Money Launderers get a beating in Fiji

Issue 368 May 1, 2017 – 

As reported in our Web Edition last week, the Real Estate Agents Licensing Board (REALB) in Fiji has signed a Memorandum of Understanding (MoU) with the Fiji Financial Intelligence Unit (FIU) to enhance the level of professionalism and integrity within the real estate industry in Fiji.

Real estate agents have similar responsibilities like the commercial banks and other non-bank financial institutions under the FTR Act to ensure that their services are not abused for conducting fraudulent and money laundering transactions.

A real estate transaction can be used to disguise the illegal origin of funds by introducing the proceeds into the financial system. Once illicit funds are invested in the real estate market, the proceeds are disguised as legitimate wealth in any subsequent property transactions.

The regulatory regime in Fiji makes it mandatory for all financial institutions to report suspicious clients and their transactions to the FIU.

The real estate sector comes under this mandatory obligation under the law.

Vigilance required

Writing in Indian Newslink (July 15, 2016) on accountability, vigilance and good governance, former Governor General Sir Anand Satyanand said that there can be no guarantee of continuance and there has to be maintained an ongoing attitude of vigilance against diminution of standards.

“Money laundering and illegal practices can flower easily if this vigilance is not maintained.  Central in all of this, is the positioning of suitably skilled and fearless holders of public office to make sure that standards are maintained.  Our country is currently well regarded for operating on free market principles in an open way which provide pathways for an agriculture based export industry supported by manufacturing, technology and services.  Long may all this continue,” he said.

Inadequacy in New Zealand

Anti-Money Laundering laws are strictly enforced in New Zealand but there has been a lacuna in the disclosure rules relating to foreign trusts.

The New Zealand Parliament passed a Bill on February 14, 2017 to tighten the regulation.

Revenue Minister Judith Collins said that the Bill was in response to the recommendations of the ‘Shawn Inquiry Report’ submitted by Adjunct Professor (Accountancy) at Victoria University in Wellington and former PricewaterhouseCoopers Chairman John Shewan in the wake of the ‘Panama Papers.’

In his report, Mr Shewan had said that the existing foreign trust disclosure rules were inadequate and that they were unfit to preserve New Zealand’s reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practices.

“A significant increase in information disclosed when a foreign trust sets up, annual reporting and increased enforcement will satisfactorily address the issues identified. Banning foreign trusts or removing the current tax exemption is not considered to be necessary or justified. In theory, New Zealand’s existing tax disclosure and exchange of information arrangements should be sufficient to deter tax abuse, and its anti-money laundering rules should ensure that funds held by foreign trusts are from legitimate sources,” Mr Shewan had said.

Money laundering and financing terrorism are financial crimes with economic effects. They can threaten the stability of a country’s financial sector or its external stability more generally. Action to prevent and combat money laundering and the financing of terrorism thus responds not only to a moral imperative, but also to an economic need.

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