Cook Islands Lacks Effectiveness in Fighting Money Laundering and Terrorist Financing

A recent report has highlighted significant weaknesses in the Cook Islands’ financial system, revealing that the country is failing to effectively combat money laundering (ML) and terrorist financing (TF).

Ineffective Operational-Level Coordination Bodies

The report, conducted by an international team of experts, found that there is little evidence of regular discussions between the two operational-level coordination bodies: the Cook Islands Combined Law Agency Group (CLAG) and the Cook Islands National Intelligence Taskforce (CINIT). This lack of collaboration makes it difficult to effectively disseminate financial intelligence, investigate ML cases, and confiscate assets.

Inadequate Investigation and Prosecution of ML Cases

The report also revealed that there is only one ongoing investigation into domestic laundering of foreign proceeds of crime. Furthermore, there have been no investigations, prosecutions, or convictions related to TF activities in the Cook Islands.

Weak Supervision Regime

The assessment team identified weaknesses in the country’s supervision regime, including limited supervisory activity conducted under the Financial Transactions Reporting Act 2017. While the FIU has issued warning letters and required businesses to prepare action plans, it has not applied other forms of remedial sanctions.

Challenges in Identifying Beneficial Ownership

Financial institutions (FIs) and licensed trust companies (LTCs) face difficulties in identifying beneficial ownership, particularly where complex structures and foreign ownership are involved. LTCs also struggle to monitor transactions of legal persons and assets held by international legal arrangements administered by them.

Concerns about the Potential for Abuse and Exploitation

The Cook Islands has been identified as a key player in the global offshore financial sector, with many financial institutions and trust companies operating from the country. However, the lack of effective regulation and supervision raises concerns about the potential for abuse and exploitation.

Response to the Report’s Findings

In response to the report’s findings, the Financial Services Commission (FSC) has committed to implementing additional measures to strengthen the country’s anti-money laundering and counter-terrorist financing regime.

Accessing the Full Report

The full report is available on the website of the Asia-Pacific Group on Money Laundering (APG).