Palau establishes Banking Commission

PALAU’S banking system may undergo a major overhaul if the findings of a newly created National Banking Review Commission are favourable.

The Commission was set up by the president Kuniwo Nakamura, after a meeting with his Cabinet, Council of Chiefs and the leadership of the Olbiil Era Kelulau (Palau’s national congress) in late December.

Nakamura signed an Executive Order giving 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,” a statement

from the president’s office said.

The Executive Order was signed less than a day after Nakamura returned to Palau from an official visit to Japan and followed on the heels of his earlier veto of legislation that might have allowed foreign interests to hide illegal activities in operations in Palau.

In reporting his veto to Palau’s

legislators, Nakamura proposed

establishing the commission 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 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 organisations to combat money-laundering and other international financial crimes.

“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,”

Nakamura said.

In a related matter, he described the recent reports of a ban on transactions in US 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.” ■

Patau's National Banking Review Commission will recommend changes to the nation's bank system