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Marshall Islands Named as Non-Cooperative Jurisdiction in Fight Against Money Laundering

The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a stern warning to banks and financial institutions operating in the country. The warning aims to enhance scrutiny on transactions involving the Marshall Islands, which have been identified as non-cooperative in the fight against money laundering.

Background

According to FinCEN, the Marshall Islands lack adequate laws and regulations to prevent financial crimes. With approximately 3,000 “non-resident companies” and a trust company managing its offshore sector, the island nation has serious systemic problems in its counter-money laundering regime.

Deficiencies in the Marshall Islands’ System

The FinCEN advisory highlights several deficiencies in the Marshall Islands’ system:

• Lack of criminal offense: Money laundering is not a criminal offense in the Marshall Islands.
• Inadequate customer identification: Financial institutions are not required to identify customers or maintain customer identification records or transaction records.
• No suspicious transaction reporting: Financial institutions are not required to report suspicious transactions.
• Strong bank secrecy laws: Strong bank secrecy laws can only be lifted by court order.

International Consequences

These deficiencies have led to the Marshall Islands being identified as non-cooperative by the Financial Action Task Force on Money Laundering (FATF), a 29-member international group tasked with combating money laundering.

U.S. Financial Institutions’ Responsibilities

The FinCEN advisory emphasizes that U.S. financial institutions should give enhanced scrutiny to any transaction originating in or routed through the Marshall Islands, or involving entities organized or domiciled there. Institutions subject to suspicious transaction reporting rules should carefully examine available facts related to such transactions and consider reporting them accordingly.

Technical Assistance from the Treasury Department

The Treasury Department has pledged to provide technical assistance to Marshall Islands officials as they work to remedy the deficiencies in their counter-money laundering systems.

Key Takeaways:

• The Marshall Islands have been identified as non-cooperative in the fight against money laundering.
• Serious systemic problems exist in the island nation’s counter-money laundering regime.
• U.S. financial institutions should exercise enhanced scrutiny on transactions involving the Marshall Islands.
• Institutions subject to suspicious transaction reporting rules should consider reporting such transactions accordingly.