Transparency Times November 2020

Kudos to transparent election processes

Suzanne Snively
Chair
Transparency International New Zealand

From the Chair – November 2020

I have been an election junkie for as long as I can remember.

Watching the US election process on TV was possible because my Dad worked for General Electric where he somehow acquired a box containing the parts of one of the earliest commercially available black and white television sets which he constructed at home.

So, I have been glued to the TV watching the Republican and Democratic conventions since they were first broadcast on US television. Even spread over several days, they were far more exciting than the election itself which was usually resolved in a day.

Even then, though, I knew from my Dad, who was also an election junkie, that the transparency of broadcast TV was mis-leading. Behind the glamour of each US State having a chance (pre-COVID) to command the stage with their flags, balloons and band music, all important decisions were made by mainly older white men in smoke-filled rooms outside the view of the cameras.

Transparency is fundamental to democracy

Transparency, democratic participation, and accountability demonstrate the integrity of a nation. Elections are an opportunity to observe the state of the nation in this regard.

Through the transparency that modern television broadcasting can provide, good journalists can even get into the (no-longer smoke-filled) back rooms when key decisions are made.

CNN has set a new higher standard of transparency for the 2020 US election through its television coverage.

It seemed like an interminable wait for the US election result. But transparency and democracy were reinforced as CNN refused to call the election until every vote was accounted for, if not completely counted. CNN’s well-informed coverage, backed up with its magic state and county maps, knew when enough of the votes had been counted.

This knowledge was supported by Attorney Generals in each of the 50 states. The televisions showed their professional state-by-state, rules-based approach to keeping track of who had voted, when, and from where. COVID-19 added to the preparation as many people preferred to vote by mail instead of in person. Larger numbers voted by mail in some locations than had voted on Election Day in 2016.

The turnout of nearly 65% of eligible US voters, was considerably above the 60.1% turnout in 2016. Learning about getting voters out may see a continuation of an upward US voting trend in the future.

With the US election held on Tuesday 3 November, it took nearly 5 days for there to be a clear winner. The final result called by CNN, was 10 days after election day. Democratic candidate Joe Biden was declared to be the winner with 306 electoral college votes to the Republican Donald Trump’s electoral college total of 232.

Biden also won 50.8% of the popular vote compared to Trump’s 47.2%. With 78,606, 682 votes counted for him as of 15 November, Biden had the highest number of votes ever in the history of the US. At 73,069, 979, President Trump had the second highest number of votes ever.

There was minute by minute real-time coverage with CNN cameras, following voters everywhere including going inside the offices where votes were being counted and interviewing the managers who pointed out that the voting was overseen by one Democrat, one Republican and two independents.

Media as propaganda

Despite CNN’s transparent coverage of how the votes were counted, 12 days after the election, 70% of Republicans believed that the “election was stolen.” This fallacy was given credence by an incumbent President who refused to concede while making unsubstantiated claims of election fraud.

Much of this is a result of what is bad about the media. In the US, the media which dominates rural America, offers an echo-chamber of propaganda – slanted coverage, unproven conspiracies and outright lies.

In the US politically aligned broadcast media along with social media divides further by channelling information that builds on the fears of particular interest groups and religious affiliations. The US election demonstrates the huge challenge faced by the world in reconciling press freedom with factual reporting.

Meanwhile the President’s own Homeland Security reported that the US election was the “cleanest in history.”

Media and transparency

The media also plays a major role in New Zealand elections. It’s assisted by the efforts of the Electoral Commission to enrol voters and to make voting accessible.

All votes were counted and reported for each electorate with the media reporting a winner on election day itself. Fortunately, our Electoral Commission had the vote counting exercise for early voting well organised. This meant that the election outcome was clear to viewers pretty much within a couple of hours of the polls closing.

The Electoral Commission was able to speed up the counting of special votes by counting them centrally, to free up the local booths to count their votes. The total number voting in New Zealand was 2.919,086. It was a 94.1% turn out, up on 2016 when the turnout was 92.4%.

Now the real work begins

Both countries got the vote out. The 2020 voter turnout was up in both New Zealand and the United States compared to the previous national elections. Kudos to the media and electoral commissions for the transparent processes for enrolling voters, providing information about voting options and for counting the votes.

When leadership is about power and control, the government and the people it governs are vulnerable to corruption. With the highest number of new COVID-19 cases and deaths every day for months, it is unsurprising that the US is a place where incomes, happiness, trust, and life expectancies are all getting worse.

