A US State Department report on Palau has highlighted people trafficking, corruption by government officials and domestic violence.
The report says that in 2007, charges were brought by Palau's Attorney General against four foreigners for human trafficking to advance prostitution in a karaoke bar.
All were convicted, with fines, restitution and jail terms.
Charges were also laid against state officials for misuse of public funds for personal benefit.
Cases are still pending against a Koror State legislator, 23 current or former legislators of Kayangel State for misuse of public funds and against the governor of Melekeok State on similar charges.
Charges of misuse of per diem against current and former members of Palau's Congress have also been filed.
In addition, an officer of the Bureau of Revenue, Customs and Taxation was charged and convicted of accepting a bribe.
The State Department also voiced concern over domestic violence involving women and child abuse with alcohol and drug abuse as contributing factors.