The Banking Amendment Act 2020
The Cook Islands has made an amendment to its Banking Act 2011 (the “Act”) to assist international banks seeking to carry on international banking business in the Cook Islands.
The Banking Amendment Act 2020 has removed the requirement for international banks to have a domestic Cook Islands banking license before being able to apply for and obtain an international banking license.
The Act provides licenses for both domestic and international banking business. Domestic banking business licensees can only provide banking services to residents of the Cook Islands, including visitors, whereas international banking business licensees can only service non- Cook Islands residents. As a result of previous amendments to the Act designed to deter shell banks and those seeking to use the financial system for illegal means, section 9(2) of the Act provided that an international license could only be issued to applicants who already had a domestic license. Whist there was no statutory requirement for international licensees to carry on domestic banking business, they were still required to have a domestic license to ensure they were vetted and met the standards required of a domestic licensee.
Upon a recent review of the Act it was decided that as a result of the Cook Islands current AML/CFT regime, the supervisory powers given to the Financial Supervisory Commission and the investigative powers given to the Financial Intelligence Unit, together with all international licensees requiring a physical presence in the Cook Islands, section 9(2) was seen as unnecessary and has now been repealed. This is on the basis that applicants for international banking licenses are subject to the same application procedure as domestic applicants, the same regulation, compliance and supervision once a license has been issued, and both require a physical premises in the Cook Islands.
The repeal of section 9(2) makes it clear that an applicant for an international license is not required to have a domestic license before making its application and will not be required to carry on domestic banking business and compete in the domestic market.
This amendment to the Act should encourage international banks seeking to establish a presence in the Cook Islands in the knowledge they can focus on servicing their international clients from the Cook Islands. They should also obtain great comfort from the outstanding report the Cook Islands received from the FATF in 2018 showing the Cook Islands’ AML/CFT regime to be one of the best in the world in protecting its financial system from money laundering and terrorist financing.