Both New Zealand’s PM, Ardern, and the US President-Elect, Biden, have received half of the popular vote. This gives them both a mandate to lead their countries through the Covid-19 crisis into economic recovery.

The challenge they face is how to engage with the half of their country who voted for their opposition. Hearing their voices is a way to demonstrate that all votes do count.

Even with the transparency of the media reporting on the outcomes of strong electoral systems, democracy is not guaranteed. That takes leaders who can set a tone from the top, capable of building trust even amongst those who voted for someone else.

Thank you for your support

This is my last column as Chair of Transparency International New Zealand. Thanks for your courage to join with me in progressing serious and urgent actions to protect and extend integrity in our beautiful Aotearoa.

Suzanne Snively, ONZM

Chair

Transparency International New Zealand Inc.

Human Rights in New Zealand

Paul Hunt Human Rights Commissioner

Steve Snively
Transparency Times Co-editor

Human Rights Commissioner Paul Hunt outlined the state of Human Rights in New Zealand to the TINZ Board at its November meeting.

He acknowledged that there is tight synergy between human rights and transparency/accountability. 

Era of declaration to era of implementation

Paul noted that on the international stage, human rights is moving from the declarative stage – that necessarily relies on legal experts – to the implementation stage. This stage needs the active engagement by others including: public servants, unions, business, iwi, civil society, economists, educators and social services.

Human rights in New Zealand

In New Zealand, human rights law sits mainly within the purview of the Human Rights Commission, Crown Law and the Ministry of Justice. 

Paul Hunt is calling for New Zealand to take on the challenge of implementation, noting that it is the right thing to do and New Zealand is legally bound to do.

New Zealand has signed up to several international human rights declarations. These include the Universal Declaration of Human Rights and the Declaration on the Rights of Indigenous Peoples. New Zealand has also committed to conventions such as  Convention on the Rights of the Child (CRC) and the Convention on the Rights of Persons with Disabilities (CRPD).  

New Zealand is legally bound to implement the commitments made in those instruments. Regrettably, this means that we are lagging behind.  In Commissioner Hunt’s view, the public sector needs to do a better job of embedding these commitments into policy and programmes. The desire to follow international law at the onset needs to be encouraged, as enforcement by national courts cannot be expected or desired.

One example is the right to adequate housing.  This is a human right recognised in international human rights law as part of the right to an adequate standard of living. It is referenced in article 25 (1) of the Universal Declaration of Human Rights.  New Zealand has committed to implementing this right but consistently, policies appear to make this an option rather than a commitment.

According to Hunt, human rights have usually been understood as committing governments not to do things, such as not to discriminate. They are not usually understood as helping governments take positive action, for example, designing and implementing a policy that ensures everyone has a decent home.  He says that this misunderstanding severely diminishes the role of human rights.

Human rights do not provide magic solutions to immensely complex problems. But they provide an anchor and compass. They can help to steady the ship – and chart the way forward.

For more information see:

Paul Hunt, Human Rights Commissioner

Paul Hunt has vast human rights experience encompassing civil, political, economic, social and cultural rights. He has worked with organisations such as the United Nations, including the World Health Organisation, addressing issues such as health and improving economic, social, and cultural rights. Mr Hunt has served on the UN Committee on Economic, Social and Cultural Rights (1999-2002) and as a Special Rapporteur to the UN Human Rights Council (2002-2008). He has been admitted as a solicitor in England and Wales and holds a Master of Jurisprudence from the University of Waikato, where he was a Senior Lecturer in Law from 1992-2000. He has published extensively on a wide range of human rights issues.

TINZ offers Parliament civil society expert advice

To the Members of Parliament, new and old, to those holding portfolios and those in opposition: Transparency International New Zealand (TINZ) congratulates you on your election and wishes you wise counsel in your leadership role.

TINZ promotes transparency, accountability and integrity as antidotes to corruption.

New Zealand’s public service and judiciary are globally ranked as least corrupt in the Corruption Perceptions Index.

That does not make us corruption free.

TINZ contributes to several global measures and indexes. We also undertake independent analysis and assessment of New Zealand’s integrity systems and make recommendations for change. Our authoritative voice is supported by a team of experts who contribute their knowledge to our reports and submissions.

