Alarm is mounting regarding the proposed legislation in the Cook Islands, which has been drafted by a US-based entity and could potentially legitimize unauthorized access to any account or system globally.
An investigation by 1News has revealed that Drumcliffe, a prominent debt collector specializing in international asset recovery, engaged the services of at least two lawyers based in the Cook Islands to formulate the Tainted Cryptocurrency Recovery Bill 2023.
Contrary to the Cook Islands’ own Crown Law, which was not involved in the drafting process, the bill, now presented in Parliament, carries significant and potentially severe international implications.
During a recent Select Committee meeting, David Greig, the deputy solicitor general of Cook Islands Crown Law, criticized the bill, labeling it as “flawed” and highlighting certain provisions as “clearly unconstitutional.”
Greig emphasized that the legislation essentially sanctions engaging in criminal activities worldwide, which could be deemed as terrorism in certain jurisdictions, and therefore, he recommended against its progression.
He expressed concerns that the bill’s provisions could facilitate hacking into accounts in New Zealand, potentially impacting the constitutional relationship between New Zealand and the Cook Islands.
Additionally, the Select Committee received a legal opinion from a UK-based barrister specializing in crypto asset recovery, who characterized the bill as “state-endorsed cyberpiracy.”
Operational Mechanism
The Tainted Cryptocurrency Recovery Bill empowers “recovery agents” to employ various methods, including hacking, to probe and locate cryptocurrencies suspected of being involved in illicit activities or derived from criminal proceeds.
Alleged international assets would be confiscated and eventually converted into cash, which would then be deposited into a bank account in the Cook Islands. While specifics about the subsequent handling of the funds remain vague, it is purported that there would be a revenue stream benefiting the Cook Islands economy.
Warning Signs
Jeff Nijsse, a cryptocurrency expert and senior lecturer at AUT, scrutinized the bill and identified numerous red flags, such as authorizing unauthorized access to systems globally, including those of universities and governments.
Describing it as reminiscent of a plot from a spy movie, Nijsse highlighted the bill’s broad language, suggesting that individuals merely suspected of possessing tainted cryptocurrency could be targeted for hacking and spyware installation. He expressed astonishment at the unprecedented nature of the bill’s provisions.
International affairs commentator and Otago University professor, Robert Patman, raised concerns about the bill’s compliance with international legal standards, particularly emphasizing the importance of due process in international law.
Implications and Response
Given the Cook Islands’ status as a realm country of New Zealand, Patman suggested that New Zealand authorities must closely monitor the situation, as it could impact the governance arrangements between the two countries.
Foreign Minister Winston Peters’ office confirmed that discussions are underway with Cook Islands officials to track the progress of the legislation.
Numerous sources interviewed by 1News expressed surprise at the influence wielded by a US-based company in the Cook Islands and questioned why this development has not been more transparent to the public.
In its submission on the bill, the Cook Islands Financial Services Development Authority raised concerns about a potential conflict of interest if Drumcliffe were to fund legislation that could lead to substantial financial gains for the company.
Drumcliffe Profile
Drumcliffe, a US-based firm, describes itself as an investment management entity specializing in overseeing high-value claims on behalf of victims of fraud and corruption. Notably, it has a stake in Odyssey Marine Exploration, a company engaged in deep-sea mining activities in the Cook Islands.
1News sought clarification from Drumcliffe’s principal, James Little, regarding the company’s involvement in drafting the bill. Little maintained that the bill is an initiative of the Cook Islands Government and emphasized the positive impact it could have in combating international crime.
Contrary to Crown Law’s reservations, Little expressed confidence in the bill’s compliance with domestic and international laws, including the Cook Islands constitution.
Cook Islands’ Standpoint
Prime Minister Mark Brown has not directly responded to queries from 1News but released a statement affirming that the bill aims to combat international cybercrime effectively.
Acknowledging feedback from the Select Committee, Brown hinted at aligning the approach more closely with international crime-fighting efforts to ensure compliance with the constitution and international obligations.
However, experts caution that seizing purportedly tainted cryptocurrency presents significant challenges, as previous successful seizures have typically relied on cooperation with law enforcement to access passwords and private keys.
The Cook Islands Finance agency warned that the bill could potentially harm the country’s financial services industry, which has contributed substantially to the government’s revenue in recent years.
Puai Wichman, CEO of Oro Partners, urged a thorough reassessment of the bill, citing national security, constitutional, and reputational concerns, suggesting that the current form of the bill should be reevaluated comprehensively.