Cook Islands: Offshore Legal and Tax Regimes
Money Laundering Law
In common with many other offshore jurisdictions, the Cook Islands responded to pressure from the OECD and FATF by tightening up its regulatory regime. Specifically, the Cook Islands responded to its inclusion on the FATF blacklist of jurisdictions which have weak anti-money laundering legislation. In September 2000, the Cook Islands parliament passed the Money Laundering Prevention Act.
The Act, designed to get the country taken off the Financial Action Task Force (FATF ) blacklist of uncooperative jurisdictions in the fight against money laundering, provided for the setting up of a Money Laundering Authority (MLA). The MLA consisted of the government's financial secretary, the commissioner for offshore financial services and the commissioner of police.
The powers and duties of the new body included receiving reports from financial instutions on any suspected criminal business transactions and the passing of such reports, if backed up by reasonable evidence, to the solicitor-general. The authority is also empowered to issue training guidelines to financial institutions in terms of anti-money laundering procedures.
The Money-Laundering Prevention Act has a section overriding any other secrecy provisions. It prevents illicit funds from being introduced into the financial system. The financial institutions which the new Act covers 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 are punishable by up to a maximum fine of USD20,000 dollars or a jail term of up to five years, or even a combination of both.
After the 11 September, 2001, terrorist attacks in the United States, the Cook Islands reiterated its commitment to the prevention of money laundering activities set out in the Money Laundering Prevention Act 2000 by announcing the Money Laundering Prevention Regulations 2001.
In 2003 a series of nine new measures were introduced in the Cook Islands Parliament with regard to the regulation of domestic and offshore financial industries after the cabinet approved the work of an Anti-Money Laundering/Counter Financing Terrorism Committee. However the issue of revised FATF regulations meant that the 2003 legislation had to be reviewed, including the Financial Transactions Reporting Act 2003, Proceeds of Crime Act 2003, Financial Transactions Reporting (Customer Identification) Regulations 2004, Financial Transactions Reporting (Offering Companies) Regulations 2004, and the International Companies (Evidence of Identity) Regulations 2004.
Following an International Monetary Fund review in 2004, various regulations relating to anti-money laundering legislation were passed.
The IMF's 2004 mission had the following to say about the Proceeds of Crime Act 2003:
"With the enactment of the Proceeds of Crime Act 2003 (POCA), the Cook Islands has put in place a sound regime for the forfeiture of proceeds and taking provisional measures, but it does not cover the freezing of terrorist funds and is untested in practice."
"Under the POCA, tainted property and benefits derived from crime can be recovered through two different types of legal action, i.e., forfeiture orders and pecuniary penalty orders. Both are discretionary criminal penalties and require conviction of a serious offense. Forfeiture can be applied also against tainted property where the accused has absconded or died. Law enforcement authorities can use production orders, monitoring orders, and search warrants for tracing assets, and seizure and restraining orders can be used to secure them."
"To date, no property has been restrained, seized, or forfeited under the current legislation. As there exists no legislation providing for the freezing of funds or other property of terrorists, the authorities are currently not in a position to freeze such funds, etc as required by the UN SCRs relating to the prevention and suppression of FT. The mission recommended that forfeiture be made mandatory for any serious offense where proceeds are detected and that legislation be adopted as a matter of priority to provide for the freezing of terrorist funds."
The Islands were finally removed from the FATF blacklist in February, 2005.