Corruption risks for New Zealand

We have identified the following current and real risks for New Zealand:

  1. Opaque and non-public beneficial ownership of companies and trusts, and enabling of facilitation payments  
  2. Poor transparency of public procurement.
  3. Poor transparency, and regulation of political party funding.
  4. Insufficient organisational integrity and accountability culture in financial services, and in business governance.
  5. Poor protection or reward for those who report wrongdoing.
  6. Outdated legislation on access to information resulting in variable performance.
  7. Powerful influences from organised crime, including money laundering.
  8. Conflict of interest and cronyism not well understood or accepted in communities.
  9. Poor management of risks of AI development.
  10. Poor controls to prevent cybersecurity and scam attacks.
  11. Cross Pacific strategic and corruption risks that impact in New Zealand and its neighbours.
  12. Active distribution of misinformation through social media platforms.    

We would like to provide you [Members of Parliament] with further written or oral briefings on risk areas and our proposals and tools for risk mitigation, to further enhance a national culture of integrity and accountability.

Why talk with Civil Society?

TINZ as a civil society organisation, has a pivotal role in fighting corruption. We influence the public and we influence authorities – central and local government, professional and industry leaders. We also provide research, resources and tools to assist both the public and authorities to consider and plan approaches to counter the threats of corruption. We have broad local, regional and international civil society networks.

Some examples of our recent work are:

Transparency International New Zealand (TINZ) is a chapter of a global movement whose strategic purpose statement for the next decade is ‘Holding Power to Account for the Common Good’.  Transparency International (TI) is a global civil society coalition based in Berlin, leading the fight against corruption. It compiles a number of measures of different aspects of corruption including the annual Corruption Perceptions Index, the Global Corruption Barometer, Exporting Corruption and the Bribe Payers Index.

On behalf of the TINZ Board by

Julie Haggie
Chief Executive Officer
Transparency International New Zealand

Suzanne Snively
Chair
Transparency International New Zealand

Urgent advice to Parliament: Increase procurement transparency

Laurence Millar
TINZ Member with Delegated Authority for Open Government

Transparency International New Zealand (TINZ) is offering the following advice to the new Parliament. 

TINZ recommends that the new Government take immediate steps to tighten up its procurement processes, record keeping and oversight.

New Zealand is rated number one in the world for government procurement, according to Oxford University’s Blavatnik School of Government.

Regrettably, the bar is low, and we have some strengths that can obscure other weaknesses. For example, our Government Procurement Rules (the Rules) are unquestionably very good. However, there is still a vagueness as to what and how much goes to where and to whom. This lack of transparency is unacceptable.

The New Zealand government spends over $40 billion dollars a year on goods and services, and local government many more billions on top of that. The COVID-19 pandemic has required quick decisions to move vast amounts of resources. This is a necessary response, but one that has unquestionably increased the risk of fraud and corruption.

Transparency enables people to see that resources are being spent responsibly, and in a fair way. The lack of open data on procurement raises concerns about bribery, corruption and fraud related to procurement. The lack of openness will undermine public trust in government.

Major concerns

TINZ has three areas of major concern about New Zealand government procurement:

  • The quality of data as reported by the Government Electronic Tendering System (GETS) is poor and a long way from meeting mandatory procurement requirements. Public agencies need to step up their recording, analysis and reporting of procurement information.

  • There has been poor and incomplete publication of emergency procurements undertaken during the COVID-19 pandemic. It is not possible for the public to monitor COVID-19 related procurement or expenditure. This is not acceptable.

  • The lack of public transparency on 97.5% of government procurement which is not reported in contract award notices on the GETS.  This must change.

Transparency builds trust

TINZ strongly supports the work of the Ministry of Business, Innovation and Employment (MBIE) to develop and publish the Rules and associated Guide to Emergency Procurement. These create the ground rules for fairness. We also commend MBIE for publication of contract awards’ notices as Open Data, to enable scrutiny of expenditure decisions. This is achieved by publishing Contract Award Notice on GETS, including the expected spend under the contract.

What this Open Data initiative has identified is that the mandated rules are not being followed, generally, or specifically under the COVID-19 response. TINZ has highlighted these concerns, publicly and through direct advocacy. The government’s response has been slow.

GETS data quality and exemptions

There are two data-fields that TINZ believes to be of the most important from a transparency perspective: (i) the contracted supplier and (ii) the value of the contract.

Sadly, only 13% of the published Contract Award Notices analysed in 2020, contained information on the successful supplier. 65% did not disclose the value of the contract. Both of these are mandated fields under the Rules.

The total value of contracts published on GETS represents a paltry 2.5% of the total annual government expenditure (on goods and services, based on Office of the Auditor-General/MBIE estimates for 2017).

While the Rules include exemptions for certain types of procurement (i.e., All-of-Government contracts, Syndicated Contracts and Common Capability Contracts), TINZ strongly advocates for all procurement to be included. For this to happen, exemptions should be phased out with the exception of awards under the Intelligence and Security Act 2017.

