Wed. May 27th, 2020

Amended FIB regulations target ‘front’ operations

President Tommy E. Remengesau, Jr. last week ratified the new Foreign Investment Board regulations, giving the Board sweeping powers to enforce laws against front business operations in the country.

Although in effect now, the regulations are subject to amendment by the Olbiil Era Kelulau, which has 120 days to make changes.

The updated regulations were mandated by RPPL No. 9-64 – signed by President Remengesau in November 2016 – and intended to give the FIB broader authority to investigate suspected fronts. They are the first substantial amendments to FIB regulations in 30 years.

With the ratification, the Board has stepped up its enforcement of suspected front business operating in the community. The stronger regulations empower the Board to conduct investigations, subpoena information and issue citations. More flagrant violators face stiffer penalties, including license suspension and revocation.

Front operations have been blamed for displacing Palauan citizens from competitively participating in startup businesses as well as employment opportunities.

In mandating FIB to aggressively target front businesses, RPPL No. 9-64 equipped the Board with the resources to carry out this requirement under the Foreign Investment Act. Additional funding enabled the retention of a full time legal counsel and investigators to assist the Board. Previously, the Board relied on part time legal advice from the Office of the Attorney General.

Having a full time investigator gives the Board the ability to conduct investigations, subpoena information and issue citations. When the Board discovers evidence that a business is a front, the Board can issue a notice of the violation and the business has thirty days to present evidence that the business is in compliance.

If the Board determines that the business is a front, the Board can issue fines of up to $25,000. Since January, the Board has initiated proceedings against several illegal front businesses including two “AirBnb” bed and breakfasts, one retail store, a restaurant and one car rental operation. Several more investigations are underway.

The Board expects to continue the year with strong enforcement.

In addition to enforcing the new regulations, FIB is also working closely with the Operation Clean Business, Sound Tourism Taskforce, a joint task force established by President Remengesau to encourage compliance and promote a fair and sound business environment in the Republic. The task force allows the Board to share information with other agencies like the Bureau of Revenue and Taxation, Department of Labor, Department of Immigration in order to detect illegal business practices.

As required by the Administrative Procedures Act, the regulations were posted for public comments from June 26 to August 8, 2018. (PR)