Cook Islands: Related Information
After the FATF published its list of countries considered uncooperative in the fight against money laundering, the Cook Islands Financial Services Commission, the government and other interested parties continued their dialogue with the FATF Asia-Pacific review group to keep them informed of the Cook Islands anti-money laundering regime plans. The chief of the group was said to be impressed with the Cook Islands response to the report, which resulted in new money laundering legislation being passed by parliament in August, 2000, designed to get the country taken off the FATF list.
The Money Laundering Prevention Act provided for the setting up of a Money Laundering Authority, to consist of the government's financial secretary (in the chair), the commissioner for offshore financial services and the commissioner of police. The powers and duties of the new body included receiving reports from financial institutions on any suspected criminal business transactions and the passing of such reports, if backed up by reasonable evidence, to the solicitor-general. The authority was also empowered to issue training guidelines to financial institutions in terms of anti-money laundering procedures.
The new Act had a section overriding any other secrecy provisions. The financial institutions which it covered are wide ranging and include money-transmission services, those which issue and administer means of payment (such as credit cards, travellers' cheques and bankers' drafts), and gambling and other betting services incorporated in the Cook Islands. Offences under the new legislation were to be punishable by up to a maximum fine of US$20,000 dollars or a jail term of up to five years, or even a combination of both.
The Cook Islands also figured on the OECD's 'harmful tax competition' black-list and joined with other Pacific territories to defend itself against the OECD's threats, setting up the Pacific Islands Forum Secretariat (PIFS), which comprised officials from the Cook Islands, Nauru, Niue, Marshall Islands, Samoa, Tonga and Vanuatu.
The Pacific nations claimed that they were being targeted by the OECD because they were deemed powerless against the international agency.
Comparing the situation to David and Goliath, Mr Iosefa Maiava, Acting Secretary General of the PIFS, stated that: 'The seven listed Pacific nations have a combined GDP of around US$1 billion, compared to Australia's annual GDP of around US$300 billion ... these nations do not have the resources of OECD members to address the issue of harmful tax competition. This position is not helped by the trade deficits the Pacific islands have vis-a-vis most OECD nations and the need to balance these against the income from the offshore centres, which can comprise 8-10 per cent of GDP. Such factors have hampered the ability of the listed nations to negotiate on an equal standing with the OECD.'
The Pacific nations went on to develop a 'regional position statement' that clearly outlined their concerns over the OECD initiative. The statement highlighted twelve points, including requests to remove the threat of sanctions and other measures for blacklisted jurisdictions that did not comply with the OECD's demands by July 31 2001, and to commit to negotiations within a more achievable timetable. The Pacific nations declared: 'If the deadline is not lifted and comes into play the membership will have to take recourse to other avenues and fora to resolve the situation.
In March, 2002, the Cook Islands made a commitment to the OECD over its 'harmful tax competition' initiative. The letter also spelled out the financial costs of refusing to make the commitment, specifically the fact that the Cook Islands is a signatory to the Cotonou agreement under which it stands to benefit to the tune of $6m a year for 15 years from the EU - but only if it maintains international standards of financial supervision.
Later in the month the OECD announced that as a result of the commitment made by the jurisdiction towards improving transparency and information exchange, the Cook Islands would not feature on its updated blacklist.
Turning back to money laundering matters, in May 2001 the Cook Islands joined the Asia/Pacific Group on Money Laundering (APG) as a means of stepping up its international cooperation to combat financial crime. Then Prime Minister Dr. Terepai Maoate said the Cook Islands would continue its own efforts against money laundering and meet its international obligations in support of the APG.
Dr. Maoate said it was important for the Cook Islands to express its commitment by participating actively in the initiatives of the APG and he was pleased that Government was fully supportive of meeting the requirements of the organisation.
The Prime Minister said Government would place more resources into the Offshore Financial Services area to allow the office to strengthen its capabilities in dealing with financial crime issues. Donor assistance from New Zealand had also been sought to strengthen local capacity.
Dr. Maoate said Government would press ahead with strengthening the framework required to prevent financial crime, including setting up a financial intelligence unit. "Our responsibility will be demonstrated with the steps we take and the commitments we make, regionally and internationally," he said.
In June of that year, the Cabinet backed a proposal for technical assistance to set up a Financial Intelligence Unit (FIU) and it was put forward for consideration by NZODA. Part of the proposal involved training assistance for the Offshore Financial Services office, and Commissioner Mathilda Uhrle participated in an anti-money laundering training programme in Washington DC.
The Financial Intelligence Unit is now in operation.
In October 2001, Ms Uhrle unveiled The Money Laundering Prevention Regulations 2001. The new rules incorporated Guidance Notes for Financial Institutions based on models from New Zealand, Japan and Guernsey. Issues covered in the Notes included 'know your customer' rules; recognising suspicious customers/transactions; reporting of suspicion transactions; keeping of records and training.
