Marshall Islands Defends Itself In Face Of OECD Sanctions

Robert Lee, Tax-news.com, London

05 March 2001

The tension is beginning to mount once more amongst the offshore financial centres targeted by the OECD's harmful tax competition crusade and the FATF's anti-money laundering initiative, given that the deadline for sanctions is looming. There has been a wave of meetings recently over the OECD initiative, the latest being in Paris last week, and the FATF last month issued an update on which jurisdictions it deemed to have made "significant additional progress" in improving their anti-money laundering controls. The Marshall Islands, tucked away in the Pacific, was unfortunate to have appeared on both the OECD and FATF blacklists, but the jurisdiction is still showing a fighting spirit and recently spoke up about its blacklisting.

The Marshall Islands is obviously angling for a removal from the aforesaid lists, but Marshall Islands officials say that the US government and the OECD have a double standard when it comes to dealing with "tax havens." Trust company manager Baron Bigler said in an interview recently that the laws that govern the Marshall Islands shipping and corporate registry are based on those of the US state of Delaware. He said: 'But you don't see Delaware on the tax haven blacklist.'

The US State Department claims that there is evidence that some Marshall Islands-registered firms were involved with the Russian mafia, but Mr Bigler said that the US authorities failed to provide any evidence when requested by the Marsall Islands. Pointing out that a recent US General Accounting Office report said that more than US$1bn flowed from Russian corporations into the US and back out during the 1990s through about 2,000 corporations registered in the state of Delaware, Mr Bigler said: 'If you lumped all the Pacific jurisdictions together, it still doesn't compare with the amount of money laundering that goes through the US'.

The Marshall Islands is a bit of a anomaly in the offshore world, given that the island has no offshore banks registered (the offshore banking industry was shut down in the 1980s). Mr Bigler said he felt the Marshall Islands was unfairly being bagged together with other offshore financial centres with banking sectors. He said the Trust Company law prohibited the Marshall Islands from registering banks, and its main business was now offshore ship registry. But, he said, 'It's a mindset at the State Department: you're a Cayman Islands.'

What worries the Marshall Islands most of all is that if it fails to be removed from the OECD and FATF blacklists in the summer, it will be hit by economic and other sanctions. Pacific neighbour Niue has already been the subject of sanctions by US banks which cited the country's links to Latin American tax haven operations when it refused to action transfers of money to Niue. The Pacific islands have since asked the OECD to put off the summer deadline and allow time for negotiations.

Recommended