Key Takeaways
- Foreign-owned companies in the Marshall Islands fall within a defined AML and KYC framework overseen by a designated supervisor.
- Customer due diligence, enhanced checks for higher-risk relationships, and ongoing monitoring form the core of these obligations.
- Registered agents play a central role in meeting KYC, record-keeping and suspicious activity reporting requirements on behalf of companies.
- Failing to meet AML and KYC duties can expose a company to penalties, making consistent compliance important for non-resident owners.
AML and KYC in the Marshall Islands: An Overview
AML/KYC in the Marshall Islands is a real and active obligation, built on the Anti-Money Laundering Regulations 2002 and supervised by the Banking Commission, the country's regulator for banks, financial service providers, and designated non-financial businesses. The framework is aligned with Financial Action Task Force standards and was reviewed in the APG evaluation adopted in September 2024.
For the foreign owner of a non-resident corporation, the practical point is that most obligations reach you indirectly, through the licensed registered agent your company is required to appoint. This article explains who is covered, what customer due diligence the agent must perform, how records must be kept, when suspicious activity is reported, and what happens if obligations are missed. It is most relevant to non-resident investors, their advisers, and anyone forming or maintaining a Marshall Islands entity from abroad.
The Legal Framework and AML Supervisor in the Marshall Islands
The anti-money-laundering regime rests on the Anti-Money Laundering Regulations 2002, issued by the Banking Commissioner under the Banking Act 1987 (17 MIRC Ch. 1). The first AML statute, the Banking (Amendment) Act 2000, drew on United Nations model provisions, and the 2002 Regulations built on that base.
Sanctions and exchange-of-information instruments complete the picture, including the United Nations Sanctions (Implementation) Act 2020 and the United Nations Targeted Financial Sanctions (Terrorism and Proliferation) Regulations 2020. Sector guidance, such as the AML/CFT Guidelines for Banks and Financial Services Providers dated September 2023, sits alongside these and is published in unofficial form by the RMI Judiciary.
The Banking Commission is the supervisor for both prudential and AML/CFT purposes, and it also oversees the DNFBP sector. Within it sits the Financial Intelligence Unit (FIU), the competent authority for monitoring compliance and for analysing suspicious transaction reports.
The governance chain runs from the Minister of Finance, Banking, and Postal Services, to the Commissioner of Banking who heads the FIU, down to the FIU Manager who handles day-to-day operations. There is no separate central bank; the Commission performs this role for all regulated entities.
The 2024 mutual evaluation rated the jurisdiction Compliant or Largely Compliant on 35 of the 40 FATF Recommendations, but recorded zero Highly Effective and zero Substantially Effective scores across the eleven effectiveness outcomes. The legal text is solid; supervisory practice and enforcement remain weaker.
The country is a member of the Asia/Pacific Group on Money Laundering and is not on the FATF list of jurisdictions with strategic deficiencies. A first National Risk Assessment on money laundering and terrorist financing was completed in August 2020.
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Who Is Subject to AML and KYC Obligations
The 2002 Regulations apply directly to banks and financial service providers as defined in Section 102 of the Banking Act 1987. KYC-covered firms include credit institutions and finance companies, insurers and brokers, securities and futures dealers, money transmitters, currency and bullion dealers, payroll cash handlers, and gaming operators.
Designated Non-Financial Businesses and Professions fall under Section 10 of the Regulations, and Virtual Asset Service Providers under Section 11. For the latter, the Commission follows FATF's 2021 updated guidance on virtual assets when fixing scope.
Here is the structural point a foreign owner needs to grasp: the offshore corporate registry and the non-resident entities it forms are not themselves directly regulated under the AML Regulations. The IMF recommended in 2018 that AML obligations be extended to both the corporate and maritime registries, and the 2024 evaluation noted this gap persists.
- Non-resident corporation officers, directors, and shareholders may hold any nationality and live anywhere.
- These entities are not required to disclose officers, directors, shareholders, or beneficial owners to the Registrar.
- The AML duties that do bite reach a non-resident company indirectly, through its licensed registered agent.
The lesson is not that obligations are absent. They simply operate one step removed, sitting with the agent rather than with the company filing at the registry.
KYC and Customer Due Diligence Requirements
A licensed registered agent is legally required to perform full KYC and AML due diligence on every beneficial owner, director, and authorised signatory before and during the company's life. This is where the real customer due diligence happens for a non-resident structure.
The standard documentation set, gathered at formation and refreshed over time, is straightforward:
- A certified copy of the passport for each director, shareholder, and beneficial owner.
- A utility bill or official proof of address no more than three months old.
- A professional reference letter.
- A curriculum vitae or background reference letter.
- Source-of-funds documentation supporting the AML assessment.
Banks and payment institutions review the same papers independently, so weak documentation tends to surface twice. Beneficial ownership information, covering directors, executive officers, and beneficial owners, must be recorded with the registered agent, and international business companies must keep a current Beneficial Ownership Register at the registered office.
