From 1981 a legal framework was put in place giving offshore banking and insurance a special place, ring-fenced from the rest of the Cook Islands economy. This was followed in 1984 by the International Trusts Act, which was amended in 1989 to introduce the first explicit asset protection trust law in the world. Building on the common law system the islands inherited from Britain and New Zealand, legislation has been developed to ensure greater protection for assets in trust and to give the settlor of Cook Islands trusts more ready control of their money. Developing Offshore Center Due to the close cooperation of business and government in the islands since the 1980s, the jurisdiction legal innovations in the area of offshore finance and asset protection have been largely favorable towards the professionals engaged in those industries and their clients. Like most offshore centers, the Cook Islands found itself on the Financial Action Task Force blacklist because it didn have the infrastructure in place required to handle anti-money laundering concerns. This spurred the Cook Islands to develop laws that provide extra safety to its investors while giving regulators the assistance and transparency they need. The islands most famous area of expertise in asset protection is derived from the use of a particular blend of laws that has developed there since the 19th century. These laws place clear protections on assets placed in trust in the Cook Islands and protection against foreign jurisdictions, so anyone trying to use litigation to gain control of funds must do so in the Cook Islands where there are relatively short statutes of limitations for creditors reclaiming funds. Aside from the inconvenience of starting court proceedings there, Cook Islands courts require proof eyond reasonable doubt that funds have been transferred to the Cook Islands with the sole purpose of denying the individual creditor. This reliance on legal instruments, rather than attempts to outsmart authorities, means that the Cook Islands are well placed to comply with the greater levels of transparency being demanded of offshore financial centers over the last decade. Between 2003 and 2005, when the country was removed from the FATF lacklist the Cook Islands worked with the IMF to create the regulatory infrastructure necessary to reduce the risk of money laundering, making it a model jurisdiction in the fight against terrorism and organized crime. Followed in 2008 and 2009 by a slew of Tax Information Exchange Agreements, coming to agreements with twelve countries so far. A New Era In 2008 the then finance minister Sir Terepai Maoate still felt that the offshore sector in the Cook Islands was not living up to its potential. He at that time created the Financial Services Development Agency, with the mission to promote the islands financial services overseas and to work with the government and the industry to ensure that the Cook Islands can compete in the global market. The offshore financial sector is also a leading component of the national sustainable development plan aiming to create an economy led by private industry. The government has given this area of the economy its full support, and is working to solve one of the islands major problems: the loss of talent due to emigration. All Cook Islanders hold New Zealand citizenship due to the two countrie ree association, giving them free access to the much larger New Zealand and Australia job markets. In recent years the government has turned this around though, adopting immigration regulations that allows easy access to the island for financial workers, as well as incentives to draw talent to the island financial sector. China has also been a major part of this new era, with Wen Jiabao pledging USD 375 million in development assistance and low interest loans to the area during the 2006 meeting of the Pacific Islands Forum. Chinese money and companies have already helped the Cook Islands build a court house, police station and sports center on Rarotonga the most populous of the islands. Just those three projects are said to have had a budget of over NZ$20 million (USD 14.5 million). As part of bolstering diplomatic ties with the Cook Islands, China also covered the $650,000 costs of the country delegation to the Shanghai Expo. Attracting clients Although the Cook Islands offshore finance sector has traditionally looked to America and European economies to provide clients, many in the industry say that the country has a lot to offer both individuals and companies in China. The country has a stable democracy and over time has shown a commitment to the offshore sector, which have only been bolstered by recent government initiatives. As described above the legal system offers a haven of clearly defined and evenly applied justice. This means that those looking to secure their personal wealth can rest assured that their money will be safe in trusts in the Cook Islands, even if they are declared bankrupt elsewhere, or if they become insolvent and owe creditors in other jurisdictions. As for companies, the speed at which it is possible to incorporate an international company or LLC in the Cook Islands, as well as the tax exemptions for these types of international companies registered in the Cook Islands make it an attractive jurisdiction to set up a company. For businesses involved in international trade the Cook Islands can offer a safe and reliable body of regulations to allow freedom of action, while at the same time allowing for the company to protect their assets from the courts of their trading partner jurisdiction. As Chinese businessmen look to markets across the seas the Cook Islands innovative products can provide a safe place for their money to rest.
