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Now Available - Fact sheets on Cook Islands Financial Services and Products
2017 March: The Financial Services Development Authority has produced the first of its Fact Sheets highlighting services, products and opportunities available from the Cook Islands financial services industry. The Fact Sheets can be accessed by clicking here or going to the FSDA website home page and clicking on the "News" tab and then “Publications." More fact sheets will be added over the coming months.
The Cook Islands Review
2017 March: The Financial Services Development Authority has produced its Summer 2017 issue of the Cook Islands Review. The Cook Islands Review is a periodic newsletter taking a look at recent activity, news and events within the Cook Islands financial services industry as well as upcoming matters of interest. The Cook Islands Review can be accessed by clicking here or going to the FSDA website home page and clicking on the "News" tab and then “Publications.”
If you would like to subscribe to future copies of the Cook Islands Review, please Sign Up on our website.
Captive in a World of Uncertainty
2017 February: Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority, has had his article entitled "Captive in a World of Uncertainty" published in the the February 2017 edition of Captive Insurance Times Magazine. In an era of increasing uncertainty, the article suggests that the Cook Islands can be a bridge to financial security in a captive. The article can be viewed here.
The South Pacific Bridge to Financial Security
2017 January: Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority, has had his article entitled "The South Pacific Bridge to Financial Security" published in the the January 2017 edition of CEO Insight Magazine. The article can be viewed here.
Wealth Management: The Cook Islands Solution
2017 January: Alan Taylor, Marketing Director of the Cook Islands Financial Services Development Authority, has had his article entitled "Wealth Management: The Cook Islands Solution" published in the China Offshore 7th Annual Trust and Foundations Guide. The article explains why a Cook Islands international trust/LLC structure is an ideal solution for holding, administering, managing and transferring the wealth of the Chinese HNWI.
The article can be viewed here.
The Cook Islands unwavering in its commitment
2016 December: In October 2015 the Cook Islands signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (“MCAA”). The MCAA sets out the OECD’s common reporting standard (“CRS”) to be followed by participating jurisdictions in regards to the automatic exchange of financial information (“AEOI”). Signing the MCAA was a commitment by the Cook Islands to include the CRS in its local laws and to commence the AEOI by 2018.
In accordance with that commitment, the Income Tax (Automatic Exchange of Financial Account Information and Other Matters) Amendment Act 2016, (“Act”) was passed on 26 September 2016, and is now followed by the Income Tax Act (Automatic Exchange of Financial Account Information) Regulations 2016 (“Regulations”) which came into force on 29 November 2016. The Act has incorporated the CRS into Cook Islands domestic laws. The Regulations set out the due diligence and reporting obligations on Cook Islands financial institutions to ensure compliance with the CRS.
In October this year the Cook Islands signed the Multilateral Convention on Mutual Administrative Assistance on Tax Matters. The Convention is the most powerful and comprehensive multilateral instrument available for all forms of tax co-operation including automatic exchange of information.
These recent events demonstrate unequivocally that the Cook Islands supports and remains committed to the global movement to transparency and combatting tax evasion.
The Cook Islands - Meeting International Regulatory Standards
2016 November: The Cook Islands is complying with its international obligations in relation to anti money laundering and the countering of terrorist financing and transparency and the exchange of financial information to combat tax evasion. It continues to work with international organisations such as the FATF and the OECD as it is committed to providing financial services in accordance with international standards and best practice.
The following summarises the Cook Islands achievements to date in meeting international regulatory standards.
1. FATF Anti-Money Laundering/Counter Terrorist Financing
2009 – Mutual Evaluation Report on Anti Money Laundering and Combatting the Financing of Terrorism carried out by Asia Pacific Group on Money Laundering (an FATF style regional body) and the Offshore Group of Banking Supervisors.
Rounds of Mutual Evaluations have been carried out on 166 countries to determine compliance with the FATF recommendations for combatting money laundering and the financing of terrorism. The Cook Islands 2nd Round report was published in July 2009 and showed the Cook Islands at that time to be in the top 20% of countries in the world for implementing international regulatory AML/CTF standards. The Cook Islands next Mutual Evaluation is due in 2017.
