NZ to crack down on corporate secrecy, trusts exclusion will remain

The Government has announced their intent to require transparency about the beneficial owners of companies in a bill to be introduced this year. The just released paper Better visibility of individuals who control companies and limited partnerships outlines their plan.

Transparency International New Zealand welcomes the Government’s intent to make it easier to see who owns and controls a company.

The Minister of Commerce and Consumer Affairs David Clark has heralded a bill that will require registered companies to provide accurate information about the ‘beneficial owners’ of a company.  

A key change will be the use of unique identifiers for all beneficial owners, directors and general partners of limited partnerships. It will make it easier for anyone who needs to know who truly controls a company.

“The devil is in the detail but this looks like a considerable step towards greater transparency.” said Julie Haggie, CEO of Transparency International New Zealand.
“Several overseas jurisdictions have taken this practical approach, and we can learn from them as we implement it. The international requirement is for a government agency to not just record but verify the ownership: it is important this is included in the design.  The move should make the process of due diligence more efficient, more accurate, one would think, cheaper. But importantly from our point of view it will limit the ability of people to hide behind name variations and other forms of obfuscation, and will improve the identification of who owns/controls companies in New Zealand. This will help to protect our country’s mana, and its reputation as a place of clean business dealings.”

The Consortium of Investigative Journalists notes that the Government said the legislative crackdown came in response to revelations made in their Pandora Papers investigation.

The Pandora Papers, like the Panama Papers and Unaoil Bribery scandal before, exposed the tempting nature of New Zealand for laundering money and hiding assets. The ease of doing business in New Zealand combined with our not corrupt reputation offers a haven.

Transparency International globally, and our national chapter have been advocating for years for more transparency around company ownership. This is one way to restrict the use of our company structures by people who want to hide the gains of corrupt activity or to avoid tax. This is an important step in holding power to account in the business sector, whilst reducing compliance burdens for ordinary people.

What about Trusts?

Our exposure to illegal use of trusts in New Zealand may well be a bigger issue than it is with companies. We must apply similar reporting of beneficial ownership to them.

As noted in a recent editorial in Stuff: (The full article is a worthwhile read on this topic)

MBIE didn’t recommend that move, acknowledging that privacy and confidentiality have historically been recognised as an essential virtue of trusts. Many a rogue would concur with that perspective.
One outfit that doesn’t agree is the inter-governmental watchdog the Financial Action Task Force, which has highlighted the need in New Zealand for beneficial ownership information to extend to domestic trusts.
Another is Tax Justice Aotearoa, whose representative, Louise Delaney, rather more succinctly puts it; “Trusts are cleverer than companies at hiding assets.”

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