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Marshall Islands Country Summary

73.89 Country Rating /100
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Sanctions

No

FATF AML Deficient List

No

Terrorism
Corruption
US State ML Assessment
Criminal Markets (GI Index)
EU Tax Blacklist
Offshore Finance Center

Background Information


Anti Money Laundering

FATF Status

The Republic of the Marshall Islands is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in The Republic of the Marshall Islands was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, The Republic of the Marshall Islands was deemed Compliant for 5 and Largely Compliant for 16 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.

US Department of State Money Laundering assessment (INCSR)

The Republic of the Marshall Islands  was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -

The Republic of the Marshall Islands (RMI) consists of 29 atolls and five islands, covering 70 square miles of land, spread across 750,000 square miles of ocean. The country is economically underdeveloped and has limited resources for private sector development. The RMI signed a Compact of Free Association with the United States in 1986, and relies on the United States for the majority of its economic support. Although the Marshall Islands accounts for less than one percent of the global market for offshore financial services, making it a tiny player compared with other secrecy jurisdictions, the RMI offshore corporate sector is vulnerable to money laundering.

There are two banks in the country, the Bank of the Marshall Islands and a branch office of the Bank of Guam.  There are no brokerage houses or other types of financial firms in the country.

Land is almost never sold due to customary land tenure practices. There are no realtors, nor are there casinos or other entities typically used to launder money. Domestic crime is low, but an analysis of suspicious transaction reports suggests tax evasion, smuggling, prostitution, embezzlement, counterfeit financial instruments, check fraud, and narcotics trafficking on the islands could be predicate offenses for money laundering.

Non-resident domestic corporations (NRDCs), the equivalent of international business companies, can be formed online subject to approval by the Registrar. Marketers of offshore services via the internet promote the Marshall Islands as a favored jurisdiction for establishing NRDCs and handle the incorporation process for applicants. A number of Marshall Islands NRDCs have gone public on exchanges in the U.S. and Europe. NRDCs are allowed to offer bearer shares. Corporate officers, directors, and shareholders may be of any nationality and live anywhere. NRDCs are not required to disclose the names of officers, directors, shareholders, or beneficial owners listed with the Registrar, and corporate entities may act as directors, officers, and shareholders. The Registrar does not release the number of NRDCs or other offshore corporate operations data. The corporate registry program does not allow the registering of offshore banks or insurance firms, online gaming institutions, or other companies which are financial in nature. All known parties to any corporate or maritime transaction are vetted by the Registry through a commercial database, which combines the UN, U.S., EU, and other national and international specially designated national lists. NRDCs must maintain a registered agent in the Marshall Islands, and corporations can transfer domicile into and out of the RMI with relative ease. In addition to NRDCs, the RMI offers resident partnerships, unincorporated associations, and limited liability companies through the Attorney General’s office.

The Trust Company of the Marshall Islands, Inc., the Registrar for NRDCs, and the Office of the Maritime Administrator (collectively the Registry) administer a registration program of corporations and ships. The RMI shipping fleet is the third largest flagged fleet in the world, although few of the vessels frequent the Marshall Islands. The port of Majuro is visited mainly by tuna fishing boats, with a few cargo ships per month delivering food and fuel to the nation.

EU Commission Tax Blacklist

On 10 October 2019, the EU Council agreed to remove the Marshall Islands from the EU's list of non-cooperative jurisdictions for tax purposes as it had passed the necessary reforms to implement the commitments they had made to improve by the end of 2018 their tax policy framework by introducing economic substance requirements.

The Marshall Islands will be moved from annex I of the conclusions to annex II as the country's commitments regarding exchanges of information on request continue to be monitored by the Council's code of conduct group pending the results of the review of the OECD's Global Forum on transparency and exchange of information.

Sanctions

There are no international sanctions currently in force against this country.

Bribery & Corruption

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           N/A

World Governance Indicator – Control of Corruption              64

Economy

With a total population of approximately 42,782 people (20,963 in the labor force) spread out over 1,200 small islands and islets across 750,000 square miles of ocean but just 70 square miles of total land mass, the Republic of the Marshall Islands (RMI) has a tiny economy with an annual GDP of around USD 259 million, per capita GDP of USD 6,172 and a 1.1 percent real growth rate.   The remoteness of the RMI from major markets (2,300 miles from Honolulu, 1,900 miles from Guam, and 2,800 miles from Tokyo) severely impacts the economy. The Marshallese economy combines a small subsistence sector in the outer islands with a modest urban sector in Majuro and Kwajalein. The RMI government is the country’s largest employer, employing approximately 63 percent of the salaried work force.  The U.S. Army Garrison – Kwajalein Atoll (USAG-KA) is the second largest employer. A semi-modern service-oriented economy is in Majuro and Ebeye, on Kwajalein Atoll, and is largely sustained by government expenditures and by USAG-KA. Primary commercial industries include wholesale/retail trade, business services, commercial fisheries, construction, and tourism. Fish, coconuts, breadfruit, bananas, taro, and pandanus cultivation constitute the subsistence sector. However, as the land in RMI is not very nutrient rich, the agricultural base is limited. The RMI has a narrow export base and limited production capacity and is therefore vulnerable to external shocks. Primary export products include frozen fish (tuna), tropical aquarium fish, ornamental clams and corals, coconut oil and copra cake, and handicrafts. The RMI continues to rely heavily on imports and continues to run trade deficits (USD 45.8 million in 2018).

The Marshallese economy remains dependent on donor funding. The RMI is part of the former US-administered Trust Territory of the Pacific Islands that gained independence in 1986 and continues to use the U.S. dollar as its currency. Since independence it has operated under a Compact of Free Association with the United States. Since 2004, the U.S. has provided nearly USD one billion in direct assistance, subsidies, and financial support to the Marshall Islands, equivalent to approximately 70 percent of the country’s total GDP during the same period. The Marshall Islands has received additional aid from Australia, Japan, Taiwan, the United Arab Emirates (UAE), Thailand, the European Union, and organizations such as the World Bank, Asian Development Bank, and UN Development Programme.

The U.S., China, South Korea, Japan, Germany, and the Philippines are the Marshall Islands’ major trading partners. Top U.S. exports to RMI include food products, prefabricated buildings, recreational boats, excavation machinery, aircraft parts, tobacco, and wood/paper products.

The Government of the Marshall Islands is increasing its efforts to attract foreign investment and recognizes its significant role in growing private sector development, although it occasionally pursues questionable cryptocurrency schemes. Most local government officials encourage foreign investment, though attitudes may differ from island to island. The government particularly encourages foreign investment in fisheries, aquaculture, deep-sea mining, manufacturing, tourism, renewable energy, and agriculture and provides certain investment incentives for foreign investors.

Foreign investment in the Marshall Islands is complicated, however, by laws that prevent non-Marshallese from purchasing land. There is no public land in the country and foreign businesses must lease land from private landowners to operate in the country. The high cost of doing business due to the country’s remoteness, its dependence on imported materials and services, and its limited infrastructure, especially transportation links, create additional challenges. Finally, due to the RMI’s exceptionally low elevation, the potential threats of climate change and sea level rise make attracting FDI to the Marshall Islands even more difficult.

The major foreign direct investments are concentrated in the fisheries sector, including a tuna loining plant and a tuna processing plant along with several fishing purse seiners, the majority of which are owned by investors from China and Taiwan. There has been no significant foreign investment over the past year.

 

Country Links

Marshall Islands Martime & Corporate Administrators - Register IRI​

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