Anti-corruption pledge tracking: Elusive final pledge

Ferdinand Balfoort
Member with Delegated Authority
Anti-Corruption Pledges, Fundraising, Governance

Ferdinand Balfoort

TINZ Member with Delegated Authority for Corporate Governance, Fundraising

Good intentions

At the 2016 Global Anti-Corruption Summit in London (ACS), New Zealand made a number of key commitments or pledges towards eliminating corruption, in order to align to international best practice. Progress towards implementing the commitments in New Zealand is monitored by Transparency International New Zealand (TINZ).

Pledge tracker

Five of New Zealand’s commitments are tracked internationally within The Anti-Corruption Pledge Tracker created by Transparency International UK. The pledge tracker now monitors progress on the commitments made by 18 participating countries. It focuses on six key themes out of the larger selection involving over 40 initially participating countries. These key themes were selected to enable progress to be compared.

Recent progress

TINZ has recently completed another half yearly round of gathering independent verifications on progress with New Zealand’s commitments. In the process,  TINZ has sought comment from the Ministry of Justice.

TINZ continues to report on the New Zealand Government’s progress on its original ACS commitments, of which a few remain actionable.

This report represents a substantial and positive effort by New Zealand agencies to address original ACS commitments and demonstrates their overall recognition of the importance of preventing corruption.

Sport: New Zealand’s additional initiative

A commitment that is not part of the ACS Tracker is New Zealand’s sporting integrity pledge. Sport commands huge interest in New Zealand and because of the massive threat of sport corruption, it is critical to progress this pledge.

Any corruption at any level is rapidly seized upon by news media to escalate civil society awareness that corruption in New Zealand is very real, often down-played or denied by affected sporting bodies, and therefore ineffectively addressed.

More to be done

The elusive and thorny commitment and theme yet to be completed, are related to the of ‘Beneficial Ownership’ (BO) of companies (and trusts), as well as Public Procurement.

Where the legislative changes fall short is for public transparency. The initial communique states that the register will be “available and fully accessible to those who have a legitimate need for it, including to help prevent abuse.”

This would include journalists, and also NGOs such as TINZ, to research any particular case.  New Zealand cannot rely solely on NZ Police and SFO to be sufficiently resourced and focussed on identifying anomalies on the BO Register.  Journalists, advocates, investigators, auditors and NGO’s are also very important in identifying corruption and fraud related issues.

Broadening the access will improve New Zealand’s ability to combat money laundering and grand corruption

Progress made

Progress on the pledges monitored by TINZ, is detailed as follows:

Company beneficial ownership Underway
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “We will ensure accurate and timely basic and beneficial ownership information (including legal ownership information) is collected, available and fully accessible to those who have a legitimate need for it, including to help prevent abuse. This requires mechanisms to ensure law enforcement and other competent authorities, including tax authorities, have full and effective access to accurate and up to date information…”

Country Statement: “New Zealand will continue to ensure that law enforcement agencies have full and effective access to beneficial ownership information for companies and other legal entities of risk registered within their jurisdiction. New Zealand will also continue to implement bilateral arrangements that will ensure law enforcement in one partner country has full and effective access to the beneficial ownership information of companies incorporated in the other partner country.”

The Companies Act 1993 and Limited Partnerships Act 2008 contain requirements for companies and limited partnerships to provide an identifiable and accessible point of contact and disclose their ultimate holding company (if they have one) to identify relationships between companies.

The Registrar of Companies may disclose information relating to ultimate ownership and control to a government agency for “law enforcement purposes.”  This ensures that information can be shared with New Zealand Police and the Serious Fraud Office to detect, investigate and prosecute corrupt activity.

The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 requires that all businesses with obligations (reporting entities) conduct customer due diligence on any beneficial owner of a customer.  The AML/CFT Act requires reporting entities to conduct enhanced customer due diligence if the customer is a trust or a company with nominee shareholders.  Enhanced customer due diligence requires the reporting entity to additionally obtain information about the name and date of birth of all beneficiaries of a trust or each class or type of beneficiary.

