Similar to Arkansas, the lone smuggler will snipe at the surrounding islands with reckless abandon if you walk on them, even if you are undetected in Sneak mode.
Should you approach the shack while sneaking, a scripted frag grenade will be thrown at you.
If you approach the island (by swimming) from the rear side, the smuggler will not shoot you, because there is no line of sight between the smuggler and the player. This allows you to sneak up on the smuggler without taking any damage and to kill him/her with a sneak attack.
Watch out; when leaving the underground lab through the hatch, the smuggler will instantly shoot at you from the shack, making you a sitting duck.