Politically exposed persons, foreign and domestic alike, trigger enhanced due diligence. All parties to a corporate or maritime transaction are screened by the Trust Company of the Marshall Islands against a commercial database that consolidates UN, US, EU, and other sanctions lists.
Corporations that issue bearer shares carry a heavier burden: they must use all reasonable efforts to obtain and maintain an up-to-date record of the names, addresses, nationalities, and, for individuals, dates of birth of every holder and beneficial owner.
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Enhanced Due Diligence and Risk-Based Assessment
The regime is built on a risk-based approach, with deeper checks reserved for higher-risk customers, industries, and relationships. Enhanced due diligence applies where a business operates in a high-risk sector or where a politically exposed person is involved.
Banks and financial service providers must not rely on a third-party intermediary established in a high-risk country flagged by FATF for strategic deficiencies. They are also required to keep an independent, adequately resourced audit function that tests AML compliance through sample testing, and to run ongoing staff training on laundering, terrorist and proliferation financing techniques, due diligence, and reporting.
Two factors weigh heavily in any risk classification: the nationality of the ultimate beneficial owner and the nature of the underlying business. Both shape not only the risk rating but also whether a bank will open and keep an account.
For DAO LLCs, members holding 25 percent or more of governance rights must complete KYC with real name, address, and passport, and on-chain activity is monitored. The 2024 evaluation found that higher-risk firms understand their obligations reasonably well, lower-risk firms only adequately, and the legal sector largely not at all, with a shortage of sector-specific guidance and typologies.
Offshore structures attract enhanced scrutiny from banks, counterparties, and regulators. Assemble a risk assessment and clear AML and substance documentation before formation rather than after a bank starts asking.
Ongoing Monitoring of Business Relationships
Due diligence is not a one-time event. Beneficial ownership information held by the registered agent must be kept current and accurate throughout the relationship, and shareholders must be reminded of their duty to supply it.
A recurring attestation reinforces this. On formation and each year afterward, every non-resident corporation, partnership, limited partnership, and LLC (publicly traded entities aside) must attest to the Registrar that it maintains a list of current directors and officers, beneficial owners, managers, their addresses, and accounting records, or that such records are not being kept.
Where bearer shares exist, any transfer or change of beneficial ownership must be reported to and recorded by the custodian, who updates the ownership register accordingly. Banks and money remitters generally run stronger ongoing controls, driven by home-country supervision and correspondent banking pressure rather than local enforcement.
Effectiveness has limits. Reporting entities have flagged difficulty identifying family members and close associates of politically exposed persons, an acknowledged weakness in monitoring practice.
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AML Record-Keeping Requirements
Retention rules differ sharply by document type, and the longest periods attach to suspicious activity files. The table below sets out the headline periods for regulated firms and non-resident entities.
| Record type | Retention period | Holder |
|---|---|---|
| General AML reports and supporting documents | 6 years from filing | Bank or FSP |
| Suspicious Activity Report and supporting documents | 15 years from filing | Bank or FSP |
| Accounting records | Minimum 5 years | Non-resident entity |
Beneficial owner and director details are filed with and held confidentially by the registered agent. No financial statements, accounts, or audits are submitted to the government, and Marshall Islands IBCs are not required to file annual financial statements or audit reports.
There is no public register of directors, shareholders, or beneficial owners. Personal data reaches only three destinations: the registered agent, who is bound by a confidentiality duty under Section 134 of the Business Corporations Act; financial institutions holding the company's accounts; and tax authorities in the owner's home jurisdiction where requested through a formal tax information exchange procedure.
No specific financial audit threshold, by dollar value or entity size, appears in the available official sources. Where a precise figure matters to your structure, the primary regulatory text should be checked directly rather than assumed.
Suspicious Activity and Transaction Reporting
A report is triggered the moment a financial institution or cash dealer knows, suspects, or has reason to suspect that funds derive from illegal activity. Section 5 of the AML Regulations 2002, titled "Reports of Suspicious Transactions," governs this duty, and the Regulations use the terms Suspicious Activity Report and Suspicious Transaction Report interchangeably.
Reports go to the FIU, which analyses them and disseminates intelligence to law enforcement. The unit also provides training and workshops for institutions and cash dealers on their record-keeping and reporting duties; its work is described on the Banking Commission site.
Two protective rules apply to anyone who reports. Tipping off is prohibited: a bank, FSP, or any of its staff, officers, directors, or agents must not tell any unauthorised person that a suspicion has formed or a report has been filed. The identity of those who file is protected by law.
A separate currency transaction reporting duty sits under Section 6 of the Regulations, though the threshold figure is not reproduced in the public extracts. The Banking Commissioner and the Attorney General both hold statutory power to freeze, seize, or detain terrorist assets, and the Attorney General may detain funds immediately where there are reasonable grounds to suspect a serious offence.
The 2024 evaluation noted that law enforcement has some experience with fraud, tax evasion, corruption, trafficking, and drug offences, but has not demonstrated experience developing intelligence on, or investigating, offences tied to non-resident entities or DAOs.