The AML/CFT Amendment Act 2017 extended obligations to designated non-financial businesses and professions, such as lawyers, conveyancers, and real estate agents.  These measures mitigate the risk of nominees being used to hide beneficial owners in relation to real estate transactions, as lawyers or conveyancers must be involved in the ultimate transfer of real estate.  Lawyers and conveyancers are required to conduct customer due diligence (or enhanced customer due diligence) on their client, which includes the purchaser of the land, irrespective of the use of nominees in the formation of the agreement.

Basic and beneficial ownership information held by reporting entities via the AML/CFT Act is available to statutory supervisors upon request, and the New Zealand Police can request the information if it is relevant for analysing information received under the Act.  Furthermore, Principle 11E of the Privacy Act 1992 is routinely used to ensure the information can be made available.  The Police and the NZ Bankers Association have further agreed a process for Police to request disclosures, which is also used for financial institutions that are non-banks.

The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill, which followed the Government Inquiry into Foreign Trust Disclosure Rules, received Royal Assent on 21 February 2017. The Act has been implemented by Inland Revenue, including the registration requirements for foreign trusts.  Following the Act coming into force, Inland Revenue has reported a significant decrease in the number of foreign trusts operating in New Zealand.  . The requirement for annual returns will commence later this year. New Zealand law enforcement agencies can receive and provide information through various bilateral arrangements (such as tax treaties), multilateral arrangements (e.g. the Egmont Group), and through formal mutual legal assistance arrangements.

Based on updates received from the New Zealand Government via the Ministry of Justice, main point of contact for TI NZ, more progress has been made since the communiqué on measures to obtain beneficial ownership (BO) information.  Further legislation has been introduced and confirmed in the interim which puts the onus on professional service providers to undertake due diligence on counterparties and retain evidence of this.  The range of professional sectors now covered has expanded positively.  TI NZ notes however that the information is not available to all those with legitimate needs, and that access to such information currently remains restricted to law enforcement agencies.

Where the legislative changes fall short is for public transparency.  The initial communique states that the register will be “available and fully accessible to those who have a legitimate need for it, including to help prevent abuse.”

This would include journalists, and also NGOs such as TI NZ, to research any particular case.  New Zealand cannot rely solely on NZ Police and SFO to be sufficiently resourced and focussed on identifying anomalies on the BO Register.  Journalists, advocates, investigators, auditors and NGO’s are also very important in identifying corruption and fraud related issues.

Broadening the access will improve New Zealand’s ability to combat money laundering and grand corruption

TI NZ also sees an opportunity for greater efficiency of Beneficial Ownership registration.  Under current legislation, information is dispersed among professional service providers, and not centralized. 

This increases administrative burden on the micro businesses and SME that make up over 80% of New Zealand businesses.

The costs to businesses of managing the beneficial ownership register could be reduced in time and cost.

In contrast, a public, central register, from a business point of view, would improve efficiency.

New Zealand has a similar system in place for individual identification of users utilizing government databases. (RealMe).

Company beneficial ownership – public register Underway
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “… It may include establishing public central registers.”

Country Statement:  “New Zealand commits to exploring the establishment of a public central register of company beneficial ownership information.”

The Ministry of Business, Innovation and Employment (MBIE) is exploring the establishment of a public central register of company beneficial ownership information. This work was noted in the Select Committee report on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill, and MBIE’s Briefing to the Incoming Minister for Commerce and Consumer Affairs.  http://www.mbie.govt.nz/about/who-we-are/our-publications/briefings-to-incoming-ministers/2017-bims/commerce-consumer-affairs.pdf

On 19 June 2018, the Ministry of Business, Innovation and Employment released a discussion document seeking feedback on what requirements there should be on New Zealand companies and limited partnerships to hold and disclose information about their beneficial owners. Submissions closed on 3 August 2018. https://www.mbie.govt.nz/info-services/business/business-law/supporting-the-integrity-of-the-corporate-governance-system/increasing-transparency-beneficial-ownership-nz-companies-and-ltd-partnerships

Twenty-nine submissions have been received. Officials are currently analysing the submissions before making recommendations.  

