Palau — Country Risk Report

Palau (Asia Pacific • Oceania). Risk report as of the 19 Jun 2026 FATF plenary.

Moderate country risk, with elevated corruption risk. Palau's country risk score is 4.2/10, placing it in the moderate-risk band. The principal driver is weak corruption. Palau is not currently FATF grey- or black-listed. Palau is not subject to comprehensive country-wide sanctions. Firms should apply additional scrutiny where exposure involves state-linked entities, restricted sectors, sensitive technology, dual-use goods or politically exposed counterparties.

Recommended treatment

Standard due diligence, with enhanced checks for defined risk triggers.

At a glance

  • FATF status: Not currently listed (one indicator only; it does not set the overall country risk rating by itself)
  • Comprehensive country sanctions: none identified. Targeted sanctions exposure: possible, screen applicable persons, entities and sectors
  • Government effectiveness and rule of law: 3.2/10
  • Corruption (CPI): no score
  • Enforcement data: not yet assessed (no RegActions coverage)

Country Risk Score: 4.2/10 (Moderate)

Higher score means higher country risk (global average 4.6). Full information available. Some evidence is older. Enforcement activity and CPI are shown for context but do not change the score.

All three parts of the score are available.

How this score was calculated

  • Financial crime controls: 6.5/10 — 50% of this score
  • Government effectiveness and rule of law: 3.2/10 — 30% of this score
  • International sanctions: 0.0/10 — 20% of this score
  • The FATF assessment is more than five years old.

International sanctions contributes 0.0 because the complete UN, UK, EU and US review found no direct country-level sanctions programme. People or organisations connected to the country may still appear on sanctions lists.

Show the exact calculation

aml 6.5 × 50% + governance 3.2 × 30% + sanctions 0 × 20% = 4.2; final 4.2

Principal risk drivers

  • Government effectiveness and rule of law drive the score; no FATF listing or direct country-level sanctions were identified

Mitigating factors

  • Not currently on the FATF grey or black list.
  • No comprehensive country-wide sanctions programme.
  • Comparatively stronger political stability (1.3/10).
  • Risk is concentrated in specific counterparties, sectors and transactions rather than applying uniformly.

Business impact

  • Customer onboarding (Medium): Additional ownership and control verification may be required.
  • Payments and transactions (Medium): Review transaction purpose, counterparties and geographic routing.
  • Trade and export activity (Medium): Screen goods, end users and potential dual-use exposure.
  • Corporate clients (Medium): Assess state ownership, government links and political exposure.
  • Ongoing monitoring (Medium): Apply alerts for ownership changes, sanctions and geopolitical developments.

Recommended controls

  • Verify ultimate beneficial ownership using more than one reliable source.
  • Identify state ownership, government influence and politically exposed persons.
  • Screen entities, directors and beneficial owners against applicable sanctions lists.
  • Apply enhanced review to technology, defence, telecommunications, financial services and dual-use activity.
  • Document transaction purpose and source of funds where cross-border structures are complex.
  • Escalate unresolved ownership opacity or adverse information to Compliance.

Enhanced due diligence triggers

  • State ownership / control
  • PEP involvement
  • Sensitive / restricted sectors
  • Opaque ownership
  • Adverse media
  • Dual-use goods & technology
  • High-risk intermediary routing

FATF status: Not currently listed

Palau is not on the FATF grey or black list as of the 19 Jun 2026 plenary.

Source details

International sanctions by issuing body

  • UN: No
  • EU: No
  • UK: No
  • US: No

No means the complete UN, UK, EU and US review found no direct country-level programme. People or organisations may still appear on sanctions lists.

Government effectiveness and rule of law (World Bank 2024, percentile)

  • Government Effectiveness: 52/100
  • Regulatory Quality: 62/100
  • Rule of Law: 77/100

Regulators and legal framework

FATF network

FATF network via APG.

Last mutual evaluation: 2018 · report

National regulators

Regulator profiles not yet available on RegActions.

FIU: Not an Egmont Group member

Framework signals

  • FATF listing: Not currently listed
  • International sanctions: no listed programme identified
  • EU tax list: Listed (Annex I)
  • Corruption (CPI): no score
  • Rule of law (WGI): 3.6/10 risk

Sector exposure

  • Banking & payments (Low): No FATF listing, rule-of-law governance within normal range
  • Trade & export controls (Low): No sanctions programme or FATF black-list constraint identified
  • Crypto & virtual assets (Low): No FATF listing, accountability governance within normal range
  • Real estate & luxury assets (Low): Corruption indicators within normal range for high-value assets
  • State-linked & procurement (Low): Political-stability and corruption governance within normal range

Derived from sanctions tier, FATF listing, World Bank WGI governance and CPI; no per-sector dataset is asserted.