Financial institutions on the Cook Islands were also provided with a summary of the relevant law and an example of a suspicious transaction report. The government said that the response from the financial institutions had been positive and a number of financial institutions had confirmed that they would incorporate the Guidance Notes as part of their corporate policies and procedures manuals.
Despite its removal from the OECD's tax competition 'blacklist', the Cook Islands remained on the FATF 's list of non-cooperative countries when it was re-published in June 2002, and the government was obliged to introduce further reforms, including nine bills compiled following a technical assistance visit from an International Monetary Fund (IMF) team in early 2003.
They included a Financial Transactions Reporting Act, which required the reporting of local and international money transfers to a central intelligence unit.
In October 2003, the chairman of the Cook Islands Financial Supervisory Commission said that the operators of offshore companies, banks, trust accounts and insurance firms would be required to make full disclosure after June 4, 2004, as a result of the new legislation. According to the FATF , the Cook Islands had failed to record relevant information on some 1,200 international firms registered in the jurisdiction.
All this activity was still not enough for the FATF , which again refused to remove the Cook Islands from its list of Non-Cooperative Countries and Territories (NCCTs) at its session in March, 2004.
In July, 2004, the Cook Islands signed a bilateral information exchange agreement with Australia covering suspected money-laundering transactions.
Following an International Monetary Fund review in 2004, the various regulations relating to anti-money laundering legislation were passed.
The jurisdiction was finally removed from the FATF 's list of NCCTs in February 2005. The FATF explained that a recent visit had confirmed that the jurisdiction was effectively implementing anti-money laundering (AML) measures.
In May 2008, though, the UK House of Commons Committee of Public Accounts published a report arguing that the Foreign and Commonwealth Office (FCO) was not doing enough to manage the risks arising from the UK's liability for the 14 Overseas Territories choosing to remain under British sovereignty, according to Edward Leigh, Chairman of the House of Commons Committee of Public Accounts.
Edward Leigh, Chairman of the Committee, observed that:
'In most of the Territories, the standards of regulation across areas such as banking, money laundering, insurance and securities are not as good as those in the Crown Dependencies. The FCO, actively supported by other relevant agencies, must do more to help the Territories, especially the smaller ones, strengthen regulation. Where necessary, this should include bringing in more UK investigators and prosecutors.'
The report, using evidence from the Foreign and Commonwealth Office and the Department for International Development, examined the oversight of offshore financial services in the Territories; the balance between UK and Territory funding and responsibilities; and governance and management of the Territories' external relations.
While the report noted that the UK government is attempting to increase capacity for oversight of Territories' financial services industries, it argued that regulatory standards in most Territories are not yet up to those in the Crown Dependencies (Jersey, Guernsey and the Isle of Man).
It also found that limited capacity reduced the ability of Territories to investigate and prosecute money laundering.
Echoing this, in late June 2008, the Commons Select Committee on Foreign Affairs in the UK published its seventh report addressing issues surrounding overseas territories and offshore centres.
On the subject of the regulation of offshore financial services, the Commons Select Committee (CSC) observed that the UK has strong reasons to ensure that Overseas Territories' financial industries are well regulated.
In November, 2009, Australia’s Assistant Treasurer, Nick Sherry, and the Cook Islands’ Deputy Prime Minister, Sir Terepai Maoate, signed a comprehensive bilateral tax information exchange agreement (TIEA).
Sherry said that: "Today's agreement signings with Cook Islands will send a very clear message to all of our Pacific regional neighbours that the international response to tax haven behaviour has shifted beyond recognition and all responsible jurisdictions need to step up to the challenge."
In April, 2010, it was announced that the Cook Islands is taking part in an OECD initiative to foster multilateral TIEAs.
Modelled on a similar approach developed by the Nordic economies, the method uses a single negotiating team representing the interests of the OECD member countries to reach agreement on the terms of a TIEA with a non-OECD jurisdiction or group of jurisdictions. Once agreed, each of the OECD member countries signs a separate bilateral agreement with the non-OECD jurisdiction.
Many non-OECD jurisdictions expressed interest in the initiative and it was launched in 2009 with the creation of three pilot projects: The Southern Caribbean Project, The Northern Caribbean Project, and The Pacific Project, coordinated by the OECD Secretariat: participating member countries include Denmark, Faroe Islands, Finland, Greenland Greece, Iceland, Italy, Ireland, Korea Japan, Mexico the Netherlands, Norway, Slovakia, Sweden for TIEAs with partner jurisdictions including Cook Islands, Marshall Islands, Nauru, Samoa, Vanuatu.