COOK ISLANDS: OFFSHORE BANKING OFFICIAL ANSWERS CRITICISMS

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By Jason Brown

AVARUA, Rarotonga, Cook Islands (May 2, 2002 – Cook Islands Star)---Offshore banking officials in the Cook Islands have finally shot back at criticisms that the industry they monitor may profit from child prostitution, terrorism or global profiteering.

No specific allegations against the industry were mentioned in their response.

But the government’s head offshore official used strong terms to answer narrow but deep doubts about the industry.

"My work is not evil or illegal," said Mathilda Urhle, Commissioner of the OFS, Offshore Financial Services.

"It enabled me to return to my mother’s homeland and contribute to world standards."

Urhle’s comments were at a national preparation conference, which will advise the World Summit on Sustainable Development.

Offshore officials and bankers were among a wide range of public and private sector leaders looking at sustainable development issues during the three-day conference.

Environmentally and economically, offshore banking is a winner, at least for the host country.

There is almost no pollution, unlike tourism, and profits – and wages – are high.

Urhle and Kate Fitzgerald, president of the CITCA, Cook Islands Trustee Companies Association, pointed out these and a wide range of other benefits from the industry.

No figures

Urhle quoted from a Dr. Arnold Goldstein, who says that millions of Americans have been "duped and deceived" about the industry by, among others, a "controlled media."

Urhle could give figures going back ten years on industry taxes paid to government.

However, little evidence was offered to support her rejection of claims that the industry is involved in ‘evil, dangerous or illegal’ activities.

She did not give figures on how many offshore companies using the industry had been checked for organized crime or terrorism links.

Nor did she say how many suspicious companies, if any, were reported to her office by offshore bankers, as required since the introduction last year of the Money Laundering Act.

Uhrle and Fitzgerald did not offer any assurances that the industry, or even the Cook Islands part of it, is free of terrorism or organized crime funds.

Questions similar to these were sent to Fitzgerald in December last year.

They have not been answered.

"Critical"

As close as they would come last week to a denial is to say nothing has been found yet.

"Thankfully, no Cook Islands linkages have surfaced," Urhle said about overseas investigations into terrorist use of offshore services.

If they ever do, it may not be thanks to regulators here.

Urhle herself admits her OFS office cannot do its job properly and needs urgent help.

"It’s critical, it’s now, it’s immediate," she told about 55 delegates and observers.

"From a government point of view, it’s quite obvious we don’t have the resources to properly regulate."

Thursday’s statement follows months of assurances from outside Urhle’s office about how well the Cook Islands is regulating its offshore industry.

Assurances from the Office of the Prime Minister also included promises that the country is properly monitoring its offshore industry.

"Low"

Last week, however, Urhle said the "biggest challenge facing the industry is capacity building within our office."

She noted that the offshore industry contributes NZ$ 2.8 million (US$ 1,335,984) to government accounts, but very little of that is spent monitoring or even promoting the industry.

Fitzgerald also criticized government for not putting enough of that money back into strengthening the OFS.

Only 8 percent of direct funding in fees from the industry is spent by government on the OFS, she says.

"I think that’s low by international standards. We need to be able to put the resources in to meet these regulatory issues. Some progress has been made," she says.

But, says Fitzgerald, "We must tackle these regulatory issues. We must keep up with other offshore centres if we are to have any credibility."

World standards

Urhle and the OFS are almost certainly contributing to the setting of new world standards.

Old world standards remain at the heart of criticisms of the offshore banking industry.

Concerns go as high as agencies of the United Nations, so far the world’s most widely accepted global authority.

Morally and ethically, the industry is regarded by some as a nightmare.

At best, critics say the industry allows organized crime bosses and terrorists to launder billions in illegal funds.

At worst, they say the offshore industry has helped concentrate huge levels of wealth in the hands of a rich few at the same time as millions die in poverty each year.

Locally, the industry is estimated at being worth NZ$ 14.1 million (US$ 6,828,348) to the economy.

Like tourism however, the offshore finance center has not been effective in helping slow down the loss of thousands of Cook Islanders overseas, raising further concerns about either industry’s contribution to sustainable development.

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