Marshalls Islands Under Fire for Banking Secrecy and Lack of Transparency
Washington D.C. - A Warning to Banks and Financial Institutions
The United States has issued a stern warning to its banks and financial institutions, advising them to exercise extreme caution when dealing with transactions involving the Marshall Islands due to the country’s notorious banking secrecy laws and lack of transparency in its anti-money laundering efforts.
The Marshall Islands: An Offshore Financial Hub
The Marshall Islands, a Pacific Ocean archipelago with a population of approximately 65,000, has been developing an offshore financial sector, which includes around 3,000 “non-resident companies” managed by the Trust Company of the Marshall Islands. However, experts have raised concerns about the country’s lax laws and regulations, which fail to:
- Criminalize money laundering
- Require customer identification
- Maintain transaction records
FATF Identifies the Marshall Islands as a Non-Cooperative Jurisdiction
The Financial Action Task Force on Money Laundering (FATF) has identified the Marshall Islands as a non-cooperative jurisdiction in the fight against money laundering. The country’s banking secrecy laws are particularly stringent, requiring a court order to lift secrecy and only for inquiries that do not conflict with local laws.
Consequences of Lack of Transparency
The lack of transparency and oversight has created significant opportunities for criminals to:
- Launder money
- Evade detection
In response, US officials are urging financial institutions operating in the United States to give enhanced scrutiny to any transactions involving the Marshall Islands, including those originating from or routed through the country, as well as those involving entities organized or domiciled there.
The US Treasury Department’s Advisory
The Treasury Department has emphasized that this advisory does not mean that US financial institutions should curtail legitimate business with the Marshall Islands. Instead, it aims to ensure that banks and other financial institutions are aware of the risks involved and take necessary measures to prevent money laundering and terrorist financing.
Reforms in Progress
In response to these concerns, the Marshall Islands is drafting new anti-money laundering legislation aimed at:
- Criminalizing money laundering
- Establishing a counter-money laundering authority and financial intelligence unit
However, until these reforms are implemented, US officials are warning that transactions involving the Marshall Islands may be used for illegal purposes.
Technical Assistance from the US Treasury Department
The US Treasury Department has offered technical assistance to help the Marshall Islands address its deficiencies in anti-money laundering efforts. However, experts say more needs to be done to ensure transparency and accountability in the country’s financial sector.