Global standard bearer for anti money laundering FATF (Financial Action Task Force) highlighted recently in its New Zealand Mutual Evaluation Report, that while New Zealand is a "high integrity jurisdiction with comparatively low crime rates" we also run a very open economy, with free flow of capital and people and "substantial ease of access".
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How are we enabling money laundering?
Interpol talks about how New Zealand's remoteness is attractive to organised crime groups wishing to engage in discreet trafficking of illegal merchandise between continents.
It states that New Zealand's principal transnational crime challenges include trafficking in drugs, people and weapons.
New Zealand might be "easy to do business with" but that should not extend to organised crime or transnational crime syndicates.
The lack of transparency around beneficial ownership leaves New Zealand at risk. Without beneficial ownership and with lax shell company regulations it is easy to obscure activities.
Establishing a company for "flow through" transactions doesn't require New Zealand to know a lot about who controls the activity or assets. New Zealand must enact legislation implementing a beneficial ownership register to show the true owners of assets and those instructing financial activity.
Criminals can assign "nominee" shareholders to be listed on official documents or can list other legal entities as the "owners," according to Open Government Partnership.
This creates a chain of companies – often across borders – that can be difficult to trace and easy for organised crime to stay a step ahead of even the most tenacious investigator.
In 2010 a shell company nominee, earning $20 per company, registered a company that facilitated a Russian jet carrying 35 tonnes of weapons from North Korea to Iran. The nominee director's full-time job was working for an Auckland fast food outlet while the beneficial owners of that company, to this day, remain unknown. Unsurprising, as the World Bank says 70 per cent of the biggest corruption cases involve anonymous companies.
Transnational organised crime exploits our legal system, in particular, the abuse of shell companies and trusts to obscure ownership and to insert additional layers between the illicit activity and the beneficial owners - offering further protections.
When it comes to inclusions in recent leaks like the Panama Papers, FinCern Leaks and even as far afield as the Danske Bank Estonia case, New Zealand continues to punch well above our weight abroad - and this is not a good thing.
Without transparency, nefarious acts detrimental to societies and economies will continue unchecked.
New Zealand is missing a golden opportunity
New Zealand has come a long way in the fight against participating in, or laundering the proceeds of modern-day slavery, human trafficking, organ trafficking, tax avoidance or child sex exploitation but we are still facilitating others.
Our reputation, stability of the political system and unique geographical position offer us an opportunity to lead the world by setting a high legal and regulatory standard, investing in New Zealand as a regulatory and financial technology hub and fostering 'clean capital' to export these gains, learnings and technology to the rest of the world.
A global response to combating the crimes that plague the world is needed and who better to take the lead than the world's least corrupt society? If we won't, who will?
- Daniel Rogers is CEO and co-founder of Avid AML.
