Financial Crime World

Mutual Evaluation Report: Republic of the Marshall Islands

Informal Use of Records and Lack of Maintenance for Statistical or Audit Purposes

Overview

The Mutual Evaluation Report highlights several key points regarding the informal use of records and the lack of maintenance for statistical or audit purposes in the Republic of the Marshall Islands (RMI).

Minimal Record-Keeping

  • At the time of the MER, consideration was given to creating a Memorandum of Understanding (MOU) between Customs, the DFIU, and law enforcement agencies on matters relating to Money Laundering (ML) and Financial Terrorism (FT). However, this MOU has not been implemented.
  • Key Findings:
    • Lack of implementation of the proposed MOU
    • Insufficient record-keeping practices

Legislation and Declaration Requirements

  • The RMI has introduced legislation and an inwards passenger declaration requirement since August 2009. However, Customs needs to undertake more work before the requirements set down in the CDA (Customs Declaration Act) are met.
  • Key Findings:
    • Introduction of new legislation and declaration requirements
    • Need for further implementation by Customs
  • Regulations for legal persons are provided under the Business Corporations Act (BCA), Revised Partnership Act, Limited Partnership Act, and Limited Liability Company Act. However, these statutes do not include mandatory disclosure of beneficial ownership, and there are no measures to prevent misuse of bearer shares.
  • Key Findings:
    • Lack of mandatory disclosure of beneficial ownership
    • Absence of measures to prevent misuse of bearer shares

Non-Profit Organizations

  • The non-profit organization (NPO) sector is governed primarily by the Non-Profit Corporations Act, Cooperatives Act, and Counter Terrorism Act. Relevant provisions of the Association Law also apply. However, due to staffing constraints, there is minimum supervision of the sector’s 100 registered NPOs.
  • Key Findings:
    • Primary governance of NPOs through relevant legislation
    • Insufficient supervision due to staffing constraints

Preventive Measures - Financial Institutions

  • RMI sets out in legislation comprehensive AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) preventive measures for the financial sector primarily through Part XIII of the Banking Act of 1987 and the AML Regulations 2002, as substantially revised in May 2010. However, these preventative measures apply across all types of entities in the RMI’s relatively small financial sector.
  • Key Findings:
    • Comprehensive AML/CFT preventive measures for the financial sector
    • Application of measures to all types of entities in the financial sector

Conclusion

While there are some legislative provisions in place to prevent money laundering and other financial crimes, there is still a lack of effective implementation and supervision, particularly with regards to record-keeping and beneficial ownership disclosure.