COOK ISLANDS FINANCIAL CRIME INVESTIGATION METHODS UNDER SCRUTINY
Background Information
A Financial Crimes Enforcement Network (FinCEN) advisory has been issued to US banks and financial institutions, urging them to exercise heightened caution when dealing with transactions originating from or routed through the Cook Islands. The advisory highlights significant deficiencies in the island nation’s counter-money laundering regime.
The Cook Islands: A Brief Overview
- A self-governing country in free association with New Zealand
- Developing an offshore financial services sector, attracting over 6,000 International Business Companies and 2,000 international trusts
Systemic Problems in the Cook Islands’ Regulatory Systems
The following shortcomings have been identified:
- Lack of criminalization of money laundering: The Cook Islands does not have adequate laws to prevent and punish money laundering activities.
- Anonymous account requirements for offshore banks: Offshore banks in the Cook Islands are allowed to maintain anonymous accounts, making it difficult to track financial transactions.
- Inadequate customer identification and transaction record retention: Banks in the Cook Islands may not be keeping accurate records of their customers’ identities and transactions.
- Limited reporting of suspicious transactions: The Cook Islands has limited regulations requiring banks to report suspicious transactions.
- Stringent secrecy provisions preventing disclosure of relevant information: The Cook Islands has strict laws that prevent the disclosure of financial information, making it difficult for law enforcement agencies to investigate money laundering activities.
Consequences and Recommendations
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 by the Cook Islands government to address these issues, US financial institutions are advised to exercise enhanced scrutiny when dealing with transactions involving entities or accounts in the Cook Islands.
US officials stand ready to provide technical assistance to Cook Islands officials as they work to address the deficiencies in their counter-money laundering systems. The advisory emphasizes that the issuance of this notice does not mean that US financial institutions should curtail legitimate business with the Cook Islands. However, institutions subject to suspicious transaction reporting rules must carefully examine facts related to these transactions and determine if they require reporting.
The Treasury Department will consider reports relating to these transactions as relevant to possible violations of law or regulation.