Over the last decade the islands have consciously moved towards a legal and regulatory framework that is approved by the international financial community and by the full range of international committees studying the implications of ffshore finance and how to regulate it. However the new regulations developed with the guidance of the IMF, far from holding back the offshore business sector in the Cook Islands, has helped the country garner greater respectability and trust in its financial industry and presented new opportunities for growth in legitimate offshore finance sectors. The Asia Pacific Group evaluation of the industry resulted in one of the highest ratings in the region for compliance with international anti-money laundering standards. The Cook Islands legal system is based on British common law and has been groomed over time to give extra certainty in cases of liability. The islands asset protection laws are well proven and the government is well disposed towards the offshore financial sector as a developing part of the economy. Also bolstering the jurisdiction is the strength of its judiciary. Senior New Zealand Appellate Court judges are appointed to the Cook Islands courts. All these aspects have created an offshore sector that can provide a full range of services to high net worth individuals and corporate clients from all over the world. We spoke to Reuben Tylor who played a key role in setting up the Cook Islands offshore center in 1982 and in 1989 pioneered the country asset protection legislation. Currently he is a partner in a law firm and a director of the Cook Islands Trust Corporation. We discussed with him the international pressures on offshore financial centers, the Cook Islands track record in this global market, and the areas he sees being important in the Cook Islands in the future. Tylor comments highlight several areas that should be of considerable interest to the growing number of people in China with assets to protect. He accentuates that with China huge export market, the concise nature of the Cook Islands liability laws means that businesses involved in exporting to more litigious countries will want to take a serious look at the options available to them for incorporation in the Cook Islands. And how the islands can help Chinese corporations protect themselves against the dangers of uncapped liabilities overseas. Who can your services help? How? We provide specialist trust services based on trust law developed in response to specific problems experienced in the United States over the last 30 years. The most significant issues are the protection of large personal wealth against litigation, often spurious, and sometimes driven by expanding and retrospective doctrines of liability. These same issues are becoming relevant in other countries as individual wealth explodes and legal doctrines developed in the United States find their way to other jurisdictions. Wealth earned from exporting goods to the United States is particularly at risk, because of extended doctrines of liability. United States courts are also easily able to find jurisdiction against foreigners. Matrimonial and family disputes over assets also feature. Traditional wealth protection planning used in other jurisdictions relies on attempting to hide assets. This tactic has become redundant, particularly with increasing information flow between countries. No reliance is placed in the Cook Islands on hiding trust assets. Cook Islands trusts instead rely on clear statements of statutory law giving certainty in relation to settlement of assets on a trust, and protection of trust assets against enforcement of foreign judgments. As a consequence, Cook Islands trusts offer settlors and beneficiaries the best level of protection to be found in any jurisdiction. With the changes to the law since 2003, can the Cook Islands still function as an effective tax haven? The changes of law brought about in the Cook Islands since 2003 relate principally to anti-money laundering, and are now mirrored in all other offshore jurisdictions. Given that no emphasis is placed in the Cook Islands on hiding trust assets, the impact of this anti-money laundering law on the Cook Islands wealth protection industry has been minimal. The Cook Islands does not impose any tax on trusts, companies, partnerships and LLCs incorporated by non-residents. That is unaffected by developments since 2003. What new areas or services do you expect to see grow? We are fortunate in that we already had diversified our business beyond tax driven products. Our specialized wealth protection business was never tax driven and this business has continued to grow steadily through this period. The growth opportunity we see now is to take the product and structures we have developed in the United States financial markets (which are the most sophisticated in the world) and apply them to other countries where there has been an explosion of private wealth and we are likely to see the same problems emerging. What do you see as the biggest challenges facing asset planning in the Cook Islands? There is a worldwide trend to criminalize activity, which is ordinarily seen as grounding for a civil action only. The extended definitions of roceeds of crime in modern anti-money laundering law do not differentiate between proceeds of drug smuggling and operating a service station without a current license. These ew crimes have the potential to expose all parties involved in a wealth protection structure to anti-money laundering offences, as well as weaken the level of protection, if great care is not taken in this area. How does the Cook Islands compare to its competitors in this field? The Cook Islands has not been losing ground in its major market place, the United States. It did however retreat from its former markets in Asia and Europe some 15 years ago, and other countries have been quick to take its place. However, the Cook Islands still retain unique advantages and the Cook Islands Financial Services Development Authority was created specifically to take us back into those traditional markets. Have Chinese started buying financial services in the Cook Islands? Chinese clients have always been a small part of the market but the industry is now focusing more of its development efforts on the Chinese market. The main area of interest is in the recent explosion of private wealth, as this normally generates an even bigger pool of persons who desire to share it. There is also interest in using Cook Islands law as a neutral intermediary jurisdiction to bridge legal conflicts between Chinese law and the law in force in China various markets. What advantages can you offer Chinese investors used to investing in Hong Kong? Distance by itself can be a significant advantage in wealth protection planning, but the Cook Islands offers more in that it has specialized law not available in Hong Kong or other similar jurisdictions.
