The Cook Islands – Unique Credentials and Recent Developments

27.04.2020

The Cook Islands has created, developed and sustained an offshore industry by being innovative and adaptable, and focusing on an aspect of trust and wealth management planning neglected by many. The strength of the Cook Islands offshore jurisdiction is its laws and its ability to pass laws to meet the needs of today’s society. The Cook Islands has established itself internationally by developing within its laws a wealth protection framework that makes it an industry leader in the preservation and protection of wealth, and the jurisdiction of choice for many high net worth individuals, their families and professional advisors.

In 1989, the Cook Islands amended its trust laws to introduce comprehensive asset protection provisions seeking to protect the rights of individuals and their assets from those who attempt to take them by force, litigation or legislation, whether through illegal, unethical or immoral means. The laws were innovative and ground-breaking at the time, their success reflected in the number of jurisdictions that have since copied them in part, or in whole.

Since the amendments to its trust laws, the Cook Islands has also enacted foundation and limited liability company laws, which contain similar asset protection provisions. Of particular note are rules that provide certainty to the rights of those who might claim against assets by reference to specific dates and events.

When deciding on a jurisdiction for his/her wealth management planning needs there are many factors the High Net-Worth Individual (HNWI) should consider. Trusts are the cornerstone of most wealth management plans. The Cook Islands is best known internationally for its development and progression of the trust concept through its trust laws, and the use of those laws in modern day wealth management planning. The cornerstone of the Cook Islands international financial services industry is therefore the Cook Islands International Trust, established pursuant to the International Trusts Act 1984. The Act provides some of the most comprehensive protection available to settlors from foreign judgments and creditors.

For over 30 years, Cook Islands trust laws have proved to be robust and practical. They were designed to enhance the benefits provided by a common law trust and protect the individual’s assets and rights. Cook Islands trust laws provide certainty to a settlor as to how assets will be managed, invested and distributed during his/her lifetime and after. The choice of law and trustee are paramount when establishing a trust structure. The Cook Islands can provide licensed trustees of vast experience, knowledge, integrity, substance and professionalism to rival any jurisdiction in the world. They are based in a sovereign jurisdiction that is politically stable, has a judiciary experienced in dealing with trust matters, and that respects the rule of law. In addition, the trustees are regulated by an independent authority that will monitor their activities and accept and investigate any complaints made by a settlor or trust beneficiaries.

Features of Cook Islands trust law that appeal to many settlors include the ability to retain a degree of control over the assets settled into a trust through reservation of certain powers, including the power to invest and manage assets. Of further appeal is the fact that a trust can be dynastic and continue indefinitely.

The Cook Islands does not feature on the European Commission’s list of jurisdictions considered to have weak AML/CFT regimes, nor on the European Union’s list of non-cooperative tax jurisdictions.

Over recent years the Cook Islands has received an outstanding Mutual Evaluation Report from the FATF indicating it has one of the best AML/CFT regimes in the world. It has implemented the CRS and FATCA into its laws to ensure automatic exchange of financial information with other jurisdictions in order to counter tax evasion and other financial crimes. The Cook Islands is a member of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes as well as its BEPS Inclusive Framework.

The products and services offered by the Cook Islands remain at the forefront of the wealth protection industry, despite the increased international regulatory and compliance demands. The Cook Islands is committed to meeting its international obligations. It has not therefore amended its products and services, but instead amended laws and regulations applicable to those providing financial products and services to ensure they meet international compliance and regulatory standards.

On 18 February 2020 the Council of the European Union (“EU”) published its revised list of non-cooperative jurisdictions for tax purposes (the “blacklist”) as well as its state of play for those jurisdictions who had committed to make changes to tax regimes by 31 December 2019 (the “grey list”). The Cook Islands had been on the “grey list”, having committed to make changes to certain tax regimes identified by the EU as preferential and harmful, by 31 December 2019. It was duly removed from the revised list having passed legislation in December 2019 to address the concerns previously raised by the EU.

The Cook Islands is therefore now on the “white list” and regarded by the EU as a cooperative jurisdiction for tax purposes.