Financial Crime World

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Marshall Islands Financial Sector Under Fire for Fraudulent Activities

Warning Issued by US Treasury’s FinCEN

Washington D.C., [Date] - The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning banks and financial institutions to exercise heightened scrutiny over transactions involving the Marshall Islands due to serious concerns about fraudulent activities in the country’s financial sector.

Systemic Problems Create Opportunities for Fraud

The Republic of the Marshall Islands, a Pacific Ocean archipelago with a population of approximately 65,000, has been developing its offshore financial sector, which includes around 3,000 non-resident companies. However, FinCEN officials have identified several systemic problems that create opportunities for money laundering and other fraudulent activities.

  • Money laundering is not criminalized in the Marshall Islands.
  • There are no requirements for financial institutions to identify customers or maintain transaction records.
  • The country’s bank secrecy laws are strong, making it difficult to access information about offshore entities.

FATF Designation

The Financial Action Task Force on Money Laundering (FATF) has designated the Marshall Islands as non-cooperative in the fight against money laundering due to these deficiencies. The country is currently drafting new counter-money laundering legislation, which would criminalize money laundering and establish a financial intelligence unit.

Enhanced Scrutiny Advised

In response, US banks and financial institutions are advised to give enhanced scrutiny to transactions originating in or routed through the Marshall Islands, or involving entities organized or domiciled there. Financial institutions subject to suspicious transaction reporting rules should carefully examine these transactions to determine if they require reporting under those rules.

No Curtaillment of Legitimate Business

The Treasury Department has emphasized that this advisory does not mean that US financial institutions should curtail legitimate business with the Marshall Islands, and officials are willing to provide technical assistance to help the country remedy its counter-money laundering deficiencies.