Financial Crime World

Marshall Islands’ Financial Sector Exposed to Fraud: Treasury Warning

Weak Anti-Money Laundering Regime Puts Financial Institutions at Risk

Washington D.C. - The United States Department of the Treasury has issued a warning to financial institutions operating in the country to exercise extreme caution when dealing with transactions involving the Marshall Islands, citing systemic weaknesses in the Pacific nation’s anti-money laundering regime.

Lack of Regulations and Laws Creates Opportunities for Fraudsters

The advisory, issued by the Financial Crimes Enforcement Network (FinCEN), notes that the Marshall Islands’ lack of regulations and laws aimed at preventing money laundering creates significant opportunities for fraudsters to exploit. The country does not criminalize money laundering, and financial institutions are not required to identify customers or maintain records of transactions.

Difficulties in Tracking Suspicious Activity

Moreover, offshore entities in the Marshall Islands are not required to disclose the names of officers, directors, and shareholders, making it difficult to track suspicious activity. Furthermore, the country’s bank secrecy laws can only be lifted by a court order, which may not be forthcoming.

As a result, FinCEN is urging banks and financial institutions operating in the United States to give enhanced scrutiny to all transactions originating from or routed through the Marshall Islands. The advisory also recommends that financial institutions report any suspicious transactions related to these activities.

Marshall Islands Acknowledges Deficiencies and Works on Improving Anti-Money Laundering Regime

The Marshall Islands has acknowledged its deficiencies and is currently drafting new anti-money laundering legislation. However, until such legislation is enacted, FinCEN is warning of the potential risks associated with doing business with entities in the Marshall Islands.

Technical Assistance Offered by FinCEN

“We urge all financial institutions operating in the United States to exercise extreme caution when dealing with transactions involving the Marshall Islands,” said James F. Sloan, Director of FinCEN. “We stand ready to provide technical assistance to the Marshall Islands as they work to remedy their deficiencies and improve their anti-money laundering regime.”

Key Points:

  • The Marshall Islands lacks regulations and laws aimed at preventing money laundering.
  • Financial institutions are not required to identify customers or maintain records of transactions.
  • Offshore entities in the Marshall Islands are not required to disclose the names of officers, directors, and shareholders.
  • Bank secrecy laws can only be lifted by a court order.
  • FinCEN is urging banks and financial institutions operating in the United States to give enhanced scrutiny to all transactions originating from or routed through the Marshall Islands.