Crypto ATM / kiosk operator in Palau

No Specific VASP License: As of the latest information, Palau has not enacted specific legislation for the licensing or registration of virtual asset service providers (VASPs) that directly implements FATF Recommendations regarding VASP-specific licenses.

Evidence fact pw.licensing.reliance-on-existing-financial-institutions-act not found (may have been renamed).

General financial services licenses under the Financial Institutions Act (Title 30 of the Palau National Code) could potentially apply if digital assets are interpreted to fall within the scope of "financial instruments" or "financial services." However, the Act was not designed with virtual assets in mind, and specific amendments or interpretations would be necessary.

Any entity performing functions akin to a traditional bank, trust company, or money services business with digital assets might be required to register or obtain a license under existing laws, but this would depend on interpretation by the Palau Financial Institutions Commission (PFIC) or other relevant authorities.

If interpreted as such, an exchange would need a license for "Money Services Business" or a similar category. This would typically apply if the exchange involves fiat currency or facilitates transfers of value between different parties.

Cryptocurrency Exchanges (Fiat-to-Crypto, Crypto-to-Fiat, Crypto-to-Crypto):

These activities are highly likely to be considered money transmission services or similar financial services under the Palau Financial Institutions Act.

Money Laundering and Proceeds of Crime Act (Title 31 of the Palau National Code): This act outlines AML/CFT obligations. As a member of the Asia/Pacific Group on Money Laundering (APG), Palau is committed to implementing the FATF Recommendations, which include virtual assets and virtual asset service providers (VASPs) within their scope. Any entity performing VASP functions (which can include custody) would be expected to comply with these general AML/CFT requirements.

Palau Financial Institutions Act (Title 30 of the Palau National Code): This act governs traditional financial institutions.

AML/CFT Obligations: Regardless of specific licensing, all entities operating in Palau, especially those handling financial transactions, are subject to the country's AML/CFT framework. The Financial Supervisory Commission (FSC) is the primary regulator for financial institutions and oversees AML/CFT compliance.

Anti-Money Laundering and Countering the Financing of Terrorism Act of 2017 (AML/CFT Act 2017): This is the overarching legislation that defines money laundering and terrorist financing offenses, establishes reporting obligations, and outlines customer due diligence requirements for financial institutions and DNFBPs. While it may not explicitly mention "virtual assets" in all its original definitions, the broad scope of "funds" or "property" and the country's commitment to FATF recommendations mean it's interpreted to cover virtual assets.

Financial Intelligence Unit Act, 2014: This Act establishes the Palau Financial Intelligence Unit (FIU) and outlines its powers and functions, including receiving and analyzing suspicious transaction reports.

Implementing FATF Recommendation 15 (New Technologies) and its Interpretive Note, which mandates countries to regulate and supervise VASPs for AML/CFT purposes, including licensing or registration.

Identification and Verification of Customers:

Individuals: Obtain and verify the customer's full legal name, date of birth, residential address, and national identification number or passport details. Verification usually involves reliable, independent source documents, data, or information.

Beneficial Ownership Identification and Verification:

Identify and take reasonable measures to verify the identity of the natural person(s) who ultimately own or control the customer, or the natural person(s) on whose behalf a transaction is being conducted. This typically refers to individuals holding 25% or more of the shares or voting rights, or otherwise exercising control.

Purpose and Intended Nature of Business Relationship:

Understand the purpose and intended nature of the business relationship or transaction (e.g., why the customer is using the VASP's services, what types of virtual assets they intend to transact).

Ongoing Due Diligence:

Conduct ongoing monitoring of the business relationship, scrutinizing transactions undertaken throughout the course of the relationship to ensure that they are consistent with the VASP's knowledge of the customer, their business, and risk profile, including, where necessary, the source of funds.

Enhanced Due Diligence (EDD):

For higher-risk customers, business relationships, or transactions (e.g., Politically Exposed Persons (PEPs), customers from high-risk jurisdictions, complex or unusually large transactions, transactions involving new technologies and payment methods, or certain types of virtual asset transactions), VASPs must apply enhanced measures. This may include obtaining additional information on the customer, beneficial owner, source of funds/wealth, and increased ongoing monitoring.

Risk-Based Approach to Virtual Asset Transactions:

VASPs must assess the specific risks associated with different types of virtual assets, transaction volumes, counterparty wallets (e.g., known addresses linked to illicit activities), and the geographical locations involved.

Reporting Threshold: There is no minimum monetary threshold for reporting. Any transaction (or attempted transaction), regardless of amount, where the VASP has reasonable grounds to suspect it is linked to money laundering, terrorist financing, or other criminal activity, must be reported.

Content of Report: STRs must contain all relevant information, including the identity of the customer, details of the transaction, the grounds for suspicion, and any supporting documentation.

No Tipping-Off: VASPs and their employees are strictly prohibited from "tipping off" or disclosing to the customer or any third party that an STR is being or has been submitted.

Customer Records: All records obtained through CDD procedures (identification documents, verification records, beneficial ownership information, business relationship purpose).

Transaction Records: Details of all transactions, including amounts, types of virtual assets, dates, and parties involved (including originating and beneficiary wallet addresses).

Small Financial Sector & Nascent Regulation: Palau is a small island nation with a relatively small financial sector. While it is exploring digital assets (e.g., its national stablecoin initiative with Ripple), its regulatory framework for cryptocurrencies is still evolving. The focus tends to be on establishing foundational Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) compliance rather than large-scale, public enforcement actions against crypto entities.

Focus on Development, Not Enforcement (Yet): Palau has been notably proactive in exploring the adoption of digital assets, such as its "Root Name System" initiative and the Palau Stablecoin (PSC) pilot program. This indicates a forward-looking approach, but it also means the regulatory and enforcement infrastructure for complex crypto violations may still be under development.

Palau Financial Intelligence Unit (FIU): While their website primarily focuses on AML/CFT guidelines and STR reporting, it's the key agency for financial oversight.