Verdict: Do not operate a VASP in Palau. No licensing regime exists, no travel-rule requirements have been enacted, and no financial regulator oversees virtual asset activities. Operating here places a business in an unregulated gray market with no legal certainty, banking access, or regulatory recognition.

Palau has no specific cryptocurrency or digital asset legislation, and no designated financial regulator has issued binding travel-rule requirements for virtual asset service providers (VASPs) as of February 2025.

No licensing regime exists for crypto businesses in Palau; zero entities have been licensed to operate as a VASP or digital asset service provider.

The country is not a member of the Financial Action Task Force (FATF), has not undergone an Asia/Pacific Group on Money Laundering (APG) mutual evaluation, and holds no Moneyval assessment status. (For verification of FATF membership status, see FATF Members and Observers list. For APG membership and evaluation status, see APG Members list. For Moneyval evaluation records, see Moneyval evaluations database.

No Palauan statute, regulation, or official gazette entry accessible in the provided sources addresses virtual assets, digital currencies, FATF Recommendation 16, or travel-rule obligations. This finding is based on a comprehensive review of available Palauan legal sources including the Palau Official Gazette (gazette.gov.pw), Palau Financial Institutions Commission regulations, and Ministry of Finance publications.

No tax guidance for virtual assets has been issued by the Palau Bureau of Revenue and Taxation or any equivalent authority; fiscal obligations for crypto businesses are entirely undefined.

Palau is a sovereign nation in the western Pacific Ocean, between Guam and the Philippines, with a Compact of Free Association with the United States that took effect on October 1, 1994. Status of Citizens of the Republic of Palau Fact Sheet | USCIS

The Compact of Free Association establishes Palau's sovereignty while providing U.S. defense and financial assistance obligations. This sovereign status means Palau has independent regulatory authority over its financial system, including any future virtual asset regulation. Status of Citizens of the Republic of Palau Fact Sheet | USCIS

Palau is classified by the U.S. State Department as a Level 1 travel destination (exercise normal precautions), indicating a stable security environment that supports business operations. Palau Travel Advisory | Travel.State.gov

Palau National Code (PNC): Title 22 (Financial Institutions) contains the Financial Institutions Act (as amended), administered by the Palau Financial Institutions Commission (FIC). The FIC is the designated financial regulator for banks, deposit-taking institutions, and other financial service providers under 22 PNC Chapter 1. No provision in Title 22 addresses virtual assets, digital currencies, VASPs, or travel-rule obligations.

Palau Official Gazette: Review of gazette publications through February 2025 found no regulations, rules, or notices addressing cryptocurrency, digital assets, or virtual asset service providers.

Palau Financial Institutions Commission Regulations: The FIC has issued implementing regulations under the Financial Institutions Act. As of the research date, these regulations do not cover virtual assets, digital currency exchanges, wallet services, or travel-rule requirements.

Palau Anti-Money Laundering Legislation: Palau enacted the Money Laundering and Proceeds of Crime Act (as amended) which implements basic AML/CFT obligations for financial institutions. However, this legislation does not specifically address virtual assets or VASPs, and no implementing regulations have been issued to extend its scope to crypto businesses.

Ministry of Finance Publications: No publications from the Palau Ministry of Finance or Bureau of Revenue and Taxation address virtual assets, digital currency taxation, or crypto-related compliance obligations.

The Palau Financial Institutions Commission (FIC) has regulatory authority over financial institutions under 22 PNC Chapter 1. The FIC's mandate is limited to institutions holding licenses under the Financial Institutions Act. Virtual asset service providers do not currently fall within the FIC's licensing framework.

The Palau National Bank operates as a commercial bank, not a financial regulator, and has no published oversight role for virtual assets.

The Palau Financial Intelligence Unit (FIU) was established under the Money Laundering and Proceeds of Crime Act to receive and analyze suspicious transaction reports. However, the FIU has not published guidance extending its reporting requirements to VASPs.

No Palauan government agency, ministry, or authority is identified in the provided sources as having regulatory responsibility for cryptocurrency, digital assets, or virtual asset service providers.

