Cook Islands: Offshore Business Sectors
This page was last updated on 6 August 2019.
Although the Cook Islands offshore industry is relatively small in world terms, it is an important source of revenue for the Government, which actively encourages its development with tax incentives and concessions. The offshore industry now only rates second to tourism in terms of its contribution to government finances.
The industry began in 1981 with the International Companies Act 1981-2, the Offshore Banking Act 1981, the Offshore Insurance Act 1981-2, and the Trustees Companies Act 1981-2. This legislation was then followed up with the enactment of the International Partnerships Act 1984 and the International Trusts Act 1984.
The Offshore Financial Services Act 1998 created the post of commissioner of offshore financial services who issued banking and insurance licences. Under the umbrella of the commissioner’s office are the registrars of companies, trusts and partnerships who licenced and regulated their respective fields.
Most regulatory and supervisory functions were however transferred to the Financial Supervisory Commission after its establishment in 2003. The insurance sector came under the FSC's regulatory remit with the Insurance Act 2008. The Offshore Banking Act was replaced and modernized by the Banking Act 2003.
In common with many other offshore jurisdictions, the Cook Islands responded to pressure from the OECD and Financial Action Task Force (FATF) by tightening up its regulatory regime. Specifically, the Cook Islands responded to its inclusion on the FATF blacklist of jurisdictions with weak anti-money laundering legislation. In September 2000 the Cook Islands parliament passed the Money Laundering Prevention Act, which provided for the setting up of a money laundering authority, to consist of the government's financial secretary, the commissioner for offshore financial services and the commissioner of police.
In 2003, a series of nine new laws were passed 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. The laws included a Financial Transactions Reporting Act, which required all banks to report local and international money transfers to a central financial intelligence unit. Since 4 June 2004, the operators of offshore companies, banks, trust accounts and insurance firms have been required to make full disclosure as a result of the updated legislation.
Disappointingly for the islands, they were not removed from the list at the FATF 's meeting in March, 2004. 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 a review undertaken in 2004 by the Financial Supervisory Commission, amendments were also made to the International Trusts Act and the International Partnerships Act.
However, the IMF made a number of detailed recommendations for the improvement of training, transparency and supervision of the financial sector. The islands were finally removed from the FATF blacklist in February 2005 and has since been considered as a leader in the fight against money laundering and terrorist financing in the Asia Pacific region.