Financial Crime World

Cook Islands Establishes Off-Site Monitoring Procedures for Banks

Wellington, New Zealand - The Cook Islands has made significant progress in establishing off-site monitoring procedures for banks and non-bank financial institutions, a crucial step towards combating money laundering and terrorist financing.

Implementing AML Legislation

According to a recent report by the International Monetary Fund (IMF), the Cook Islands has implemented a comprehensive suite of anti-money laundering (AML) legislation, including:

  • The Money Laundering Prevention Act 2000
  • The Financial Transaction Reporting Act 2003
  • The Banking Act 2003

The country has also developed guidelines for banks and other financial institutions to prevent money laundering and terrorist financing.

Challenges in Monitoring Procedures

While the Cook Islands has made significant progress in implementing AML legislation, there are still concerns about the effectiveness of its monitoring procedures. Specifically:

  • The Financial Supervisory Commission (FSC) has not yet started its program of supervision of licensed financial institutions.
  • The agency is facing challenges in training its supervisory staff.

Recommendations for Improvement

The report highlighted the need for the Cook Islands to develop a basic supervisory infrastructure, including:

  • Regulations and guidance notes
  • On-site and off-site surveillance tools

Additionally, the FSC needs to:

  • Develop a clear philosophy on the type of institution it wishes to license.
  • Consider ways of publicizing the list of institutions that are licensed to conduct banking business.

Due Diligence for International Companies (ICs)

The report noted that there is currently no effective mechanism for authorities to check on the due diligence performed on ICs registered in the Cook Islands. The responsibility lies with the six trustee companies, but the FSC does not currently have the capacity to undertake compliance checks of these entities.

Risks and Recommendations

While the lack of adequate supervision of ICs does not pose a direct risk to the Cook Islands, it poses a significant threat to the international financial community, as countries with AML/CFT regimes that do not meet international standards could find their financial institutions establishing relationships with Cook Islands ICs for which proper due diligence was not undertaken.

To mitigate this risk, the report recommended that:

  • The Cook Islands strengthen its supervisory infrastructure.
  • Develop a more effective mechanism for authorities to check on the due diligence performed on ICs.
  • Consider ways of publicizing the list of institutions that are licensed to conduct banking business.
  • Issue warnings where it discovers unlicensed institutions that continue to promote themselves as Cook Islands licensees.

Conclusion

Overall, the report concluded that while the Cook Islands has made significant progress in implementing AML legislation, there is still much work to be done to ensure the effective supervision of financial institutions and the prevention of money laundering and terrorist financing.