Exporting

Cook Islands

Exporting financial services

THE GUARANTEE of security, client protection, confidentiality and privacy form the foundation of the Cook Islands □ffshore banking industry.

“Gur lips are sealed,” a spokes person for the latest arrival, the Hongkong Bank Trustee (Cook Islands) Ltd, a division of the Hongkong Bank

►aid, declining an interview.

Undoubtedly offshore banking is a

icnsitive issue involving questions of

overeignty as well as vested political merest.

David McNair, a director of iouthpac Trust Ltd, one of the two bunding trust companies unique in >eing staffed and owned solely by locals without affiliation to outside institutions, lowever, did speak.

“What we have done here as part of commercial incentive to make the Cook slands’ offshore finance centre attractive > to provide a statutory means of privacy diich is the equivalent in commercial srms of an individual’s right of privacy i those countries that do have such tatutes,” he said.

Questions as to client numbers,

mount of money passing through,

'here that money comes from, where it oes to, he describes as naive. Details are mply not available.

Confidentiality is reinforced by

were penal provisions. Describing it 5 an “institutionalised form of privacy,”

IcNair says to dispel the air of mystery tie has to understand the principles on hich it exists.

“We simply export financial scr ees. What distinguishes the Cook lands is that it is a new, viable gnificant and successful export industry •eating minimum social impact on the mntry,” he says. This industry earns te government NZ$l.3 million annu ly. With a legal system based on the nglish Common Law model and com ned with separate and specific offshore lance centre legislation, firm asset

protection laws are in place. Unbending laws exist to repel undesirable infil tration.

To fall beyond the law would be financial suicide in this small but inter nationally competitive, politically sound and lucrative tax haven. The prime minister, Sir Geoffrey Henry, has prom ised an immediate revoking of licence following any hint of scandal, without right of appeal.

Surprisingly, despite a lack of hard facts, the industry occasionally attracts suggestions that South Pacific financial institutions might be used for money laundering purposes and other serious financial irregularities.

This material is speculative and the reliability of it is undetermined, certainly in the Cook Islands jurisdiction.

But, in February this year, at a law enforcement conference in Fiji, concern was expressed about the potential dangers of money laundering through tax havens such as Vanuatu and the Cook Islands.

Trevor Clark, chief executive of Standard Chartered said at the time, “I never heard question of the Cooks being used for this purpose.”

Police commissioner Tepure Tapaitau backed him up by saying no investigation or official complaint had been made known to the police.

“Serious police and customs net working in conjunction with Australia, Asia, the FBI and DEA is in force,” he said.

Ask anyone in the business and they will tell you the ethics and credibility of the Cook Islands institutions are sound.

No doubt has ever been 1 cast in that direction since it’s inception, a decade ago.

During this time the industry saw an important reinforcement of credibility, when the Cook Islands became one of three nations to be registered on the

Hong Kong stock exchange as an

alternative offshore domicile for locally listed companies last year.

McNair says, “We are leaders in this respect. Our integrity is unchallenged, otherwise it would have been out of the question for Standard Chartered and Honkong Bank to come here,”

The time zone is almost unique highly convenient for dealing with the West Coast of the USA and East and South East Asia. Handy when dealing with highly complex transactions such as cross border aircraft leasing contracts.

Modern satellite communications,

essential to the industry, were installed in 1980.

This may explain the frustration experienced recently in the industry when, after an arson attack in May on the government administration block, a report stated company records were destroyed. The cost to assure clients international company records were in tact and undamaged was substantial.

Client pacification when communica tions were down, was a nightmare, a spokesperson said at the time.

Offering a client service is not as simple as it may seem. A local person, once rang several trust companies mak ing a US$l million investment enquiry.

“I was given a sharp shift. ‘No,’ was the very firm and unanimous answer,” he said.

McNair says this is quite under standable. “Residents are not permitted to use the offshore legislation.”

“People cannot just come on to the beach with a sack of money,” says Geoff

Barry, acting manager at the European

Pacific Banking Corporation, which was affiliated to European Pacific Trust (Cook Islands) Ltd - the Cook Islands’ other founding and largest financial institution until August last year. Then, Standard Chartered, an international banking group represented in over 50 countries, with administered assets of US$l7.2 billion registered with its financial division, Chartered Financial Holdings, bought the assets of European Pacific.

Maine Brown, acting secretary of the Monetary Board explains: “For example, all applications for a banking licence must come through one of the seven trust companies. Proof of registration, who the clients and auditors are and in what currency transactions will take place are issues closely vetted before Monetary Board approval is granted.

Fees of US$25OO, renewable annually, are payable up front. Companies must be registered as international companies in the Cook Islands. Liquid assets must be in excess of US$2 million for a ‘B’ class, and US$lO million for an ‘A’ class licence.

“It’s one way of keeping it clean,” he says, “Cook Islands fees are probably the highest in the Pacific Basin to attract only people with integrity. We have an understanding with the trust companies to keep their noses absolutely clean.”

McNair puts it this way: “Self regu lation in co-operation with government has operated effectively for 10 years”. □

Reports from Ed Rampell in Hawaii; Martin Tiffany in Fiji; Wally Hiamhohn in Papua New Guinea; and Christine Hatcher in the Cook Islands.