MBIE is in the process of seeking direction from Cabinet about establishing a register of company beneficial ownership information.
Limited progress has been made therefore. Interest has been indicated to progress this ahead of the EU by the current Speaker of the House, Justice Minister and Minister Open Data.
Procurement Underway
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “We will ensure public contracts are awarded and managed openly, accountably and fairly, consistent with applicable law -making public procurement open by default… We will make greater use of e-procurement to make public contracting processes more transparent.”

Country Statement:  “New Zealand will continue and intensify efforts to develop procurement capability, including initiatives that safeguard integrity in the procurement process.”

Government tenders are advertised online at: https://www.gets.govt.nz/ExternalIndex.htm

New Zealand has established a Procurement Capability Index, which is a tool designed to assist government agencies to self-assess procurement performance against a wide range of measures, including governance, accountability and good procurement practice measures.

From mid to late 2017, all agencies covered by the Government Rules of Sourcing were required to complete the Procurement Capability Index.

New Zealand has consulted on amendments to the Government Procurement Rules which strengthen the government’s expectations for ethical behaviour and for suppliers not to engage in any form of corruption. Subject to Cabinet approval, the amended Rules are expected to come into force in October 2019.

In July 2018 Cabinet agreed to a cross-agency Anti-Corruption Work Programme, through which work is being done to understand procurement vulnerabilities in New Zealand. Part of this work involves a focus on local councils and will result in working with national Local Government bodies to share guidance and best practice

Procurement is managed through the Minister for Economic Development who under the previous government regarded procurement as a low priority. Recent events, such as the Auckland Transport Case, has brought procurement practice into focus. 
Register of company corruption convictions Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “Corrupt bidders should not be allowed to participate in public procurement tenders. We will make efforts to ensure relevant information, such as final convictions, is made available to contracting authorities to inform decisions on suspending and excluding bidders where appropriate. We encourage countries to explore ways of sharing relevant information …”

Country Statement:  “New Zealand will explore establishing an accessible and central database of companies with final convictions for bribery and corruption offences, and ways of sharing information on corrupt bidders across borders.”

Some relevant information is already available on the Serious Fraud Office website (https://www.sfo.govt.nz/cases  and through the New Zealand Companies Office Register (http://www.procurement.govt.nz/procurement/companies/about-us/enforcement/conviction-results). 

Agencies have not provided formal advice on centralising this information into an accessible database. However, officials’ preliminary exploration suggests that there is likely to be little benefit in establishing such a database. New Zealand has not convicted a company of bribery of corruption and, as such, there is no information for New Zealand to put in such a register at present. Overseas countries and civil society may, therefore, be better placed to establish registers in relation to overseas convictions that could then be shared with New Zealand.

We have given consideration to this issue, and the provisional view is that it is not a tangible benefit in proceeding with it at this stage. Given the commitment is to “explore”, not to implement, our view is that this commitment could arguably be assessed as having been completed.
FATF Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “In the non-financial professional services sector, we call on all countries to regulate and effectively supervise the legal, accounting, property, trust and company services sectors and support the promotion of global industry best practice in these sectors to underpin full and consistent implementation of FATF standards globally. We will also be alert to activities or sectors emerging as vulnerable to being used for facilitating or laundering proceeds of corruption.”

Country Statement: “New Zealand has implemented the FATF Recommendations on beneficial ownership to ensure that accurate and timely company beneficial ownership information is available and accessible to those who have a need for it and can prevent abuse. New Zealand will also explore how to appropriately incorporate the FATF standards on preventing money laundering in the non-financial professional services sector into domestic legislation.”

