Cook Islands Financial Services: A Model of Protection and Propriety

The Cook Islands, in the heart of the South Pacific continues to constitute the premium international financial services location, knocking spots off the competition.

With the Mutual Evaluation Report (MER) having been adopted in Nepal in July 2018, the jurisdiction now has the endorsement of the international regulatory authorities, so testifying to its watertight credentials on the compliance front.

The Cook Islands is in tune with the requirements of the wealth management market and its representatives, be they from civil or common law jurisdictions, or with connections to multiple countries and systems of law, in so doing, striking the right balance between a person’s right to privacy and confidentiality, with more exacting regulation and exchange of information.

This serves to evidence the concrete recognition now afforded the Cook Islands and the high esteem in which its anti-money laundering/combating the financing of terrorism (AML/CFT) regime is held. As well as this recognition not having come at the expense of confidentiality or privacy, neither has it been achieved through any watering down of product, such that the heart and soul of the Cook Islands’ asset holding and investment vehicles – namely its international trust and foundation – remain as fit for purpose as ever.

The Cook Islands’ asset holding and investment vehicles remain as fit for purpose as ever.

In addition, the Cook Islands Financial Services Development Authority (FSDA), as well as those providing the financial services themselves, are acutely aware of the ever-evolving cyber security risks and those relating to cryptocurrencies. In fact, all private and public sector interests in the Cook Islands are working in close concert to shared objectives, where the importance the Cook Islands authorities attach to securing the green light from those with international regulatory oversight, sees them required to have as robust a framework of systems, processes and controls as the world’s largest economies. That it manages to do this should be considered an achievement of huge significance and reassurance to all stakeholders.

Responsible, well-regulated island IFCs like the Cook islands play a central global role that goes beyond tax mitigation, offering fantastic opportunities for both corporations and individuals alike. Furthermore, this misunderstood and much maligned sector offers such small island states the opportunity to diversify, innovate and grow into fiscally independent jurisdictions, unchecked by the usual restrictions associated with geography. 

For those prioritising wealth preservation and long-dated investment horizons, the Cook Islands’ pioneering and much aped asset protection trust is merely the headline to a story of outstanding product, service, expertise, pedigree, innovativeness and trustworthiness.

While there has been an undoubted thrust towards greater transparency in tax matters in recent years, the Cook Islands has remained not merely compliant, but gone over and above the call of duty, having signed the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, enacted the Income Tax Amendment Act and passed the Income Tax Act. In addition, the Cook Islands International Trusts Act constitutes one of the jurisdiction’s most important pieces of legislation and is regularly updated, so further consolidating that trust’s status as the world’s premium wealth protection vehicle. Part of that which elevates it above the competition is its affording of protection from political and economic uncertainty, how and when beneficiaries receive assets, the avoidance of forced heirship provisions, as well as protection against foreign judgements and statute of limitations.

Private and public sector interests in the Cook Islands are working in close concert to shared objectives.

Meanwhile, macro socio-economic developments in China are accelerating the ongoing momentum towards full internationalisation of RMB, the One Belt One Road initiative gathers pace and there is exponential growth in the levels of private wealth held by Chinese citizens. It all means the Cook Islands, with its Pacific proximity, is perfectly placed to assist Chinese nationals prioritise wealth preservation and seek an international wealth management plan to reflect the increasingly global nature of their personal and business holdings.

For its part, the Cook Islands IFC space has adapted and evolved to accommodate the requirement for higher levels of service and advice that Chinese clients expect, compared to those from many other markets.

As a jurisdiction, the Cook Islands is aware that China is, essentially, a civil law jurisdiction and therefore more pre-disposed towards foundations, such that its trust offering is marked by its flexibility and ability to be used for a variety of planning purposes. These include succession, wealth protection, avoidance of probate, tax and pre-migration, illustrating that the trust can be the cornerstone of a wealth management plan.

In truth, the Cook Islands provides the fiscal maturity and regulatory environment China currently lacks for the legal protection and secure investment of the wealth its HNWIs now increasingly hold. In addition, it scores highly on the security and privacy front, which is of great importance, since in China itself, many of the financial institutions are, to all intents and purposes, extensions of the State apparatus.

The Cook Islands Government is committed to the international financial services sector as a key component of its economy, both now and going forward, which is a key reason why the jurisdiction should be on the radar of anyone concerned with wealth preservation. For here is a place that offers protection, flexibility and ease of administration, with plans customised to the client’s unique personal and family circumstances and needs.

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