Foreign Beneficial Owners need to be registered – New Zealanders already are!

Ash is with the New Zealand Police and has aMasters of Anti-money Laundering and Counter Terrorism.

By Ashton Johnstone

Transparency International New Zealand Member

Masters of Anti-money Laundering and Counter Terrorism

New Zealand already has a central register of company details about beneficial ownership which is a publicly accessible online for any person, organisation and for law enforcement anywhere in the world. It is the only register in the world that is completely free to search and almost all of the company details are online.

Companies Office registers

The New Zealand Companies Register allows online searches of the companies registered in New Zealand. It is a straight forward and accurate source of information for company secretaries and auditors to maintain records of existing companies, or new ones when they are incorporated.

The Companies Office also maintains the Financial Service Providers Register for organisations that offer financial services in New Zealand and New Zealand registered financial service providers that work internationally. It also maintains the records for charitable trusts, Incorporated Societies and Limited partnerships.

Director and shareholders information required to incorporate a company include:

  • At least one director must live in New Zealand or be a director of an incorporated company in an enforcement country under a law that is equivalent to the Companies Act
  • For each director, their full name, residential address and date and place of birth is required
  • The full name and residential address of every shareholder and the number of shares to be issued to each. 
  • The proposed company’s ultimate beneficial holding company information, inclusive of other companies that can be named as shareholders.

Actions to get legislation up to AML standards

What is missing from the existing New Zealand Companies Office legislation for alignment with Anti-Money Laundering (AML) standards, are:

  • the requirement for more details to identify beneficial owners, and
  • an enforcement system that ensures that the New Zealand directors are held accountable with penalties of imprisonment for non-compliance.   

Beneficial ownership identification details need to be strengthened through adding to the Companies Office Act mechanisms such as those found in existing AML legislation which requires a passport and mail address verification.

The Companies Act needs to define a “Beneficial Owner”. The United States has that it is a “natural person who exercises substantial control of corporation through LLC, ownership interests, voting rights or has a substantial interest in or receives substantial economic benefits from assets of corporation or LLC.”  

The true “beneficial” owners of a business or other organisation are the individuals who ultimately control or profit from it. Often this information is unavailable or deliberately obscured, making it far more difficult to detect corrupt activity. 

Making directors liable for any non-compliance on changes to shareholding, for failure to supply identification documents or for creating false documents, would mean that persons setting up companies are responsible.

This would go a long way to deterring people who are living overseas, from setting up shell company structures, because anonymity is a key attribute behind a decision about where to harbour their funds. 

Sanctions are required if any falsity is discovered, on New Zealand company operators that incorporate these companies in the first place. An example  from United States is, apart from their civil penalties of up to a $1 million, a person found to have falsely incorporated a company can get up to three years imprisonment.    

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