The Republic of the Marshall Islands (hereafter RMI) is a small country composed of atolls dotted across the central Pacific.†
If you’re a World War II aficionado, some of the island’s names might be familiar to you. Even if not, the imperialist association is important. The islands has non-existent Spanish governance, then German mercantile governance, then Japanese military governance, followed by arguably more beneficial U.S. governance.
This means that domestic banking in the RMI connects to the rest of the world through the U.S. financial system. And increasing complex regulations here have made it unprofitable for U.S. firms to maintain their connection to the RMI. Ostensibly, those regulations are about monitoring and discouraging money movements related to terrorism and organized crime. But the alternative is that countries like the RMI become cash-based, which is good for terrorism and organized crime. Sheesh.
… The IMF and other agencies are now trying to help the Bank of the Marshall Islands get in compliance with the new rules.
“For a little country like this and for the small banking community there, this has been overwhelming,” said Andrew Spindler, president of the Financial Services Volunteer Corps, a New York-based nonprofit that has been working with Marshall Island officials.
“The tide has been rising over the last 10 to 15 years about what banks expect from each other,” said Adam Szubin, who has led efforts to combat terror financing and money laundering at the U.S. Treasury Department. “And that has excluded some peripheral banking systems that just haven’t caught up.” …
For now, there’s one branch of one foreign bank (the Bank of Guam) on one island.
† SUU has some students from the nearby Federated States of Micronesia. Potentially they have the same problems, although the FSM is twice as populous and has about three times the GDP.