The Cook Islands Financial Intelligence Unit is an independent unit within the Cook Islands Financial Service Commission dedicated to collecting, analysing and disseminating financial information and intelligence on suspected money laundering, the financing of terrorist activities and other serious offenses to the appropriate authorities in the Cook Islands and internationally.
2. Transparency and the Exchange of Information
OECD Global Tax Transparency Forum Phase 2 Peer Review The Cook Islands is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Cook Islands phase 2 peer review (published in March 2015) judged the Cook Islands to be “largely compliant”. Phase 2 peer reviews check that a jurisdiction is actually following the tax transparency practices set out in its legislative framework and in international agreements for exchange of information on request (“EOIR”). As of July 2016, 22 jurisdictions were deemed fully compliant, 67 largely compliant and 12 partially compliant. 22 jurisdictions have yet to progress from the Phase 1 review due to non-compliance with OECD standards.
Multilateral Convention on Mutual Administrative Assistance on Tax Matters The Cook Islands signed the Multilateral Convention on Mutual Administrative Assistance on Tax Matters (the “Convention”) on 28 October 2016. The Convention was developed jointly by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010. The Convention is the most powerful and comprehensive multilateral instrument available for all forms of tax co-operation including automatic exchange of information (“AEOI”).
The Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information The Cook Islands signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (“MCAA”) in October 2015. The MCAA sets out the common reporting standard (“CRS”) to be followed by participating jurisdictions in regards to the AEOI. The signing of the MCAA is a commitment by the Cook Islands to include the CRS in its local laws and to commence the AEOI by 2018.
Income Tax (Automatic Exchange of Financial Account Information and Other Matters) Amendment Act 2016 The Income Tax (Automatic Exchange of Financial Account Information and Other Matters) Amendment Act 2016 (the “Amendment”) was passed into law on 26 September 2016. The primary purpose of the Amendment is to provide for the exchange of financial information in accordance with the CRS. Regulations pursuant to the Amendment giving effect to the provisions of the CRS are currently being drafted.
Tax Information Exchange Agreements The Cook Islands has entered into 21 bi-lateral Tax Information Exchange Agreements (“TIEAs”). TIEAs are based on an OECD model and are another tool designed to promote international co-operation in tax matters through the exchange of information. Some jurisdictions have amended existing bi-lateral Double Tax Agreements to include information sharing provisions in accordance with the OECD’s TIEA model.
Foreign Account Tax Compliance Act Cook Islands financial institutions have commenced providing information to the US IRS in regards to US account holders. The Foreign Account Tax Compliance Act (“FATCA”) is United States legislation requiring jurisdictions to report, either directly to the IRS or through inter-governmental agreements, information on US tax residents’ offshore financial accounts and assets.
The Cook Islands signs the Multilateral Convention on Mutual Administrative Assistance in Tax Matters
2016 November: On 28 October 2016 Andrew Haigh, of the Revenue Management Division of the Cook Islands Ministry of Finance and Economic Management, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the “Convention”) on behalf of the Cook Islands government.
The Convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters, most notably the automatic exchange of financial information as required by the OECD’s Common Reporting Standard (“CRS”).
The Cook Islands signed the CRS Mutual Competent Authority Agreement in October 2015 which, together with the Convention, will enable the Cook Islands to fulfil its commitment to the automatic exchange of such information by 2018.
In order to incorporate the CRS into its domestic laws, the Cook Islands enacted the Income Tax (Automatic Exchange of Financial Account Information and Other Matters) Amendment Act 2016 (the “Amendment”) on 26 September 2016. The Amendment provides for the provision of financial information by Cook Islands financial institutions in accordance with CRS.
The signing of the Convention and the Amendment is further evidence of the Cook Islands’ continued commitment to meeting its international obligations and providing financial services in accordance with international standards and best practice.
FATF Gives Guidance on Correspondent Banking Services
2016 October: In response to concerns of global leaders, including the G20, about a need for further clarification of regulatory expectations, the FATF has approved a guidance on correspondent banking services. This guidance addresses the issue of de-risking and clarifies how money laundering and terrorist financing risks should be managed, customer-by-customer, in the context of correspondent banking relationships.
