The move to curb Money Laundering and Terrorism finance
Wellington, July 14, 2018
Consumer Affairs Minister Kris Faafoi is working on law changes aimed at cracking down on overseas criminals potentially misusing companies in New Zealand.
According to him, the goal is to curb money-laundering and the ability of overseas based criminals to use New Zealand’s well-regarded companies register to conceal some of their business.
“Certainly we are cracking down on beneficial ownership and figuring out who the beneficial owners are of companies that are registered here in New Zealand… [so we know] exactly who controls those and where the money flows are going”, Mr Faafoi said.
Beneficial Ownership Register
As part of this process, the Ministry of Business, Innovation and Employment (MBIE) released a discussion paper on beneficial ownership.
MBIE seeks feedback on a proposal to develop a register of companies and limited partnerships which holds information on the true owners or controllers – the beneficial owners. This relates to a commitment the government made at the 2016 Anti-Corruption Summit where New Zealand committed to exploring a beneficial ownership register.
Transparency International New Zealand (TINZ) has consistently called for a beneficial ownership register of all legal entities, to enhance transparency of New Zealand companies and trusts.
Transparency is essential to prevent New Zealand companies and trusts from being misused by criminals – this is why identification of the true owners or controllers of the entity is very important. A beneficial ownership register will help protect our reputation by deterring criminals from using New Zealand companies and trusts, and by helping law enforcement to “look through” these corporate vehicles in their investigations.
A beneficial ownership register would also help regulated businesses to comply with their AML obligations. A central, public register would save duplication of processes to collect ownership details, reducing the cost to local businesses of collecting all the required information themselves.
This process is a positive step in addressing a challenging issue. New Zealand can learn from global experience. Jurisdictions such as the United Kingdom, the European Union, Singapore, and Hong Kong have each established beneficial ownership registers.
Of concern is a decision to not consider trusts as a part of this initiative.
According to the discussion about, “We are aware that trusts can also be used by criminals. Trusts would be captured by the options in this paper where the beneficial owners of corporate entities are people who control a trust. However, we have not considered a beneficial ownership register for trusts in this paper.”
Reasons for excluding trusts at this time include the need for more analysis.
This is because a register would be a significant departure from historic recognition of privacy and confidentiality as among the essential virtues of trusts. Registering beneficial ownership of trusts requires system changes that could result in compliance costs for all involved parties. Based on this and other considerations, the Law Commission felt considerable analysis is still required before it is practical to consider beneficial ownership of trusts.
Exploitation by criminals
The ‘Panama Papers’ and other recent investigative media findings have highlighted how criminals are misusing companies and trusts for money laundering, tax evasion, corruption and other crimes, including those in New Zealand.
Criminals increasingly use corporate vehicles to disguise their ownership of assets or their involvement in transactions to avoid detection and to enjoy their criminal proceeds.
TINZ welcomes the Government’s response to the ‘Panama Papers’, to make changes for foreign trusts and to extend anti-money laundering (AML) regulations to lawyers, accountants and real estate agents.
TINZ is preparing a response to MBIE’s consultation document.
We encourage all of our readers to review the documents and consider responding as individuals or through organizations they represent.
Second Discussion Paper
A second associated discussion document was released at the same time. It relates to creation of director identification numbers and publication of directors’ residential addresses in the Companies Register.
The deadline for submissions on the discussion documents is 5 pm on August 3, 2018.
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Source: Transparency Times (Transparency International New Zealand, Wellington)