Palau: analysis

Palau is a Pacific island state in free association with the United States and a member of the Asia/Pacific Group on Money Laundering (APG). Its risk picture is governance-derived, with no FATF or sanctions overlay. The governance base is strong: political stability is strong, accountability is strong, rule of law is moderate, and corruption is the weakest domain. Palau sits in the upper third of the World Bank governance indicators, though no CPI data are published. The most material external signal is its presence on the EU Annex I tax list, which the Council last confirmed on 17 February 2026; that listing reflects tax transparency and cooperation concerns rather than an AML/CFT deficiency. Palau completed its APG mutual evaluation, with the report adopted at the 2018 APG annual meeting following an on-site visit in late 2017, and its trustee sector was noted as falling outside comprehensive AML/CFT obligations at that time.

Outlook

Palau's practical risk profile turns on its EU tax-list status and its offshore exposure more than on its governance base. The Council of the EU reviews Annex I twice a year, with the next scheduled revision in October 2026, so any de-listing or continued inclusion is the single most important forward indicator. APG follow-up reporting on the adequacy of AML/CFT coverage of the trustee and corporate sectors is the other key consideration. Firms should monitor the EU tax list and apply enhanced due diligence to Palauan structures.

Key watchpoints

  • EU Council review of the Annex I tax list (next scheduled October 2026): monitor whether Palau is retained or removed.
  • APG follow-up reporting on the adequacy of AML/CFT coverage of Palau's trustee and corporate sectors.
  • Corruption domain (moderate) as the weakest governance reading.
  • Absence of CPI data limits independent corruption benchmarking; supplement with credible third-party indicators.

Assessment currency

  • FATF status: Not listed (as of 19 Jun 2026)
  • Sanctions exposure: None identified (as of Jul 2026)
  • Governance (WGI): Latest dataset incorporated (as of 2024)
  • Corruption (CPI): Not available (as of 2025)
  • RegActions assessment: Reviewed (as of 19 Jun 2026)

Public evidence layer

FATF action: none. No FATF call-for-action or increased-monitoring status was identified at the latest plenary. This does not establish low risk.

Contextual signals (not scored)

  • FATF network membership: FATF regional network: APG (present, as of 2026-07)
  • EU non-cooperative tax jurisdictions: Listed in Annex I (present, as of 2026-02-17)
  • Egmont Group FIU: No Egmont member FIU identified (absent, as of 2026-07-17)
  • Beneficial-ownership register: No live register identified in the source (unavailable, as of 2026-07-17)
  • Transparency International CPI: No CPI result available (unavailable, as of 2025)

Evidence freshness

  • FATF monitored-jurisdiction status: current; data 2026-06-19
  • FATF mutual evaluation and follow-up ratings: current; data 2026-07-31; follow-up 2023-06; base assessment 2018-09
  • World Bank governance indicators: current; data 2024
  • UN, UK, EU and US sanctions regimes: current; data 2026-08-16

Contextual signals are public evidence only and do not change the immutable v2 score.

Download evidence PDF · CSV · JSON

Regional peer scores

FAQ

Is Palau on the FATF grey list?

No. Palau is not on the FATF grey or black list as of the 19 Jun 2026 plenary. FATF listing is one AML indicator; absence from the list does not by itself make Palau low risk. The next FATF plenary review is scheduled for Oct 2026.

Is Palau subject to sanctions?

No country-level programme was identified. In the approved RegActions snapshot, no comprehensive or targeted country-wide sanctions programme was found for Palau, but individual listed persons may still exist, so firms should continue to screen counterparties against the applicable lists.

What is Palau's country risk rating?

RegActions rates Palau at 4.2/10 (Moderate risk), where a higher score means higher country risk. The score combines financial crime controls, government effectiveness and rule of law, and international sanctions.

What due diligence applies to Palau?

Standard due diligence, with enhanced checks for defined risk triggers. This is decision-support based on Palau's FATF status, governance and sanctions signals, and is not a substitute for a firm's own risk assessment.

Source: FATF black & grey lists · World Bank WGI (CC BY 4.0 — World Bank WGI) · TI CPI (CC BY-ND 4.0 — Transparency International, display only)