The Role of the Registered Agent in AML and KYC Compliance
For a foreign owner, the registered agent is the centre of the AML system. Every company must appoint one with a physical Marshall Islands address; without it, a filing cannot proceed.
The agent is legally bound to conduct KYC and AML due diligence on all beneficial owners, directors, and authorised signatories, to verify identities, and to keep the entity compliant with the Regulations. Non-resident corporations must record beneficial ownership information with this agent, who holds it privately and discloses it only under legal process or an international exchange obligation.
Confidentiality and compliance run together here. Section 134 of the Business Corporations Act imposes a duty of confidentiality on the agent, while the AML Regulations require that same agent to carry out due diligence and operate measures against laundering and terrorist financing.
Bearer share arrangements add a custodian. The custodian must be a licensed professional, verifies the identity, address, and financial details of beneficial owners, physically retains the share certificates, and keeps records that can be disclosed to authorities on a valid legal request.
One supervisory caveat is worth carrying forward: the 2024 evaluation found that the Trust Company shares screening intelligence on request but does not share proactively, which limits domestic cooperation on sanctions.
Losing your agent is not a minor lapse. Failure to maintain one exposes the company to fines under Section 232 of the Business Corporations Act, or de-registration as a last resort under Section 142.
Penalties for AML and KYC Non-Compliance
Sanctions cluster around the duty to keep and attest to records. Knowingly or recklessly failing to maintain, produce, or attest to records of directors and officers, beneficial owners, or managers, or refusing the required attestation, carries a fine of up to USD 50,000 and/or revocation of the entity's formational documents and dissolution.
The same exposure attaches to false or misleading records and false attestations, and to a failure to maintain bearer share records.
| Breach | Maximum sanction |
|---|---|
| Failure to keep or attest to required records | USD 50,000 fine and/or dissolution |
| False or misleading records or attestations | USD 50,000 fine and/or dissolution |
| Failure to maintain bearer share records | USD 50,000 fine and/or dissolution |
| Failure to maintain a registered agent | Fines under MBCA s.232; de-registration under s.142 |
Civil money penalties for breaches of the AML Regulations themselves are addressed under Section 7, though the precise monetary range is not reproduced in the public extracts and should be checked against the primary regulation text. Individual bank staff and officers also face personal criminal and civil exposure for due-diligence and reporting failures under the Banking Act.
A realistic note on enforcement: as of the 2011 evaluation there had been no money-laundering or terrorist-financing prosecution, and the 2024 report still recorded no substantially effective outcome. The same report urged that promoters of the offshore registry stop marketing confidentiality features that conflict with AML obligations, a clear signal of where future regulatory pressure will fall.
Conclusion
The formal anti-money-laundering rulebook here is sound, but it works through your registered agent rather than the registry, and its enforcement record remains thin. That combination means the documentation you and your agent assemble carries real weight, and weak files tend to be exposed not by local regulators but by banks and correspondent institutions.
Treat the agent's due diligence as the load-bearing part of your compliance, and prepare clean beneficial ownership and source-of-funds records before you incorporate. The direction of travel, flagged in the 2024 evaluation, is toward tighter scrutiny of non-resident structures, not looser.
How Expanship Can Help Your Business in the Marshall Islands
Expanship supports foreign owners with the practical side of AML and KYC in the Marshall Islands, from preparing beneficial-owner and source-of-funds documentation to maintaining the records your registered agent must hold, and the firm extends that support across the full life of a non-resident entity.
- Company formation and structuring for non-resident entities
- Licensed registered agent and registered office in the jurisdiction
- Ongoing compliance and annual filing management
- Accounting and bookkeeping aligned to record-retention rules
- Economic-substance and beneficial-ownership documentation support
- Introductions to banks and payment institutions
To discuss your structure or an existing entity, contact Expanship Marshall Islands.
Frequently Asked Questions
Yes, but indirectly. The company itself is not a directly regulated entity, yet your licensed registered agent is legally required to perform full KYC and AML due diligence on every beneficial owner, director, and authorised signatory under the AML Regulations 2002.
No. There is no public register of directors, shareholders, or beneficial owners, and non-resident corporations are not required to disclose these names to the Registrar; the information is held confidentially by the registered agent under Section 134 of the Business Corporations Act.
Expect a certified passport copy for each director, shareholder, and beneficial owner, a proof of address no older than three months, a professional reference letter, a curriculum vitae or background reference, and source-of-funds documentation. Banks reviewing the same structure typically request the same set independently.
Banks and financial service providers retain general AML reports for six years and suspicious activity reports for fifteen years from filing. Non-resident entities must keep accounting records for at least five years.
The Banking Commission supervises the financial and DNFBP sectors, and its Financial Intelligence Unit receives, analyses, and disseminates suspicious activity reports. There is no separate central bank or financial regulator.
Knowingly or recklessly failing to keep or attest to records of beneficial owners, directors, officers, or managers can bring a fine of up to USD 50,000 and dissolution of the entity. Failing to maintain a registered agent exposes the company to fines under Section 232 of the Business Corporations Act or de-registration under Section 142.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