The FATF has recognised the important role that correspondent banking services have in the global economy and the reliance that entire sectors and regions place on them.
In recent times some financial institutions have decided to close their correspondent banking relationships with whole classes of customers or entire regions, in order to avoid, rather than mitigate, money laundering and terrorist financing risks. This is not however in line with the FATF’s stated risk-based approach. This “de-risking” can lead to financial exclusion, by depriving customers from access to the regulated financial sector for their financial transactions. The loss of correspondent banking relationships makes it harder to make cross-border payments, and can potentially damage the resilience and stability of the financial system.
An incorrect understanding and application of AML/CFT measures can increase the costs of doing business with correspondents, and cause unnecessary pressure on banks to end correspondent relationships.
Following its Plenary meeting in Paris last week, the FATF has made it clear to banks providing correspondent services that they are not required to carry out customer due diligence on each individual customer of their respondent institutions, and that any enhanced due diligence measures have to be commensurate to the degree of risks identified.
The FATF's new guidance, intended to deter banks from withdrawing financial services such as correspondent banking from whole classes of customers or entire regions as part of a 'de-risking' strategy, is a most helpful and welcome step for the financial services industry in the Cook Islands. As with all jurisdictions the industry in the Cook Islands is subject to the de-risking decisions made by banks internationally. The clear message given by the FATF will hopefully reduce and remove the pressure on such banks to de-risk and similarly reduce and remove the possibility that Cook Islands service providers and their clients may be the undeserved and unsuspecting victims of such unnecessary action.
Family Wealth Transfer
2016 October: According to the recently published Wealth X 2016 report on Family Wealth Transfer (the “Report”), the world’s “ultra wealthy population” (“UHNWIs”), being those individuals with a net worth of at least USD30m, has grown to 212,615 with a combined wealth of USD30 trillion. Despite continued global economic uncertainties and geopolitical events, these numbers continue to grow year on year. However what is more astounding than the levels of wealth being generated are the amounts that will be transferred to the next generations over the coming decades.
The Report states that a staggering USD4 trillion will be transferred within the next decade and almost USD30 trillion within the next 30 years. The Report provides a comprehensive breakdown of the ages of UHNWIs, the types of assets they hold and the regions in which they live.
For those involved in the financial services industry and in particular in the provision of wealth structuring, management and administration services, the Report serves to show the incredible opportunities available over the coming years to assist in the anticipated transfer of wealth. Those service providers offering the highest levels of professional service and expertise with proven products backed by robust laws, stable economies and political environments will be well placed to take advantage of such opportunities as they arise.
We believe Cook Islands service providers are ready to meet that challenge.
The full Report can be obtained at this link: http://marketing.nfp.com/wealth-transfer-report-pf.
The Pacific Catastrophe Risk Insurance Facility
2016 September: In June of this year the Cook Islands passed the Pacific Catastrophe Risk Insurance Facility Act 2016 (the “Act”). The Act sees the formalising of many years of effort by several organisations, including the World Bank, Asian Development Bank and Pacific Islands Forum Secretariat, as well as certain Pacific Island states, to provide Pacific Island states with direct support to finance immediate disaster relief and advisory services on the financial management of natural disasters.
Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority, has an article published in the latest edition of Captive Insurance Times detailing the background to and the purpose and framework of the Pacific Catastrophe Risk Insurance Facility (the “Facility”). A link to the publication is available here.
The choice of establishing and administering the Facility in the Cook Islands is a testament to the jurisdiction's strong legal and regulatory framework as well as the quality of its professional service providers. The World Bank and other stake holders have the confidence in the Cook Islands to deliver a first class insurance structure providing essential financial support to Pacific Island states vulnerable to climactic and other natural disasters and catastrophes.
Italy Publishes the New White List for Tax Purposes
2016 August: On 22 August 2016 the Italian Government added 51 new jurisdictions to the list of jurisdictions that it considers allow an adequate exchange of information for tax purposes with Italy (the so called “white list”). It is also providing a broad range of tax benefits to tax payers resident or established in the listed jurisdictions.
