U.S. BANKING SANCTIONS HIT NIUE, COOK ISLANDS WORRIED

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By Michael Field

HONOLULU, Hawai‘i, (January 30, 2001 – Agence France-Presse)---A Pacific tax haven linked to Panama has been hit with American banking sanctions while another big Pacific operator in the business expressed concern Tuesday that it too would be hit.

Niue Prime Minister Sani Lakatani told the Pacific Islands Conference of Leaders meeting here that his country’s Panama partners had advised that they could not pay Niue as a result of a decision by United States banks to forbid cash transfers to Niue or any of its entities in New Zealand or Australia.

"This is a brutal blow. …. It was a lifeline and they have cut that line to the people of Niue," he told AFP.

Later, Cook Islands Prime Minister Dr. Terepai Maoate expressed concern that his country too would be hit.

He claimed the U.S. and the Organization of Economic Cooperation and Development (OECD) were blacklisting Niue and the Cook Islands, but were taking no action against bigger tax haven nations like Switzerland and Hong Kong.

"Why not? We are just chicken feed. We are easy prey," he told AFP.

Another Pacific nation, Nauru, has been accused by the US of funneling 70 billion U.S. dollars worth of black money from Russia. Nauru, Palau and Vanuatu two years ago were hit by sanctions in the wake of a U.S. investigation into how the Russian Mafia laundered money through the Bank of New York and Nauru.

Niue has given the Panama City law firm of Mossack Fonseca and Co., the exclusive right to register "international business companies (IBC)" in Niue and it pays Niue around 1.6 million U.S. dollars a year, which is a substantial portion of Niue’s government budget, projected this year to be around 3.75 million NZ dollars (2 million U.S.)

Niue has also licensed six offshore banks, operating in Australia, which the OECD is pressing them to close. Lakatani said if they were to do so it would be "like cutting the throat of Niue."

In a money laundering report, the U.S. State Department questions the "awkward sharing arrangements" with the law firm and warned that Niue’s operation was ideal for money laundering.

Lakatani was speaking here on a debate over the impact of globalization and used it to reveal that Mossack Fonseca had advised him last Friday that the U.S. banking system was refusing to accept the transfer of any money to Niue.

"Our small nation has been kicked in the stomach by the powerful nations of the world," he said.

The 50,000 U.S. to 100,000 U.S. dollars a month received from Panama was a lifeline.

"A very little money goes a long way in Niue.

"The banks in the United States have stepped in. I don’t know where to look now."

Lakatani said the action had immediately been imposed by the Bank of New York and Chase Manhattan and had spread to the global banking system, preventing transfer to a Niue account with the Bank of New Zealand.

Maoate told the conference that the Cooks was not a tax haven, and that American citizens using its off-shore registration system were using it for "asset protection" and not tax avoidance.

He claimed his country was initially encouraged by Australia and New Zealand to set up its international banking services, which has been done.

"With one foul and uncaring sweep this is all threatened."

He said it was like a tornado sweeping in the Pacific.

"It is hard to build something but it is easy to tear something down."

He told AFP that the OECD countries had set up the dialogue with tax haven nations, including the Cooks, and this was taking place in London. Yet, out of the blue, sanctions were imposed on Niue.

"I am disappointed to hear that sanctions have already been applied."

"As far as the Cook Islands is concerned we are squeaky clean. Our product is asset protection, we are not a tax haven."

But he said the major nations no longer wanted to listen to small countries like his that had few options in economic development.

"I would not be surprised if they put a sanction on us."

Michael Field New Zealand/South Pacific Correspondent Agence France-Presse E-mail: afp.nz@clear.net.nz  Phone: (64 21) 688438 Fax: (64 21) 694035 Website: http://www.afp.com/english/ 

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