The Bank of Marshall Islands — and the RMI in general — is facing the threat of losing all connections with US banks, links that allow thousands of individuals, businesses and government agencies to carry out routine financial transactions. This threat to BOMI and the RMI economy stems from enforcement by the US government of heightened anti-terrorism financial rules.
RMI government and Banking Commission officials are working behind the scenes with the US government to find ways to maintain financial links with the US.
In the wake of the terrorist attacks on September 11, 2001, the US government ratcheted up the level of security in many areas, including banking and relations of American banks with banks outside the country. The banking provisions of the Patriot Act that was adopted by the US Congress soon after 9/11 allow US regulators to conduct enhanced due diligence on foreign correspondent accounts — in essence they established rigorous oversight and hefty penalties for US banks whose correspondent banks did not meet the new requirements.
Finance Minister Brenson Wase spoke at Nitijela earlier this week about the impending bank problem that is resulting from big penalties US banks are facing for non-compliance with US law.
This hit Bank of Marshall Islands beginning in 2004. The following year, Citizens Security Bank terminated its correspondent relationship with BOMI and in 2006, American Express followed suit.
After losing its correspondent bank relationship with Citizens Security Bank, BOMI turned to First Hawaiian Bank, which has provided financial services to BOMI for many years. But last year, First Hawaiian put BOMI on notice that it will terminate its relationship sometime this year.
“This will pose a major problem to the RMI since BOMI is the largest bank serving Ebeye and Kwajalein, including key outer islands such as Wotje and Jaluit,” said Banking Commissioner Sultan Korean. “The termination of BOMI accounts with FHB, without an alternative backup would mean termination of all US payment and settlement services to these locations and to RMI citizens.
“What the RMI government wants is an avenue for local bank access to the US financial system, accounts with US banks and the US Federal Reserve since the RMI is using the US dollar as its legal tender,” said Korean. “Preparations are underway to meet with officials in Washington from the US Federal Reserve, American Bankers Association, and Financial Crimes Enforcement Network (FINCEN) at the US Treasury to address this and find some short and long term solutions.”
Read more about this in the February 19, 2016 edition of the Marshall Islands Journal.