Financial Crime World

Non-Profit Organizations and Regulatory Frameworks in the Republic of Marshall Islands

The Republic of Marshall Islands (RMI) has established various laws and regulations to govern non-profit organizations (NPOs) and financial institutions. However, there are areas where improvements can be made to enhance transparency and prevent misuse.

Establishing and Operating Entities in RMI

The Business Corporations Act, Revised Partnership Act, Limited Partnership Act, and Limited Liability Company Act provide the legal framework for establishing and operating domestic and non-resident corporations, partnerships, limited partnerships, and limited liability companies in RMI.

Key Points:

  • The statutes outline the requirements for registration, management, and operation of entities.
  • Companies can be established with or without a local presence.
  • Partnerships and limited liability companies have similar requirements to corporations.

Beneficial Ownership Transparency

The statutes do not require mandatory disclosure of beneficial ownership (except under the Foreign Investment Business License (FIBL) Act). This can make it difficult to identify true owners of entities, especially when using bearer shares or nominee directors.

Consequences:

  • Lack of transparency increases the risk of money laundering and other illicit activities.
  • It can be challenging for regulatory bodies to monitor and supervise entities with unclear ownership structures.

Formation of Trusts

The formation of trusts is governed by the Trust Act of 1994 and the Trust Companies Act of 1994. However, since the Marshall Islands Trust Company (MITC) has not accepted any trust applications, there are currently no existing trusts in RMI formed by MITC.

Key Points:

  • The laws outline the requirements for establishing and operating trusts.
  • Trustees have fiduciary duties to manage trust assets.
  • There is a lack of trust structures due to the absence of applications from MITC.

Non-Profit Organization (NPO) Sector

The NPO sector is governed primarily by the Non-Profit Corporations Act, Cooperatives Act, and Counter Terrorism Act. Relevant provisions of the Association Law also apply. However, due to staffing constraints, there is minimal supervision of the approximately 100 registered NPOs in RMI.

Key Points:

  • The laws outline the requirements for establishing and operating NPOs.
  • NPOs have tax-exempt status, subject to certain conditions.
  • There is a need for improved oversight and monitoring due to limited staffing resources.

Preventive Measures for Financial Institutions

The RMI has implemented comprehensive AML/CFT preventive measures through Part XIII of the Banking Act and the revised AML Regulations. These measures apply across all types of entities in the RMI’s financial sector.

Key Points:

  • The regulations require financial institutions to implement AML/CFT controls.
  • Institutions must report suspicious transactions and maintain customer due diligence records.
  • There is a need for ongoing training and education on AML/CFT requirements.