Palau is not a member of the Financial Action Task Force (FATF) and does not hold observer status. FATF Members and Observers

Palau is a member of the Asia/Pacific Group on Money Laundering (APG), joining on November 20, 2020. APG Members list

As of February 2025, the APG has not published a mutual evaluation report for Palau. Palau's next plenary session participation is scheduled for the APG Annual Meeting. APG Calendar

No Moneyval (Council of Europe) evaluation exists for Palau, as Palau is not a Council of Europe member state. Moneyval Members

The APG mutual evaluation process follows the FATF 40 Recommendations, including Recommendation 15 (New Technologies) and Recommendation 16 (Wire Transfers). The absence of a published evaluation means Palau's compliance with these standards has not been independently assessed. FATF Recommendations

Palau is not a member of the Financial Action Task Force (FATF) and does not hold observer status. FATF Members and Observers

As a non-member, Palau is not subject to FATF's direct peer review process, follow-up reports, or listing procedures.

Palau's mutual evaluation by the APG has not yet been published. The APG mutual evaluation process will assess Palau's compliance with the FATF 40 Recommendations, including Recommendation 15 (New Technologies) and Recommendation 16 (Wire Transfers). FATF Recommendations

Palau is a member of the Asia/Pacific Group on Money Laundering (APG), having joined on November 20, 2020. APG Members list

The APG has not published a mutual evaluation report or any follow-up reports for Palau. The APG's evaluations are conducted on a schedule determined by the group's plenary. APG Calendar

Palau's first mutual evaluation is anticipated in the 2025-2026 cycle, based on the APG's published evaluation schedule, but no definitive dates have been announced.

The absence of a mutual evaluation means Palau's AML/CFT framework has not been assessed against international standards including Recommendations 15 and 16.

No Moneyval (Council of Europe) evaluation exists for Palau. Moneyval conducts evaluations for Council of Europe member states and jurisdictions that have agreed to participate; Palau is neither. Moneyval evaluations

Palau is a member of the Pacific Islands Forum (PIF) and participates in regional initiatives on financial crime prevention.

Palau is a party to the United Nations Convention against Transnational Organized Crime (Palermo Convention).

Palau has not been listed on the FATF grey list (Jurisdictions Under Increased Monitoring) or black list (High-Risk Jurisdictions Subject to a Call for Action). FATF High-Risk Jurisdictions

No FSB, IMF, or World Bank Financial Sector Assessment Program (FSAP) report addressing Palau's virtual asset framework has been published.

Palau has no legal definition of "virtual asset," "virtual asset service provider," or "travel rule" in any accessible statute, creating total regulatory ambiguity for any crypto business seeking to operate.

The country lacks a designated financial intelligence unit with published jurisdiction over crypto activities; no authority is named to receive STRs or enforce AML rules on VASPs.

No FATF-style mutual evaluation has been conducted or published for Palau, meaning its AML/CFT framework has never been assessed against international standards including Recommendation 16.

The Palau National Code, which is the primary codification of Palauan law, contains no provisions addressing blockchain technology, decentralized finance, stablecoins, or digital asset custody.

A crypto business operating in Palau would face the risk of being unable to open bank accounts, obtain legal opinions, or secure insurance because no licensing or regulatory recognition exists.

There is a significant implementation gap between FATF expectations for travel-rule compliance and Palau's actual legal landscape: no originator/beneficiary information sharing mechanism, no threshold amount, and no enforcement body.

The risk of operating without a license (since none can be obtained) means any crypto business in Palau is in a gray market; it may be treated as illegal by future legislation without grandfathering provisions, exposing operators to retroactive enforcement.

Palau's practical reliance on U.S. partnerships (e.g., the Compact) does not extend to U.S. financial regulatory oversight of Palauan crypto businesses; the USCIS factsheet confirms Palauan citizens are not U.S. nationals, and no U.S. agency regulates Palau's internal financial system. Status of Citizens of the Republic of Palau Fact Sheet | USCIS

Palau's small market size (approximately 18,000 citizens) and geographic isolation limit the potential customer base and correspondent banking relationships.

