MARSHALL ISLANDS BECOMES MONEY LAUNDERING HOTSPOT, FINCEN WARNS US BANKS
Washington D.C. - FinCEN Issues Advisory on Marshall Islands
The Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning U.S. banks and financial institutions to exercise heightened vigilance when dealing with transactions related to the Marshall Islands.
A Thriving Offshore Financial Sector with Systemic Problems
The tiny Pacific nation of 65,000 has been quietly developing a thriving offshore financial sector, comprising over 3,000 “non-resident companies.” However, FinCEN officials say that this burgeoning industry is riddled with systemic problems that make it an attractive haven for money launderers.
Lack of Effective Anti-Money Laundering Laws and Regulations
According to the advisory, the Marshall Islands lacks effective anti-money laundering (AML) laws and regulations, allowing individuals to conceal their identities and transactions with ease. The country’s strong bank secrecy laws further complicate efforts to track illicit funds.
International Authorities Label Marshall Islands a Non-Cooperative Jurisdiction
FinCEN Director James F. Sloan noted that the Marshall Islands’ deficiencies in AML controls have led international authorities to label it a non-cooperative jurisdiction in the fight against money laundering. Despite this, the island nation has indicated a willingness to reform its financial sector and establish more stringent AML regulations.
U.S. Banks Advised to Take Extra Precautions
Until such reforms are implemented, U.S. banks are advised to take extra precautions when processing transactions involving the Marshall Islands. This includes:
- Conducting thorough due diligence on customers
- Reporting any suspicious activity to the relevant authorities
“We urge U.S. financial institutions to remain vigilant in their dealings with the Marshall Islands,” Sloan said. “The Treasury Department stands ready to provide technical assistance to help the Marshall Islands strengthen its AML controls.”
FinCEN’s Advisory as Part of a Broader Effort
FinCEN’s advisory comes as part of a broader effort to combat money laundering and terrorist financing worldwide. The agency has issued similar warnings for other jurisdictions deemed high-risk, including Panama and the Cayman Islands.
U.S. Banks Required to Report Suspicious Transactions
U.S. banks are required to report any suspicious transactions exceeding $5,000 in value under the Bank Secrecy Act. FinCEN officials emphasize that this advisory does not imply a blanket prohibition on business with the Marshall Islands but rather serves as a warning to be cautious when dealing with high-risk transactions.
Reports Related to Transactions Involving Marshall Islands Protected
The Treasury Department has clarified that reports related to transactions involving the Marshall Islands will be considered “suspicious” and therefore protected from disclosure and liability under U.S. law.