Financial Crime World

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Financial Institutions Urged to Enhance Scrutiny on Transactions Involving Marshall Islands

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The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning financial institutions operating in the country to exercise increased caution when dealing with transactions originating from or routed through the Republic of the Marshall Islands.

Systemic Problems in the Marshall Islands’ Counter-Money Laundering Regime

According to FinCEN, the Marshall Islands’ counter-money laundering regime is plagued by systemic problems that create opportunities for financial crime. The lack of effective regulations and oversight mechanisms allows for money laundering and the protection of proceeds of crime.

Deficiencies in the Marshall Islands’ System

  • Money laundering is not a criminal offense in the Marshall Islands.
  • Financial institutions are not required to identify customers or maintain customer identification records or transaction records.
  • There are no requirements for reporting suspicious transactions.
  • The country maintains strong bank secrecy laws that can only be lifted by court order.

These weaknesses have led to the Marshall Islands being identified as non-cooperative in the fight against money laundering by the Financial Action Task Force on Money Laundering (FATF).

Draft Legislation and Cooperation

Despite these challenges, FinCEN notes that the Marshall Islands is currently drafting counter-money laundering legislation and has cooperated with judicial inquiries into non-resident companies. However, until this legislation is enacted and effective regulations are implemented, financial institutions operating in the United States should remain vigilant.

What Financial Institutions Need to Know

Banks and other financial institutions operating in the United States are advised to:

  • Give enhanced scrutiny to all financial transactions originating from or routed through the Marshall Islands.
  • Carefully examine available facts relating to such transactions to determine if they require reporting under suspicious transaction rules.
  • Consider any report of a transaction described in this advisory as a report of a suspicious transaction relevant to a possible violation of law or regulation.

Technical Assistance Offered

The United States Department of the Treasury is ready to provide technical assistance to Marshall Islands officials as they work to remedy deficiencies in their counter-money laundering systems.