The Cook Islands signed a Tax Information Exchange Agreement with Italy in 2011 which came into force in February 2015. It is currently regarded as cooperative with Italian exchange of information requirements and is on the white list. The most recent additions to the white list include Switzerland, Jersey, Liechtenstein, British Virgin Islands and Hong Kong.
It is expected the amended white list and tax benefits will significantly increase the appeal of investing into Italy for investors from white list jurisdictions and should simplify enormously the structuring of inbound investment.
Investors resident or established in white list jurisdictions will enjoy a wide range of tax benefits on Italian source income such as full exemption at the source on:
- - Interest and capital gains on bonds and similar securities;
- - Interest and capital gains on loans (subject to certain conditions);
- - Proceeds and gains from Italian investment funds, including real estate funds;
- - Proceeds from derivatives including repos and securities lending;
- - Capital gains on shares and participating instruments representing “non-qualified” participations.
The Italian Ministry of Finance reserves the right to test the actual compliance of each white list jurisdiction with the exchange of information obligation and to remove from the list any uncooperative jurisdictions. Under Italian law the white list has to be updated every six months.
Capital Security Bank in the Cook Islands first for safety of deposits
2016 August: Following the UK vote to leave the European Union, and with the fallout from the Global Financial Crisis of 2008 still fresh in the minds of those who lost money held in financial institutions, people in Europe are again questioning the security of their funds deposited in banks around the world.
With this in mind Christian Hirsch Biel, the Head of Wealth Structuring at BNP Paribas in Germany, has researched where clients should be depositing their funds and has named Capital Security Bank as one of the six preferred options. Others on the list include DBS and UOB, two of the largest full service banks in Asia, both based in Singapore.
Mr. Biel regards Capital Security Bank as an attractive option due to it maintaining 100% liquidity, as it does not provide lending to clients, and its existing banking relationships in Europe, especially Switzerland.
This is an excellent endorsement for Capital Security Bank and further evidence of the growth and global acceptance of the Cook Islands financial services industry.
Here is a link to the article. Capital Security Bank will be attending the Sibos Swift International Bank Operations Seminar in Geneva this September where more than 8,000 attendees from around the world are expected to attend.
The OECD's Global Tax Transparency Forum Phase 2 Peer Review Process Continues
2016 July: The OECD’s Global Tax Transparency Forum Phase 2 peer review process continues with Switzerland, the world’s largest financial centre in terms of funds under custody, having now attained the rating of “largely compliant”.
The Cook Islands attained the same rating in March 2015.
Despite the rating given, some of Switzerland's continuing practices, such as the toleration of bearer shares in some circumstances were criticised in the OECD report, as was its regime concerning the availability of beneficial ownership and identity information.
Phase 2 peer reviews check that a jurisdiction is actually following the tax transparency practices set out in its legislative framework and in international agreements for exchange of information on request.
A new peer review round on the exchange of information on request is expected to begin later this year to assess whether standards are being maintained and improvements made where required. It is not clear yet when the Cook Islands next peer review will take place, but it is clear that the Cook Islands remains committed to meeting its international obligations and ahead of many of its peers in this regard.
The New Zealand Government Inquiry into Foreign Trust Disclosure Rules is Released
2016 July: The New Zealand Government Inquiry into Foreign Trust Disclosure Rules was released on the 27 June 2016. Following the leak of information (known as the Panama Papers) from the Mossack Fonseca firm in April this year, the New Zealand Government appointed John Shewan to carry out a complete review of New Zealand’s rules concerning the disclosure of information required in relation to foreign trusts. That is, those trusts established under New Zealand laws by non-New Zealand resident settlors.
Mr. Shewan’s report concluded that New Zealand’s current disclosure requirements were “inadequate” and “not fit for purpose”. The Inquiry has recommended for New Zealand to adopt a more strict disclosure regime for foreign trusts which, Mr Shewan notes, may cause a reduction in the number of foreign trusts registered in New Zealand.