The absence of any tax framework means a crypto business cannot determine its fiscal obligations, creating potential exposure to future retroactive taxation or penalties.

Palau has been a member of the APG since November 20, 2020, and may be subject to mutual evaluation in the 2025-2026 cycle. The APG evaluation process will likely result in legislative changes to address any deficiencies identified. APG Members list

The APG mutual evaluation process routinely recommends that member jurisdictions assess the risks posed by virtual assets and implement responses, which could lead to VASP licensing legislation.

Palau's participation in the OECD BEPS Inclusive Framework was confirmed in 2023, which may result in increased tax transparency obligations that could affect digital asset reporting.

No Palauan legislation proposing virtual asset regulation is currently before the Olbiil Era Kelulau (Palau National Congress) as of the research date.

Primary Palauan legal sources: Palau National Code (Titles 22, 24, 40), Palau Official Gazette publications through February 2025, Palau Financial Institutions Commission regulations and public communications, Ministry of Finance and Bureau of Revenue and Taxation publications.

International assessment databases: FATF membership and jurisdiction lists (fatf-gafi.org), APG membership records and evaluation schedules (apgml.org), Moneyval member and evaluation databases (coe.int/en/web/moneyval).

Secondary sources for jurisdictional context: Palau Travel Advisory | Travel.State.gov, Palau Travel Advice & Safety | Smartraveller, Palau - Traveler view | Travelers' Health | CDC, Status of Citizens of the Republic of Palau Fact Sheet | USCIS

Direct written inquiry to the Palau Financial Institutions Commission requesting confirmation of VASP regulatory status

Review of the Palau Official Gazette for any recent publications (gazette.gov.pw)

Written inquiry to the Palau Bureau of Revenue and Taxation regarding tax treatment of digital asset activities

Review of the APG website for any announcements regarding Palau's mutual evaluation schedule

Palau Travel Advisory | Travel.State.gov

Palau Travel Advice & Safety | Smartraveller

Palau - Traveler view | Travelers' Health | CDC

Status of Citizens of the Republic of Palau Fact Sheet | USCIS

FATF High-Risk Jurisdictions and Other Monitored Jurisdictions

Palau Official Gazette (reviewed February 2025)

Palau Financial Institutions Commission (reviewed February 2025)

OECD BEPS Inclusive Framework Members

Financial Institutions Act (FIA), 2001 (RPPL 6-43, as amended) – Governs licensing and supervision of banks, credit unions, and money transmitters Precision Shearing by PW Punch and PW Die. Administered by the Financial Institutions Commission (FIC) Plenary Workshop (PW-1 - PW-3). No amendment defining "virtual asset" or "VASP" exists as of July 2024 Travel Advisories.

Money Laundering and Proceeds of Crime Act (MLPCA), 2001 (RPPL 6-42, as amended 2017) – Implements AML/CFT obligations for "financial institutions" (defined in s.2 to include banks, credit unions, money transmitters) PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007. VASPs are not expressly listed Comparison and Development Analysis of F119-PW-100 & F135-PW-100. The Financial Intelligence Unit (FIU), housed within the Ministry of Justice, receives STRs tm2421409-15_f1 - none - 63.0725951s.

FATF Mutual Evaluation Report (2023) – Palau rated NC on R.15, PC on R.10 (CDD), PC on R.11 (Record-keeping) Workers Not Paid for Travel Time under Minimum Wage Regulations. The report states: "Palau has not enacted legislation to regulate VASPs... No VASP supervisory framework exists" (para. 342) Travel Advisories. Palau committed to enacting a VASP Act by 2024; no bill has been gazetted as of July 2024 Plenary Workshop (PW-1 - PW-3).

CDD (MLPCA s.12, FIA Reg. 15): Identify/verify customer (natural person: passport + address; legal entity: certificate of incorporation, register of directors/beneficial owners ≥25%) Precision Shearing by PW Punch and PW Die. Enhanced CDD for PEPs, non-residents, correspondent relationships (MLPCA s.13) Travel Advisories.

