Marshalls Islands: A Haven for Financial Crimes?

The recent advisory issued by the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has raised concerns about the Marshalls Islands’ lack of effective counter-money laundering measures. This has led to a haven for financial crimes, making it essential to understand the issues at hand.

Lack of Effective Counter-Money Laundering Measures

The Marshalls Islands, with a population of approximately 65,000, is developing an offshore financial sector, which includes around 3,000 non-resident companies. However, its legal, supervisory, and regulatory systems suffer from serious systemic problems that make it vulnerable to money laundering.

• Money laundering is not a criminal offense in the Marshalls Islands.
• Financial institutions are not required to identify their customers or maintain customer identification records or transaction records.
• Financial transactions can only be lifted by an order of a Marshalls Islands court, and only to assist in an inquiry that does not conflict with the laws of the Marshalls Islands.

Offshore Entities: Lack of Transparency

Offshore entities in the Marshalls Islands do not have to disclose the names of officers, directors, and shareholders or beneficial owners. This makes it difficult for authorities to track suspicious transactions.

• Financial institutions are not required to report suspicious transactions.
• Criminals can evade detection due to the lack of transparency.

Financial Action Task Force (FATF) Assessment

The FATF, a 29-member international group that works to combat money laundering, has identified the Marshalls Islands as non-cooperative in the fight against money laundering. This is due to the deficiencies mentioned above.

• The Marshalls Islands is currently drafting counter-money laundering legislation that would criminalize money laundering and create a financial intelligence unit.
• However, the legal, supervisory, and regulatory systems of the Marshalls Islands at present create significant opportunities for criminals to launder money and evade detection.

Recommendations for Banks and Financial Institutions

As a result of these concerns, banks and other financial institutions operating in the United States are advised to give enhanced scrutiny to any transaction originating in or routed to or through the Marshalls Islands, or involving entities organized or domiciled, or persons maintaining accounts, in the Marshalls Islands.

In conclusion, while efforts are being made to address the issues, the Marshalls Islands’ lack of effective counter-money laundering measures and commitment to bank secrecy create significant opportunities for financial crimes. It is essential that banks and financial institutions operating in the United States take necessary precautions to detect and prevent money laundering activities involving the Marshalls Islands.