In summary the Inquiry recommends:
- - A register be maintained containing detailed information on foreign trusts and searchable only by regulatory authorities;
- - When establishing a trust, settlors declare they will comply with all New Zealand disclosure laws;
- - Information be disclosed to the tax authority at the time a trust is established including; the name, email address, foreign residential address, country of tax residence and tax identification number of each of the trust’s settlor or settlors, protector, non- resident trustees and any other natural person who has effective control of the trust, as well as beneficiaries of fixed trusts. For discretionary trusts, each class of beneficiary will need to be described in sufficient detail to enable identity to be established at the time of a distribution or when vested rights are exercised;
- - The trust deed be filed with the tax authority upon registration of the trust;
- - An annual return be filed (with accompanying financial statements) detailing the amount of any distributions paid/credited noted with names, foreign address, Tax Identification Number and tax residence country of the recipient beneficiaries;
- - Anti-Money Laundering legislation be revised to require verification of the underlying source of funds or wealth settled on a foreign trust in all cases and to facilitate the reporting of suspicious financial transactions that do not go through a New Zealand bank;
The New Zealand Government has indicated that it supports all the recommendations in the report. It is therefore anticipated relevant legislation will be amended later in the year to accommodate necessary changes with existing trusts being required to provide additional information as earlier as the end of this year. An annual fee of NZ$50.00 and an initial filing fee of NZ$270.00 will be charged to each foreign trust.
Some practitioners and commentators in New Zealand view the proposed changes as necessary for the long term viability of the foreign trust regime and maintaining New Zealand’s international reputation. Others believe they will mark the end of New Zealand’s popularity as a foreign trust jurisdiction leading to a reduction in new trusts being set up and forcing existing trusts to redomicile away from New Zealand. Time will tell and we shall await the outcome with interest.
Commonwealth International Tax Roundtable
2016 June: The FSDA attended a Roundtable hosted by the Commonwealth Secretariat in London. The Cook Islands maintains a keen interest in continuing to implement international regulatory standards and addressing emerging issues that may be relevant to the growth of its financial services industry.
2016 May: In response to media purporting to connect the Panama Papers to the Cook Islands, National Business Review requested an interview with our CEO, Tamatoa Jonassen. The interview can be found here, which reaffirms the Cook Islands as a jurisdiction positively ranked for implementing international regulatory standards.
Global Island News Article
2016 May: Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority was recently featured by Global Island News in an article titled "A Bridge to Financial Safety in a World of Turmoil" available in the May 2016 edition of Global Island News or online here.
Captive Insurance Times
2016 March: Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority was interviewed by Captive Insurance Times captive insurance industry beginning in the Cook Islands. The short article can be found online here which was published in a special conference edition this month by Captive Insurance Times.
2015 November: The FSDA attended the China Offshore Summit in Shanghai in November. The publication China Offshore Trust and Foundation Guide was also release with a section covering the Cook Islands. The publication included an article highlighting Cook Islands Trusts found online here and a Question & Answer interview found here.
A short Youtube video of the conference by China Offshore can also be found here.
Signing of TIEA between the Cook Islands and the Kingdom of Belgium
2015 Sept: The Cook Islands signed its 21st Tax Information Exchange Agreement (“TIEA”) with the Kingdom of Belgium in Brussels on 21 August 2015. The signing signifies further progress by the Cook Islands in meeting our international tax obligations.
The Minister of Finance, Honourable Mark Brown stated that “these signings are an important step for the Cook Islands in demonstrating its international cooperation on tax matters and to the principles of transparency and effective exchange of information”, and that “the entering into of this agreement is further evidence of the Cook Islands’ commitment to the Global Forum’s efforts in creating a level playing field in the international arena, encompassing the principals of transparency and effective exchange of information for tax purposes.”
This signing makes a total of 21 TIEAs entered into by the Cook Islands, and demonstrates that the Cook Islands has become a leading jurisdiction in the fight against tax evasion and avoidance. The TIEAs allow for these countries and the Cook Islands to request information from each other where a specific taxpayer is under investigation, and where there is reason to believe that relevant information is held in the other country.
Recently the Cook Islands underwent a Phase 2 Peer Review by the Global Forum on Transparency and Exchange of Information for Tax Purposes, which resulted in a largely compliant rating, confirming our advancements and good international standing in this area.