The AML/CFT Amendment Act 2017 received the Royal Assent on 10 August 2017.

The Act extends the AML/CFT Act to lawyers, conveyancers, accountants, real estate agents, and sports and racing betting. Businesses that deal in certain high value goods, including motor vehicles, jewellery and art, will also have obligations under the Act when they accept or make large cash transactions.

The implementation of the AML/CFT Amendment Act has concluded, with all additional sectors now being required to comply with their AML/CFG obligations.

Information on the legislation can be found at: https://www.justice.govt.nz/justice-sector-policy/key-initiatives/aml-cft/aml-cft-amendment-bill/.

There will be a FATF Review in New Zealand in 2020.

Combat the misuse of non-financial professional services sector.  Phased implementation will take place over a 2 year period. 

The obligations for lawyers, conveyancers and businesses that provide trust and company services began on 1 July 2018. Accountants came into the regime on 1 October 2018.  Real estate agents were covered from 1 January 2019.  From 1 August 2019 the AML/CFT legislation will extend to cover some high value dealers and the NZ Racing Board.
IACC Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “We welcome the proposal to establish an International Anti-Corruption Coordination Centre by interested countries, which will work closely with relevant international and national organisations, including FIUs, and support countries that have suffered from grand corruption.”

Country Statement: “New Zealand will support the proposal to establish an International Anti-Corruption Law Enforcement Coordination Centre (‘IACCC’) by nominating a representative to the IACCC.”
New Zealand has nominated representatives to the Governance Board of the IACCC and provided a London based resource to the IACCC. This person is employed by the NZ Serious Fraud Office who liaises regularly to facilitate the provision of NZ based information relevant to IACCC work. The SFO/IACCC relationship has become a valuable one and liaison is frequent on matters of mutual interest. SFO seek to make the posting and arrangement a permanent one. New Zealand Police have increased the capacity of its FIU so that, amongst other things, it is better equipped to work closely with relevant international and national organisations to support countries to keep out the proceeds/ activities of grand corruption.
UNCAC Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “We underline the centrality of UNCAC and call on States that have not yet done so to ratify or accede to it and implement its provisions. We support the implementation review mechanism of UNCAC and call on providers of development assistance to support implementation efforts.”

Country Statement:  “New Zealand commits to working together to support efforts to implement the United Nations Convention Against Corruption including the voluntary provisions.”

New Zealand underwent its’s first cycle of self-assessment under the UN Convention Against Corruption (UNCAC) “Implementation Review Mechanism”, which began in July 2016. The executive summary of the reviewers’ findings, including their recommendations, is publicly available on the UN Office on Drugs and Crime’s website.

New Zealand is currently one of Kenya’s reviewers for the second cycle of assessment. Our second cycle review will take place in 2020/2021.
NZ continues to engage with the UNCAC process including the assessment mechanism. 
Denial of entry Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué:“We want to make it harder for them to travel and do business in our countries. By increasingly seeking to prevent international travel by corrupt individuals, in ways consistent with national laws, we will help stop those engaged in corruption from enjoying their ill-gotten gains.”

Country Statement: “New Zealand will also, where appropriate under New Zealand law, deny entry to specific individuals who are identified as being involved in grand scale corruption.”

The Minister of Immigration may refuse to grant a visa or entry permission to a person who is, or is likely to be, a threat to the public interest, which can include risk to international reputation; see section 16 of the Immigration Act 2009. This does not require a conviction, but must have a rational basis.

Individuals identified as being involved in grand scale corruption could meet these criteria. A person the Minister considers is likely to commit an imprisonable offence in New Zealand, such as corruption, may also be denied entry.

Immigration New Zealand (INZ) has a dedicated team of open-source researchers and welcomes information from international partners.

New Zealand may not be able to refuse entry in every such case, particularly as affected individuals must be given the chance to comment on potentially prejudicial material.

