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Crack down on dirty money

By   /  March 20, 2017  /  Comments Off on Crack down on dirty money

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MIL OSI – Source: Green Party – Press Release/Statement

Headline: Crack down on dirty money

There was widespread applause when a Transparency International report rated New Zealand equal highest in the world for financial integrity, but the report was derived from a series of ‘expert ratings’ and should not used be an excuse for complacency. In our globalised world, there are huge amounts of money from organised crime, drugs, and tax evasion flowing across borders, looking for a home and a laundromat – a place that dirty money can be channelled through a legitimate activity to emerge clean.

Last week, the Government introduced legislation into Parliament to require lawyers, accountants, real estate agents, and others to report on suspicious transactions. This has been a long-standing call from the OECD’s Financial Action Task Force (FATF). Their critical report in 2010 resulted in New Zealand being struck off the ‘White List’ list of non-corrupt countries by the EU adding to cost of doing business there for New Zealand companies.

The National Government has had plenty of warnings about money laundering, tax havens, and tax evasion. A 2009 evaluation of New Zealand’s money laundering controls undertaken by the FATF found 197 investigations into money laundering between 2004 and 2008 relating to fraud, drugs, robbery, theft, blackmail, and burglary. Since 2007, the purchase of real estate, the use of professional services, and foreign exchange dealings have been popular ways to launder funds.

Money laundering is closely linked to gambling and political influence. In August last year, the High Court ordered recovery of $43 million from William Yan and associates after a money-laundering inquiry. Yan (also known as Yang Liu) has previously been granted citizenship by the former Minister of Immigration at the time, Shane Jones, overruling the advice of officials and attracting criticism from the Auditor-General. He gave political donations to the National and Labour parties and gambled $293 million at Sky City over 12 years, losing $23 million. Sky City was allowed to keep the money, even though some of the funds were probably the proceeds of crime.

After public concern and pressure from the FATF over a number of cases, the Government passed the first phase of anti-money laundering laws in 2009. However, these didn’t come into effect until 2013, and covered only banks, financial intermediaries, and casinos. They clearly did not go far enough and, after a lengthy delay, phase 2 legislation on money laundering has now been introduced.

One of the key ways that money is laundered in New Zealand is in real estate. The NZ Police Financial Intelligence Unit (FIU) last year noted real estate remains an attractive option for money launderers, both in the layering and integrating of the proceeds of crime. An example quoted by Caroline Courtney in North-South was of a foreign house buyer viewing more than 50 houses and snapping up in excess of 40 of them in one buying spree.

Will the new Anti-Money Laundering Bill be strong enough to stop the flood of dirty money into New Zealand? The signs aren’t promising. Already the Government has delayed the introduction of the Bill, weakened its provisions, carved out companies that have activities outside New Zealand, and narrowed its scope after lobbying from lawyers, real estate agents, and others. The Minister, Amy Adams, has admitted that the Bill was only a start in that it would disrupt only a small fraction of the $1.3 billion per year problem.

Most OECD countries now have anti-money laundering laws, and experience from Australia and the UK shows that legislation by itself is insufficient to stop the flow of dirty money into sectors like real estate. A far more comprehensive approach is needed.

The Green Party will be pushing hard for a stronger anti-money laundering Bill, as well as other measures. These include the development of a Diverted Profits Tax to ensure multinationals pay their fair share of tax, a public register for foreign trusts to prevent our collusion in tax havens, a requirement that only residents can buy residential homes, and a proper register of property ownership, and a requirement that casinos should forfeit the profits they make from the proceeds of crime.

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