Global Island News Interview
2015 Sept: Tamatoa Jonassen, CEO of the Cook Islands Financial Services Development Authority was recently interviewed by Global Island News relating to the financial services industry in the Cook Islands. The article titled "Cook Islands: Where East Meets West" will be is available in the October edition of Global Island News or online here.
Order Designating Foreign Governments
2015 Sept: The Financial Institution (Provision of Customer Information) Act 2013 ("Act") passed in 2013 was designed to remove legislative barriers which prevent Banks and Trust Companies that operate in the Cook Islands from providing to the tax authorities of other countries information relating to their citizens. The Order in Executive Council passed this month officially designates the United States of America, Australia, and New Zealand as the foreign countries that the Act will apply to. This Order is part of the Cook Islands continued commitment towards a globally competitive and reputable financial industry.
Cook Islands' Global Forum Phase 2 Peer Review Press Release
A positive Phase 2 Peer Review reinforces the strength of the Cook Islands' regulatory environment and commitment to meeting its international obligations. The OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes has just released its report on the Cook Islands titled "Peer Review Report Phase 2 Implementation of the Standard in Practice—Cook Islands". The report is the result of months of research and consultation by the Peer Review assessment team with stakeholders in the Cook Islands. The process was lead locally by Andrew Haigh of the Revenue Management Division of the Ministry of Finance and Economic Management, Paul Heckles of the Financial Supervisory Commission, and the Financial Services Development Authority ("FSDA").
"The positive report reflects all of the work of the Cook Islands in meeting its exchange of information obligations and modernising its laws in this area," says Andrew Haigh. The Cook Islands has 19 Tax Information Exchange Agreements in place and continues to develop more. The purpose of this Phase 2 Peer Review was to assess how the Cook Islands exchanges information for tax purposes in practice, using its network of tax information exchange agreements. Amendments to the Income Tax Act, made in 2011, set out the process by which such requests are to be handled.
Phase 2 involved a visit to the Cook Islands by a group of assessors from both the Global Forum Secretariat and other jurisdictions. The assessors reviewed any legislative developments since the country's Phase 1 Review (2012) and focused on the timeliness of exchanges of information and effectiveness of the systems for the monitoring and enforcement of the Cook Islands' exchange obligations. Paul Heckles says, "This is another example of the Cook Islands being independently assessed against important international standards and being found well up to the mark." It is expected that the Cook Islands will be further reviewed (Phase 3) in a few years time to ensure that the standards are maintained.
Ten Elements comprised the Phase 2 assessment including: ownership information, accounting records, banking information, powers of the competent authority to request information, evaluations of the tax information exchange agreements as well as how effectively information is exchanged in practice. The Cook Islands received 8 "Compliant" ratings, which are the highest ranking, and 2 "Largely compliant" ratings.
With respect to the two elements receiving the largely compliant rating, the FSDA says that these are easily fixable. "One element was rated lower due to the relatively low number of exchange of information requests received by the Cook Islands and this should increase over time, and with further requests, a compliant rating should be issued. The other element only requires some minor amendments to our international legislation. For example, the Foundations Act requires some penalty provisions to be inserted for non-compliance."
Andrew Haigh, who represented the Cook Islands at the recent Global Forum Peer Review Group meeting in Paris where the Report was ratified, said, "The process has been a lot of work for a jurisdiction as small as the Cook Islands but it is great to receive another positive report reinforcing the strength of our regulatory regime". Minister of Finance, the Honourable Mark Brown, was pleased to note that the Global Forum's webpage stated in the Report's Key Findings that "the Cook Islands has answered all requests for information from treaty partners in full and timely manner and peers are very satisfied with the Cook Islands as an exchange of information partner."
The Executive Summary of the Report can be found here or for the full Report visit http://www.oecd.org/tax/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews-cook-islands-2015-9789264231450-en.htm
2014 Trustee Companies Act Release
The Cook Islands Parliament passed the Trustee Companies Act 2014 which will improve the Financial Supervisory Commission's ability to carry out its functions in line with current international standards. The new Act replaces the Trustee Companies Act 1981-82 and puts the Cook Islands in a fully compliant position with respect to regulation of trustee companies.
