Marshall Islands’ Offshore Trust Complexes Increasingly Linked to Terrorism and Iran

The picturesque Marshall Islands, long known as a hub for tax-friendly offshore incorporation services, is becoming a surprising focal point for entities linked to terrorism and Iran.

What stood out recently is the sharp rise in the number of Marshallese Trust Company Complexes designated as connected to terrorism or Iran-related activities. Comparing 2023 to 2024 (year to date), there have already been ten updates to the relevant lists in 2024 naming Marshallese Trust Company Complexes, a significant jump from just one such update in 2023.

Interestingly, these designations are strictly tied to “Counter Terrorism” or “Iran Designation” list updates. They do not appear in updates related to Russia, Ukraine, Cuba, or Venezuela. This omission might indicate that businesses linked to those countries simply haven’t yet capitalized on this offshore setup.

It’s worth remembering that the Marshall Islands, one of the world’s smallest nations, also boasts nearly 6,000 vessels flying its flag—a notable figure given its size.

What does this tell us? The country of organization is critical when evaluating risks. For fintechs, lendtechs, private wealth firms, broker-dealers, foreign correspondent banks, and commercial banks, the lesson is clear: a company’s registration in a U.S. state does not eliminate risk. Assessing the country of origin is essential to a comprehensive risk analysis.

The Marshall Islands may not have envisioned its tax-friendly incorporation benefits enabling terrorist organizations, but the data suggests that these structures have inadvertently opened doors for malign actors. While this setup might generate revenue, the long-term viability of such practices comes into question when corporations linked to terrorism and sanctions violations find a haven there.

This raises a pressing question: what are U.S. authorities, particularly the Secretary of State and related organizations, doing—or not doing—to ensure that foreign companies incorporated in the U.S. are scrutinized for ties to high-risk countries, terrorism, or offshore tax havens?

And this isn’t just about sanctions. As the issue demonstrates, it’s a matter of taking a “holistic view of AML risk.” The Marshall Islands’ example underscores the necessity of heightened diligence across all sectors. As the situation evolves, the global financial community is left to reflect and, as the author notes, "Happy Hunting!"

By fLEXI tEAM