Since May 2016:

INZ has not received any information from international partners in regard to individuals involved in grand scale corruption

INZ’s specialist Risk Assessment Team has not assessed any application from an individual known to be involved in grand scale corruption, and

INZ has not identified any individual who is known to be involved in grand scale corruption who has been granted entry permission to New Zealand.
NZ appears to have sufficient laws and mechanisms to allow denial of entry for individuals identified as being involved in grand corruption.  Increased resourcing of the Police FIU will assist through gaining information identifying those engaged in corruption.
Common Reporting Standard Initiative – Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “We will increase international transparency on tax to deter tax evasion and other tax crimes and to prevent individuals from concealing proceeds of crime, including corruption in other jurisdictions. We will endorse and take steps to implement the Common Reporting Standard (CRS) on automatic exchange of information, which is vital for global tax transparency, in time for the first exchanges in 2018 at the latest.”

Country Statement: “New Zealand has signed up to the Common Reporting Standard initiative.”

The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill, including the measures to implement the CRS as well as tightening disclosure rules for foreign trusts, received Royal assent on 21 February 2017.

As set out at ‘Company beneficial ownership’, above, Inland Revenue has proceeded to implement the legislation.

Legislation has been enacted to implement the common reporting standard initiative, which supports the exchange of information commencing in 2018.
Asset recovery Complete
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: “Consistent with the provisions of UNCAC, we will co-operate to provide timely, coordinated and appropriate technical assistance and expertise on asset recovery, especially when a country is in need of urgent support. We encourage countries to support the efforts of the World Bank and United Nations Office on Drugs and Crime (UNODC) to strengthen StAR in support of countries’ efforts to recover and return stolen assets. We welcome efforts to strengthen international cooperation on the transparent and accountable management of frozen and returned assets. We will develop advice and practical ideas for those engaged in the return of stolen assets, and welcome work by the UNODC and others to start this.”

Country Statement: “New Zealand supports efforts to develop internationally-endorsed guidelines for the transparent and accountable management of returned stolen assets. New Zealand also supports the development of common principles governing the payment of compensation to countries affected by corruption, to ensure that such payments are made safely, fairly and in a transparent manner.”
New Zealand continues to contribute to discussions concerning asset recovery via international organisations and fora, including the OECD Working Group on Bribery and the UNCAC Implementation Review Group. NZ is engaging with international organisations through multilateral fora on the development of internationally endorsed guidelines for the return of stolen assets.  Its role is strengthened through the work of the larger Police FIU
Sport Inactive
Communiqué text and Country statement Action reported by the Ministry of Justice TINZ comment on progress made on commitments

Communiqué: sports organisations and other key stakeholders to support and strengthen efforts to implement high standards of transparency and good governance, and to underpin the wider fight to eliminate corruption from sport. We will encourage good governance within national sports organisations (including through educational and capacity building initiatives) and improve information sharing between international sports organisations and law enforcement agencies…”

Country Statement: “New Zealand will work with international sports bodies to develop a partnership for combating corruption in sport.”

New Zealand is working closely with the World Anti-Doping Agency (a global partnership between governments and the sports movement) to protect the international anti-doping system from corruption. In 2018, New Zealand will take over the Oceania seat on the World Anti-Doping Agency (WADA) Executive Committee from Australia for one year. New Zealand will also remain on the WADA Foundation Board (WADA’s supreme decision-making body).

New Zealand also promotes its policy on Sports Match-Fixing and Related Corruption, and encourages the adoption of good governance standards by sports bodies. Sport NZ is also currently undertaking a Sport Integrity Review to ensure both government and the sector are responding appropriately.

New Zealand will monitor the International Sports Integrity Partnership and may consider joining it in the future.

We consider this commitment to be inactive rather than complete.

Much needs to be done internationally and in New Zealand to combat corruption in sport.

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