The main new requirements or controls that the Act will bring in are:
- - Intervention grounds which if breached will allow the FSC via the Courts to take over the running of a Trustee Company if they were breaking the law or have become financially distressed. This allows greater protection of a trustee company's customers.
- - Powers of the FSC to refuse a licence or revoke an existing one if those associated with it are not fit and proper persons or have criminal records. The powers also allow FSC to protect the reputation of the Cook Islands in financial matters.
- - Vetting by the FSC for key staff and shareholders.
- - Allows the FSC to issue directions to a licence holder and take other enforcement action.
- - Powers of the FSC to investigate unlicensed Trustee Companies.
- - Provides the FSC with information seeking powers.
- - Provides various offences for not running a Trustee Company properly and honestly e.g. making false statements to customers, concealing facts etc.
- - Provides for proper recourse to the Courts for licence holders unhappy with FSC actions and other checks and balances on the activities of the FSC in this area.
The Cook Islands was last evaluated against the OECD Financial Action Task Force (FATF) Forty Recommendations on Combatting Money Laundering and the Financing of Terrorism and Proliferation standards in 2009 and received one of the highest assessments and markings in the Pacific region. However, the international standards have since been revised and rewritten since that assessment. The new Act strives to ensure the resilience of the Cook Island's financial regulatory regime to stand-up to modern scrutiny by our peers and international bodies.
All Trustee Companies operating in the Cook Islands were consulted on in the drafting of this Act and have contributed to its final wording. The Act brings the regulatory regime for Trustee Companies in line with that already in existence for banks and other financial institutions.
Minister of Finance Mark Brown commented, "The passing into legislation of the Trustee Companies Act 2014 is very important for the Cook Islands and the future good governance of our financial industry. It helps ensure that we continue to make the Government's regime, to help protect our financial industry from abuse by criminals and terrorists, one of the best in the world. This Act will greatly help the Cook Islands in any future assessments or international scrutiny."
"The present Government is committed to meeting international and recognised world standards wherever it can, to help protect the Cook Islands, its people, its industries and its reputation. The passing of the Trustee Companies Act 2014 continues that commitment and strengthens our nation's defences against money launderers and the financiers of terrorism abusing our facilities and services."
Paul Heckles, FSC Commissioner, stated, "This is a very important Act, which the passing of will significantly help the Cook Islands when international bodies evaluate and scrutinise whether we have effective and serious regulatory control of our financial industry."
Cook Islands Passes Captive Insurance Act
As part of its long term strategy to grow the international financial services industry through new services and new client markets, the Parliament of the Cook Islands passed the Captive Insurance Act 2013 during yesterday's session. This Act follows the introduction of Foundations for the industry in June 2012.
Minister Mark Brown emphasizes the importance of the industry to the country's economy and indicates that there has been strong interest in Captive Insurance from overseas insurance firms in anticipation of passing the legislation. Brown says, "The government has made a commitment to diversifying our economy by encouraging, strengthening and promoting our Financial Services sector. The passing of the Captive Insurance Act will increase business opportunities and is an important step in the growth of this key industry to our economy."
Captive Insurance is essentially self-insurance allowing a company or groups of companies to provide adequate coverage of their risk at a lower cost than through large insurers. "Captives still require regulation to ensure compliance and the Financial Supervisory Commission will be responsible for licensing and overseeing compliance of Cook Islands captives," says the Cook Islands Financial Services Development Authority ("FSDA"). Paul Heckles, Commissioner of the Financial Supervisory Commission, adds, ""The Cook Islands are a stable and well regulated jurisdiction. This bespoke piece of legislation complements and adds to the range of financial services we offer to the international community."
Drafting of the legislation was done by Appleby Group with local input. Consultation with overseas industry stakeholders was also undertaken. Only two other finance centres in the Asia Pacific region offer captives and the Cook Islands hopes to tap into the underserved regional market. "Our first focus will be on New Zealand and Australia corporations from which we have already had interest," says FSDA. "The legislation was designed to provide advantages over current options for the region through flexibility and 'right touch' regulation. We also offer cost stability, relevant expertise, and convenient location." The legislation is the first in the industry to also allow domestic companies to avail themselves of the service by forming a captive through a Cook Islands company.