Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill — First Reading

There has been growing evidence that New Zealand’s ‘light’ regulation has allowed the inflow of a flood of dirty money, especially into real estate. It is likely that the proceeds of crime have been a factor in ramping up house prices. Last week the government belatedly introduced a Bill on Money Laundering, covering real estate, lawyers, accountants and the NZ Racing Board. This comes 8 years after their initial Bill that required information on large transactions by banks, casinos and financial intermediaries. I wrote a blog on it last week and here is my speech.

BARRY COATES (Green): Tēnā koe e Te Māngai. I rise to speak to the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. It is with great anticipation that we welcome this bill to the House. As a previous speaker, Michael Wood, said, it has been too long before this bill has actually arrived here in the House. There has been an extensive delay. As many people may be aware, it has resulted from international pressure as well as from public pressure and as well as from a compliance regime that New Zealand has not fully implemented.

The issue, I think, is really important for New Zealand. Transparency International's report, which was recently released to great celebration around New Zealand topping the list of non-corrupt countries, has perhaps, I think, added to a certain amount of complacency around New Zealand's reputation and our role with regard to corruption.

If we look at this particular issue of money-laundering, what we see is that New Zealand's reputation has suffered. The Financial Action Task Force on Money Laundering is an intergovernmental forum on money-laundering. It comprises international experts, it has the strong backing of Governments, and it includes, as well as money-laundering, countering terrorism financing.

In 2010 the Financial Action Task Force provided a damning report on New Zealand. It highlighted the number of investigations that had taken place over a previous 4-year period and revealed cases of fraud, drugs, theft, blackmail, and burglary that had resulted in criminal funds, which had then been subject to money-laundering. As a result, New Zealand was struck off the prestigious European Union white list of countries that had financial integrity. Being struck off that white list, I think, is a sad indictment of New Zealand's descent into a kind of economy where money-laundering has become rife, where tax evasion and the facilitation of tax havens has become rife, and where we have been a soft touch for multinationals, which can get away without paying tax on their New Zealand activities.

Subsequent to that Financial Action Task Force report there were further warnings. It is pleasing to see that there has been a first phase of action—banks, financial intermediaries, and casinos were included in phase one of the regulations in 2009—but there has been considerable resistance to the process of adding those others that have a significant responsibility for potentially facilitating money-laundering. We welcome the fact that this bill will apply to real estate agents, lawyers, accountants, conveyancers, the New Zealand Racing Board, and high-value dealers. The coverage is important.

I would like to highlight, in particular, the coverage of real estate. The New Zealand Police financial intelligence unit has highlighted the use of real estate as an attractive haven for money-laundering. As people may know, what starts off as proceeds of crime goes into the purchase of property, and, if there are no checks on the source of those funds, then the money can be counted as a legitimate form of investment. We have seen too much of this. It has been cited by many experts as a major factor in the high property prices that we have seen, not only in Auckland but, increasingly, in other cities across New Zealand.

There was a nice article in North & South magazine by Caroline Courtney who included an anecdote where she said that an overseas buyer had come in, viewed 50 houses in a day, and bought 40 of them. There were no questions asked as to where the money came from. This is rife potential for money-laundering. We have seen too much evidence of dirty money in New Zealand, of money from all sorts of illegal sources. When the Minister of Revenue has talked about this bill, she has reminded us of the scale. I think it is good that there is anticipated disruption of $1.3 billion, but by all accounts that is the tip of the iceberg, and there is far more money that is being laundered in this country than $1.3 billion. The lesson from countries like the UK is that the legislation needs to be broadened to cover additional areas rather than just taking a check-box approach. An expert doing a PhD on money-laundering, Ron Pol, is very eloquent about the need for Governments to get beyond this check-box approach.

That is what we going to be looking for in this legislation. We are going to be looking for legislation that helps with action on money-laundering, not just adding to compliance costs for no reason through a check-box approach that actually does not achieve the aims that the legislation should be seeking. In particular, in the UK what we have seen is that they had regulation far more comprehensive than ours in 2007, and the UK, subsequently, has gone on to introduce a number of other measures. We should be anticipating those in this legislation. It established a national crime agency particularly on money-laundering. What it has done recently is to establish a provision so that foreign companies wishing to buy property in the UK will need to join a new public register of beneficial ownership.

This is what we do not have, with regard to a property register of foreign owners in this country. Those kinds of mechanisms would be very beneficial, and, further, they also apply that same register to those foreign companies that would provide Government contracts, or bid on Government contracts. The third thing that the UK is doing is that it is the first of the G20 countries to establish an accessible central register showing domestic companies that control US companies and buy real estate. So what we are seeing is far greater disclosure on who the beneficial owners are amongst the property dealers, but also amongst the beneficial corporate owners. That kind of transparency—that kind of disclosure—is the standard that we should be looking for in this legislation. We do not see it yet in the proposals that we have before us.

Certainly, as the Green Party, we would be looking to significantly extend the disclosure and the transparency around money-laundering, because sunlight is the antidote to corruption, and sunlight is the antidote to money-laundering. We need that transparency if the money-launderers are to be identified and held to account.

We have not had an auspicious start to this legislation. It has been far too long coming to the House. The Government has been tardy in responding to this. It has obviously been heavily lobbied, and we suspect that that would be one of the reasons for the delay, but, further, we are worried about the narrow scope of the legislation.

Thank you for this call. We will engage positively with this legislation. We really want to see it happen, and we want to see it happen quickly, but we want strong legislation that actually makes a difference and cleans up dirty money in New Zealand. Thank you.