From the Chair

Suzanne Snively ONZM Chair Transparency International New Zealand

Suzanne Snively ONZM
Transparency International New Zealand

Growing Awareness about the role of Transparency of Beneficial Ownership

Last month, accountants became the latest group to take up the opportunity to join the force in reducing New Zealand’s vulnerability to corruption via the Anti-Money Laundering and Counter Terrorism Financing Act.

A narrative of the requirements of the Act is that accountants, like banks before them, will be subject to compliance. The Ministry of Justice estimates that it may cost the accounting sector $25 million to $101 million this year. Their clients will notice this additional compliance both in terms of request for more information to confirm their identity and, potentially, the bite of larger accounting fees.

This focus on compliance misses the point about the magnitude of corruption from offshore. It is far less costly to protect against it than to litigate against it once it sneaks into the country.

Accountants are required to report all international wire transfers of more than $1000 that they facilitate for their clients and cash transactions worth more than $10,000.

Specific obligations include appointing an anti-money laundering compliance officer, producing written risk assessments, doing various due diligence on clients and reporting suspicious activity. Information relevant to AML is to be contained in an Annual Report filed with Internal Affairs.

The law change helps make money-laundering “front of mind” for accountants. This joins accountants with banks and other service providers in ensuring that their clients are not using their services to launder money.

Beneficial Ownership

Other key changes being addressed by the government relate to registration of beneficial ownership which – while it is the responsibility of investment owners – requires the oversight of financial services providers. TINZ’s well-researched submission to the Ministry of Business and Innovation sets out what needs to be done and why.

Training and preparation is now needed as a means of detecting when to apply “knowing your customer” and how to put clients into the picture of why it matters. This is an opportunity too for accountants to build knowledge to provide clients better services.

We all benefit from the ring of confidence where banks and accountants and their clients are keeping an eye out to ensure that the proceeds of corruption don’t make it to New Zealand shores. The amounts, estimated at 2% of the world’s GDP, would quickly swamp our economy.

Applying the AML to accountants elicited screams of agony that New Zealand was changing from one of the easiest places to do business into a sea of endless processes and forms.

These concerns did not deter the World Bank from again naming New Zealand the best country to do business in for 2019.

World Bank Survey

New Zealand has again topped the World Bank’s ranking of the best countries to start and run a business in their just released report Doing Business 2019. New Zealand is ranked ahead of Singapore, Denmark and Hong Kong. This puts us way ahead of Australia, ranked at 18th!!

It is particularly remarkable that New Zealand retained top ranking even though there were no new reforms for doing business, as specified by the World Bank, implemented in the past year.

Other countries are working to catch up, From June 2, 2017 to 1 May 2018, the World Bank reported that there were a record 315 regulatory reforms designed to improve conditions for doing business implemented in 128 countries.

Public beneficial ownership registry in New Zealand

Meanwhile, Commerce Minister Kris Faafoi is consulting about setting up a publicly searchable register of the “beneficial owners” of Kiwi businesses for New Zealand.

As with AML, a strong case can be made in support of this as it ensures New Zealand remains at the forefront of countries striving to prevent corrupt persons from bringing the proceeds of crime into their country.

Advantages of a central public register include:

  • Enhancing our ability to cooperation with international law enforcement
  • Strengthening our reputation for integrity by implementing a framework that helps keep business honest
  • Lowering compliance costs with information centralised in one place eliminating redundant know your customer research by banks and professional service organizations
  • Improving the accuracy of information provided about beneficial ownership

Add transparency to beneficial ownership

Currently, the Companies Office register lists the directors and some information about the shareholders of private firms. Initially TINZ was recommending that overseas owners meet the minimum requirements of the Companies Office register.

TINZ now recommends that more information be collected about the addresses of directors and shareholders so that beneficial owners cannot hide behind structures such as limited partnerships.

It is important that this information is more transparent given the Police’s latest annual report estimating that the proceeds of fraud and corruption are $1.35 billion a year. This costs New Zealanders in terms of disruption to their communities and to business, and the increased prices of goods and services.

It is our expectation that a well implemented beneficial ownership registry would prevent abuses such as the alleged abuse by Chinese businessman – and potential Parliamentary candidate – Colin Shijia Zheng from registering business interests using three different addresses in an apparent attempt to avoid detection.

TINZ position favours stronger sanctions when beneficial owners fail to register their details accurately.

Suzanne Snively, ONZM


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