Marshall Islands Financial Crime Reporting Requirements Come Under Scrutiny
The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning financial institutions to exercise enhanced scrutiny over transactions involving the Marshall Islands, a group of atolls and reefs in the North Pacific Ocean.
Systemic Problems with Counter-Money Laundering Regime
The Marshall Islands is developing its offshore financial sector, which includes approximately 3,000 “non-resident companies”, managed by The Trust Company of the Marshall Islands. However, FinCEN has identified serious systemic problems with the country’s counter-money laundering regime, including:
- Lack of criminalization: Money laundering is not a criminal offense in the Marshall Islands
- Insufficient customer identification and record-keeping: Financial institutions are not required to identify their customers or maintain customer identification records or transaction records
- No suspicious transaction reporting requirement: Suspicious transactions do not need to be reported
- Strong bank secrecy laws: Make it difficult for authorities to access information
Non-Cooperative in the Fight Against Money Laundering
As a result, FinCEN has identified the Marshall Islands as non-cooperative in the fight against money laundering by the Financial Action Task Force (FATF). The country is currently drafting counter-money laundering legislation, which would criminalize money laundering and create a counter-money laundering authority and financial intelligence unit.
Enhanced Scrutiny Required
Despite these efforts, FinCEN warns that the current legal, supervisory, and regulatory systems of the Marshall Islands create significant opportunities for money laundering and protection of crime proceeds. Financial institutions operating in the United States are advised to give enhanced scrutiny to any transactions involving entities organized or domiciled, or persons maintaining accounts, in the Marshall Islands.
Reporting Requirements
The advisory notes that financial institutions subject to the suspicious transaction reporting rules should carefully examine the available facts relating to any such transaction to determine if it requires reporting. Institutions not subject to specific suspicious transaction reporting rules are encouraged to consider such a transaction with relation to their reporting obligations under other applicable law.
Technical Assistance Offered
FinCEN’s advisory aims to alert U.S. financial institutions to the potential risks associated with transactions involving the Marshall Islands, without discouraging legitimate business. The Treasury Department has emphasized that any report relating to a transaction described in this Advisory will be considered a report of a suspicious transaction relevant to a possible violation of law or regulation.
Conclusion
U.S. officials are ready to provide technical assistance to Marshall Islands officials as they work to remedy the deficiencies in their counter-money laundering systems.