Financial Crimes on the Rise in Marshall Islands Banking Sector
Warning Issued by FinCEN
The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a warning to banks and other financial institutions operating in the country to be on high alert for suspicious transactions involving the Marshall Islands.
Background on the Marshall Islands
- The Marshall Islands is a group of atolls and reefs in the North Pacific Ocean with a population of approximately 65,000.
- The country has been developing an offshore financial sector that includes around 3,000 non-resident companies.
Systemic Problems with Counter-Money Laundering Regime
- Money laundering is not a criminal offense in the Marshall Islands.
- The country does not require financial institutions to identify their customers or maintain customer identification records or transaction records.
- Financial institutions are also not required to report suspicious transactions.
- The Marshall Islands maintains strong bank secrecy laws that can only be lifted by an order of a Marshall Islands court and only to assist in an inquiry that does not conflict with the laws of the Marshall Islands.
Key Issues Identified by FinCEN
- Absence of Effective Supervision and Enforcement Mechanisms
- Failure to Criminalize Money Laundering
- Lack of Customer Identification and Transaction Reporting Requirements
- Maintenance of Strong Bank Secrecy Laws
Impact on Global Anti-Money Laundering Efforts
- The Financial Action Task Force on Money Laundering (FATF) has identified the Marshall Islands as non-cooperative in the fight against money laundering.
Response from FinCEN
- Despite these challenges, FinCEN notes that the Marshall Islands has indicated an awareness of the impact of its counter-money laundering systems and is currently drafting legislation to address these issues.
- Until such reforms are implemented, banks and other financial institutions operating in the United States should exercise enhanced scrutiny over transactions involving the Marshall Islands.
Call to Action from FinCEN Director James F. Sloan
“Given the significant opportunities for money laundering and the protection of illicit proceeds in the Marshall Islands’ financial system, we urge all U.S. financial institutions to be vigilant in their monitoring of suspicious transactions.”
Resources for More Information
- For more information about FinCEN’s programs, visit the FinCEN website at http://www.fincen.gov.
- Questions or comments regarding this advisory should be addressed to the Office of Communications, FinCEN.