctions evasion via Palau-flagged tankers
  • [HIGH] Russian shadow-fleet reflagging through Palau registry
  • Beneficial ownership opacity in Palau legal persons
Sources
  1. Asia/Pacific Group on Money Laundering (APG) / FATF
  2. Asia/Pacific Group on Money Laundering (APG)
  3. Palau Financial Intelligence Unit
  4. US Office of Foreign Assets Control (OFAC)
  5. US Office of Foreign Assets Control (OFAC)
  6. US Office of Foreign Assets Control (OFAC)
  7. Bloomberg
  8. European Commission
  9. HM Revenue & Customs (UK Government)
  10. UNODC (UNCAC Country Review)
  11. UK National Crime Agency / OFSI / FCDO (JMLIT+)
Coverage gaps
Palau's Corporations Act does not require legal persons to m…
Palau's Corporations Act does not require legal persons to maintain beneficial ownership information beyond the direct legal owner of shares, and there is no centralised or public BO register.
The Palau International Ship Registry screens and deflags ve…
The Palau International Ship Registry screens and deflags vessels reactively, generally only after a foreign sanctions authority (chiefly OFAC) designates the vessel, rather than vetting at point of registration.
Palau has no legal framework, policy or coordination mechani…
Palau has no legal framework, policy or coordination mechanism to implement targeted financial sanctions related to proliferation financing; Recommendation 7 remains rated non-compliant across both the 2018 MER and 2023 follow-up report.
Palau has no licensing or registration regime for virtual as…
Palau has no licensing or registration regime for virtual asset service providers and no designated AML/CFT supervisor for the sector; Recommendation 15 was re-rated non-compliant in the 2023 follow-up report.
Lawyers, rated the highest-risk DNFBP sector in Palau's NRA …
Lawyers, rated the highest-risk DNFBP sector in Palau's NRA and the only entities effectively performing TCSP-type company-formation services, are exempt from AML/CFT obligations on legal-privilege grounds.
Independent investigative journalism and NGO reporting speci…
Independent investigative journalism and NGO reporting specific to Palau's domestic AML/CFT enforcement is sparse compared to coverage of its ship registry; most substantive analysis derives from FATF/APG assessment documents and OFAC vessel-designation notices rather than Palau-specific civil-society or press investigation.

Evidence

Confidence-tiered claims

No structured claims published for this jurisdiction yet.