Banking

The law relating to banking, the obtaining of a banking licence and banking confidentiality is contained in the Offshore Banking Act 1981 and the Banking Act 2003.

The Banking Act 2003 provides for the following categories of licenses:

• Domestic Authorizes licensees to carry on domestic banking business in and from within the Cook Islands.
• International Authorizes licensees to carry on international banking business in or from within the Cook Islands.
• Restricted International Authorizes licensees to carry on international banking business of a type and nature specified in the license and approved by the FSC.

With the passing of the Financial Supervisory Commission Act 2003 all applications for licences now go before the FSC. Currently there are sixteen licensed banks in the Islands.

Licensed banks must submit audited accounts each year. Westpac Banking Corporation and the Australia & New Zealand Banking Group (ANZ) have a presence on the Islands.

Insurance

The law relating to insurance and the licensing of insurance companies is contained in the Offshore Insurance Act 1981 and in the Offshore Financial Services Act 1998.

The Cook Islands are home to 20 (October, 2004) captive insurance and reinsurance companies. The Government has not disclosed the total asset and premium size of the sector.

With the passing of the Financial Supervisory Commission Act 2003 all applications for licences now go before the FSC.

Only an International Company or a Foreign Company incorporated under the International Companies Act 1981-2 (see Forms of Company) can be authorized to carry out insurance business. The licensing fee, payable annually, is $2,000. The minimum capital requirement is US$2m and the company's tangible assets must exceed its liabilities by US$100,000.

A licensee cannot deal with the local market and is restricted to offshore insurance business transactions such that all policy beneficiaries must reside outside the Cook Islands. Audited accounts must be filed every year.

Legislation is pending with regard to protected cell companies.

Trust Management

Cook Island trusts are known locally as International Trusts and are governed by the provisions of the International Trusts Act 1984 (The Act), which has been substantially amended in 1989, 1991 1994 and 1996. See Forms of Company for a description of the legal basis and formation procedure for trusts, and see Law of Offshore for a more detailed analysis of Cook Islands trust law. As of 2004, about 2,100 trusts had been established under the legislation.

The Act provides for the licensing of trustee and trust management companies. All International Trusts must have a resident licensed trustee with management powers (unless they come within the custodian trustee exception cited below). Normally this means that the International Trust is required to use one of the 5 registered trust companies which operate out of the Islands. To obtain the protection of the Islands' laws the trust must be registered by the licensed trustee company within 45 days of its creation and they must certify that the trust is an International Trust under the Act.Trustee companies.

The non-resident settlor may appoint a licensed and resident Cook Islands trustee as a custodian trustee and is then free to appoint managing trustees within his own jurisdiction. The Act imposes strict confidentiality rules on trustees and the staff of licensed trustee companies, which can only be breached in the circumstances detailed below:

The Trustee Companies (Due Diligence) Regulations 1996 require the officers and employees of a registered trust company to take reasonable precautions to ensure that an International Trust is not being used to shelter assets derived from drug smuggling, money laundering or other serious crime; and the Offshore Criminal Provisions Act 1996 provides that where an officer or employee of a registered trust company has cause to suspect that an International Trust is being used to shelter the proceeds of drug trafficking or that a person related to or involved with the entity has been convicted of serious criminal activity, that matter is to be referred to the appropriate Government regulatory body. Furthermore the registered trust company is to provide such reasonable assistance , documentation and other information as may be required by the Government regulatory body under the law.