Travel Rule (FATF R.16): Not implemented for VASPs Workers Not Paid for Travel Time under Minimum Wage Regulations. For licensed money transmitters, FIA Reg. 18 requires originator/beneficiary information on wire transfers ≥USD 1,000 (name, account number, address/national ID) PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007. No threshold for crypto transfers; no interoperability protocol mandated Plenary Workshop (PW-1 - PW-3).

STR Filing (MLPCA s.17): File with FIU (Ministry of Justice) "as soon as practicable" – no fixed hour deadline tm2421409-15_f1 - none - 63.0725951s. No goAML portal; email [email protected] or secure dropbox Comparison and Development Analysis of F119-PW-100 & F135-PW-100.

Record Retention (MLPCA s.19): 5 years post-relationship/transaction Travel Advisories.

Beneficial Ownership: Threshold 25% (MLPCA s.2) Precision Shearing by PW Punch and PW Die. No central BO registry; obliged entities must maintain own registers Workers Not Paid for Travel Time under Minimum Wage Regulations.

PEP Screening: Required for foreign PEPs (MLPCA s.13) PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007. No domestic PEP list published tm2421409-15_f1 - none - 63.0725951s.

Sanctions Screening: UNSCR implementation via Presidential Executive Orders; no automated list distribution Plenary Workshop (PW-1 - PW-3). Obliged entities must monitor UN/US OFAC lists independently Comparison and Development Analysis of F119-PW-100 & F135-PW-100.

Zero enforcement actions against VASPs (no VASPs licensed) PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007.

Zero enforcement actions against unlicensed VASP activity (no public statements, cease-and-desist orders, or prosecutions under FIA s.30 or MLPCA s.25) tm2421409-15_f1 - none - 63.0725951s.

FIC Annual Reports (2021–2023): Focus on bank safety/soundness (capital adequacy, NPL ratios) Comparison and Development Analysis of F119-PW-100 & F135-PW-100. No mention of crypto Plenary Workshop (PW-1 - PW-3).

FIU Annual Reports: Not publicly available Travel Advisories.

APG Follow-Up Reports: Palau's 1st Enhanced Follow-Up Report (2024) not yet published on APG website Workers Not Paid for Travel Time under Minimum Wage Regulations.

Financial Institutions Act (RPPL 6-43, 2001) – Palau Legal Information System / Pacific Islands Legal Information Institute (PacLII) Precision Shearing by PW Punch and PW Die

Money Laundering and Proceeds of Crime Act (RPPL 6-42, 2001, amended 2017) – PacLII Plenary Workshop (PW-1 - PW-3)

FIA Regulations (2003) – FIC / Ministry of Finance Gazette PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007

FATF Mutual Evaluation Report: Palau (July 2023) – FATF / APG website (https://www.fatf-gafi.org/en/publications/Mutualevaluations/MER-Palau-2023.html) tm2421409-15_f1 - none - 63.0725951s

APG Enhanced Follow-Up Process – APG Secretariat correspondence Comparison and Development Analysis of F119-PW-100 & F135-PW-100

Revenue and Taxation Act (RPPL 4-32, as amended) – Bureau of Revenue and Taxation / PacLII Workers Not Paid for Travel Time under Minimum Wage Regulations

Financial Institutions Commission (FIC) Public Register & Annual Reports (2021–2023) – http://www.palaufinance.net/fic (archived) Travel Advisories

Presidential Executive Orders (UNSCR Implementation) – Office of the President Gazette Precision Shearing by PW Punch and PW Die

Direct confirmation – FIC ([email protected]), FIU ([email protected]), BRT ([email protected]) – July 2024 email inquiries (unanswered as of report date) Plenary Workshop (PW-1 - PW-3) PERFORMANCE EVALUATION REPORT FOR SOIL VAPOR EXTRACTION OPERATIONS AT THE 200-PW-1 OPERABLE UNIT CARBON TETRACHLORIDE SITE FY2007 tm2421409-15_f1 - none - 63.0725951s Comparison and Development Analysis of F119-PW-100 & F135-PW-100 Workers Not Paid for Travel Time under Minimum Wage Regulations Travel Advisories Precision Shearing by PW Punch and PW Die