Banking
Marshall's Ship Registry's Global Clout Grows
But Islanders Wonder:What Will It Take To Get Off Blacklist?
The Marshall Islands ship registry has shrugged off its obscurity of the early 1990s to become the ninth largest flag of convenience registry worldwide in terms of gross tonnage. And it recently passed another key milestone: the U.S. Coast Guard announced that the Marshalls is the only major open registry to pass the U.S. Port State Control detention ratio test — which means Marshalls-registered ships had few pollution or safety violations.
But, largely because as an off-shoot of its successful ship registry, the Marshalls launched a corporate registry, it was blacklisted last year as being uncooperative on money laundering, and more recently was added to the OECD’s “harmful tax practices” blacklist. Though a meeting of G7 finance ministers in Sicily in mid-February recognized the Marshalls and the Cook Islands — another of six Pacific Islands on the blacklist — for improvements, they’re still on the list. “The blacklist is like one of those catalog mailing lists,” said one local official. “Once you get on it, you can’t get off.” Is the blacklist hurting the ship registry? No, he says. But with sanctions set to drop like a guillotine after a July 31 deadline, islanders are anxious to get off.
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The Trust Company of the Marshall Islands, which administers the registry, said that the U.S. Coast Guard recognition would benefit ship owners by reducing unnecessary port inspections and delays that occur for registries with poorer safety records.
The Marshall Islands registry also has a better record than older, more established registries such as Panama and Libera for port detentions internationally, according to a comparison ranking of the registries. An international review of the top ten largest registries showed that the Marshall Islands registry was the best performer in 2000 as far as safety and pollution standards. Although the Marshalls has only about 350 ships flying its flag, many of those are oil supertankers. All together, the Marshalls has 11 million gross tons registered.
Sanctions or dialogue?
At a Tokyo meeting of the Organization for Economic Cooperation and Development in mid-February, all of the Pacific Islands represented asked OECD to delay the July 31 sanction deadline to allow time for dialogue. The islands look to gain support from an unlikely corner. The new Bush administration is considering backing away from the OECD’s international crack down on tax havens.
Many islands that operate offshore corporate registries think the U.S. and the OECD apply a double standard when dealing with tax havens in the region. For example, the laws that govern the Trust Company of the Marshall Islands ship and corporate registry are modeled on those of the U.S. state of Delaware. “But you don’t see Delaware on the tax haven blacklist,” said Trust Company manager Baron Bigler.
Bigler is curious to know what it will take to get off the blacklist. He said since the money-laundering blacklist was issued a year ago, the Marshalls — which doesn’t have an offshore banking industry — has passed new anti-money-laundering legislation addressing concerns of the OECD, and established a financial intelligence unit.
He and others feel that OECD and the State Department have painted everyone with the same brush, but haven’t bothered to research the actual situation in each Pacific jurisdiction. “The focus of the Trust Company is the ship registry,” said Bigler. “The corporate registry is a spin off, and we don’t have any banks registered. It’s not in our interests to upset the U.S.” on tax or money-laundering issues because, with 90 percent of all ships dealing with the U.S., the U.S. could impose sanctions on Marshalls-flagged vessels dealing a severe blow to a registry that is growing in global clout.
