October 14, 2003
By Michael Field
An Indian politician said to have hidden millions of dollars in the South Pacific faces exposure thanks to tough new laws removing secrecy surrounding a once highly covert tax haven.
The chairman of the Cook Islands Financial Supervisory Commission, Trevor Clarke, said that new laws meant that by June 4 next year operators of off-shore companies, banks, insurance companies and trust accounts will have to make full disclosure.
“Basically the procedures and principals that will apply in the Cooks are those that will apply any where else,” he said.
This may have political consequences in India where former Punjab Chief Minister Parkash Singh Badal is under investigation by the state’s Vigilance Bureau (VB).
Current Chief Minister Amarinder Singh says the Badals had Rs 3,500 crore (770 million dollars) in disproportionate assets, much of it in land in India.
Singh told a New Delhi magazine, National Review, that the Badals had laundered the money in the Cook Islands.
“Now, they (VB) have found a nexus with an off shore bank in Cook Islands and all sorts of funny things which they are doing,” he said.
Badal has denied the allegations, saying it was all “false propaganda”.
Although Indian media coverage has expressed bemusement that a small Pacific nation of just 14,000 people could be at the centre of a potential political scandal the Cook Islands tax haven operation has previous rattled governments in Australia, New Zealand, Japan and Hong Kong when it was a British colony.
The Cooks tax haven operation began in the early 1980s and was designed by a then Hong Kong based company, European Pacific International. Banking, as a way for mainly Japanese and Australian companies to hide profits off shore. For the Cook Islands Government, perennially short of money, the operation provided licensing revenue and a number of high paying professional jobs. Legislation very favourable to tax evaders was passed and draconian secrecy laws imposed limiting virtually all disclosure of any information on the operation at all.
The Paris based Financial Action Task Force (FATF), made up of member states of the Organisation for Economic Cooperation and Development, has tried to end the excesses of the tax havens and has threatened financial sanctions against nations which do not cooperate. The Cook Islands is on FATF’s list of non-cooperative countries, along with, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines and Ukraine.
FATF says the Cooks government has had “no relevant information on approximately 1,200 international companies that it had registered. The country also licensed offshore banks that were not required to identify customers or keep their records and were not effectively supervised.”
Clarke told AFP that the number of companies registered remained around the same, along with 20 registered off shore banks.
He said he had received no approaches from Indian authorities over the claims made against Badal.
Under new laws regulations were being put in place, a commissioner had been appointed and the country was, he believed, close to complying with the FATF demands.
“The Cooks have made considerable progress toward that end,” he said.
The new rules will require disclosure over capital adequacy of off shore institutions, prudential requirements, on-site inspections and physical presence.
“There is quite a bit of work to do and we are making progress and the first priority is to review the positions with the banks.”
He said he did not know whether or not any operation in the Cooks was linked to India but he said under the new rules all the existing licences will expire on June 4 next year. They will not be able to be renewed under the old secrecy rules and operators will have to apply for fresh licences under the new wider disclosure regime.
Clarke said he did not believe being on FATF’s non-compliance list had harmed the Cooks, but coming off would help.
”Yes I think so, there is a credibility issue attached to it and coming off would be seen as a plus.”
Copyright: Michael Field
