Suspicious Transactions: What You Need to Know About Cooking Islands
An Advisory on Financial Transactions Originating from or Routed Through the Cook Islands
A recent advisory issued by the Financial Crimes Enforcement Network (FinCEN) has raised concerns about financial transactions originating from or routed through the Cook Islands. This small Pacific nation, which is an internally self-governing country in free association with New Zealand, has been developing its offshore financial services sector.
Serious Systemic Problems with Counter-Money Laundering Regime
However, FinCEN has identified serious systemic problems with the Cook Islands’ counter-money laundering regime. Money laundering is not a criminal offense in the country, and offshore banks licensed by the Cook Islands are not required to:
- Verify customer identities
- Keep records of transactions
Lack of Transparency and Secrecy Provisions
Furthermore, financial institutions in the Cook Islands are not required to report suspicious transactions, and ownership records may be kept in nominee form. The country’s secrecy provisions also prevent disclosure of relevant information concerning offshore companies, except in limited circumstances.
Non-Cooperative in Fight Against Money Laundering
As a result, the Financial Action Task Force on Money Laundering (FATF) has identified the Cook Islands as non-cooperative in the fight against money laundering. Despite efforts to remedy these deficiencies, including proposed legislative changes and the establishment of a domestic financial intelligence unit, the country’s legal, supervisory, and regulatory systems still create opportunities for money laundering.
Enhanced Scrutiny Advised
In light of these concerns, banks and other financial institutions operating in the United States are advised to give enhanced scrutiny to any transactions involving entities or persons from the Cook Islands. Financial institutions subject to the Bank Secrecy Act should carefully examine the available facts relating to such transactions to determine if they require reporting.
Legitimate Business Not Affected
The issuance of this advisory does not mean that U.S. financial institutions should curtail legitimate business with the Cook Islands, but rather that they must exercise greater caution when dealing with transactions from or routed through the country.