Financial Crime Investigation Techniques Crucial in Marshall Islands

Combating Financial Crimes with Enhanced Scrutiny

In a move aimed at combating financial crimes, the United States Department of the Treasury has issued an advisory to banks and other financial institutions operating in the US to exercise enhanced scrutiny on transactions involving the Marshall Islands.

A Growing Offshore Financial Sector

The Marshall Islands, a group of atolls and reefs in the North Pacific Ocean, has been developing its offshore financial sector, which includes around 3,000 “non-resident companies.” However, its legal, supervisory, and regulatory systems have been identified as having serious systemic problems.

Lack of Legal Protections

Money laundering is not a criminal offense in the Marshall Islands, and there are no requirements for financial institutions to identify customers or maintain customer identification records. The country also maintains strong bank secrecy laws that can only be lifted by an order of a Marshall Islands court.

Identified as Non-Cooperative

As a result, the Financial Action Task Force on Money Laundering has identified the Marshall Islands as non-cooperative in the fight against money laundering. The country is currently drafting counter-money laundering legislation to criminalize money laundering and create a financial intelligence unit.

Opportunities for Money Laundering

Despite this, the current legal system creates significant opportunities for money laundering and protection of crime proceeds. The commitment to bank secrecy and lack of supervisory or enforcement mechanisms aimed at preventing and detecting money laundering increase the possibility that transactions involving Marshall Islands offshore entities and accounts will be used for illegal purposes.

Enhanced Scrutiny Advised

As such, banks and other financial institutions operating in the US are advised to give enhanced scrutiny to any transaction originating in or routed to or through the Marshall Islands, or involving entities organized or domiciled, or persons maintaining accounts, in the Marshall Islands.

• Financial institutions should carefully examine available facts relating to any such transaction to determine if it requires reporting under suspicious transaction reporting rules.
• The Financial Crimes Enforcement Network (FinCEN) has issued this advisory as part of its efforts to combat financial crimes and money laundering.

Technical Assistance Offered

The US government is willing to provide technical assistance to the Marshall Islands officials as they work to address the deficiencies in their counter-money laundering systems.