Recommendations

  1. All government agencies to publish details of all COVID-19 procurements by 31 December 2020, with details of the supplier and contract value.
  2. MBIE to specify data required and set targets for quality of published GETS data:
    • Contract values to be published for 100% of award notices by June 2021 (current 35%)
    • Supplier field to be published for 100% of award notices by June 2021 (current 80%).
  3. Exemptions for publicising awards under procurement rules should be phased out.

We welcome an opportunity to meet with you, or provide our data analysis.

Largest banks declare profits in tax havens

In October, Transparency International EU published a report titled “Murky Havens and Phantom Profits: Tax Affairs of EU and UK Banks.”

Most of Europe’s large banks have structured their firms to claim billions of profits in tax havens where they have offices with no employees. This is a finding of research just published in a new report by the European Union Chapter of Transparency International (TI EU).

Two of these banks have subsidiary companies in New Zealand – HSCB Holdings PLC and Rabobank.

Of the 39 biggest banks in Europe, 31 declared profits in low or zero-tax jurisdictions. Of these, 29 banks had no people working in the country where large portions of their profits were declared.

An important EU requirement since 2015 is that banks publish country-by-country reports as part of their annual financial statements. This provides the EU’s monitors with the opportunity to scrutinise key financial data for each country where the banks operate.

This data allows TI-EU to scrutinise the tax behaviour of banks. While banks using tax havens could be identified, transparency is still lacking about the nature of banks’ transactions hidden away in tax havens.

Over the 5 years that the data have been published, TI EU identified 210 cases of “ghost operations”. This is where banks disclosed having some economic activity in jurisdictions where they have no staff.

Interestingly, of those 15 banks who took up the right of reply to the allegation of “ghost operations”, several took the opportunity to say they had strong principles behind their tax (avoidance) planning.

One bank emphasised its principle of “doing the right thing.”

HSCB, Barclays, Deutsche Bank and Standard Chartered were recently implicated by FinCEN for money-laundering. This poor conduct is made easier in tax havens because of the lack of transparency around financial transactions and other performance measures.

One of the six key recommendations from TI EU’s report is to require banks to publish their reports in open, machine-readable data format.

Another recommendation is that the EU require banks to be fully transparent about their organisational structure by publishing details of all fully consolidated subsidiaries, branches and joint ventures as well as their shares in these entities.

New Zealand initiative

Transparency International New Zealand (TINZ)’s Financial Integrity System Assessment (FISA) project team will monitor this bank data when assessing the New Zealand banking sector. There are useful insights for comparing the financial transactions of our own banks with the 39 EU banks researched by TI EU.

The team will also look out for the response of the EU to the report’s findings.

Transparency International Annual Members Meeting

Julie Haggie
Chief Executive Officer
Transparency International NZ

The Annual Members’ Meeting of Transparency International (TI AMM) was recently held over several days as usual, but this time it was online.

Whilst non travel is essential for managing COVID and good for the environment, people renew their energy and common purpose more when they can meet together kanohi ki te kanohi (face to face). Unfortunately, the pandemic made this impossible for this year’s TI AMM.

I attended this year’s AMM as Transparency International New Zealand (TINZ)’s voting Official Chapter Representative. Given that the time zone was set for the majority of attendees, zooming in from New Zealand started from midnight. The conference sessions went on until 4.30am, four nights in a row.

Several TINZ Directors, staff and volunteers could join in on parts of sessions, which they found very interesting and informative. In the past, this opportunity had been largely unavailable due to the AMM being held in Berlin or somewhere else distant. 

The on-line organisation and orchestration of the 2020 AMM with 200+ participants was fantastic. It was efficient and dependable.

Down to business

Like many global civil society movements, TI has its share of internal disagreements and disputes which are aired at formal meetings, and this was no different.  Recently, the movement has changed its rules to shift the balance of power from individual founding membership (IFMS), to country chapter membership. Issues like these generated long debates and some pain, particularly on the part of individual members, some who have been involved in TI from its inception.

Nevertheless, the AMM started on a unanimous high, with the embracing of the ten year 2030 Strategy for the movement. The endorsement followed a long process of consultation with the movement during 2019. Having been built from the ground up, TI’s 2030 Strategy has broad support from the 100 or so country chapters. Embodied in its purpose statement is: Holding Power to Account for the Common Good’. You will see that call to action repeated in future communications from TI and TINZ.

The AMM also voted to adopt two resolutions related to the new strategy: 

  • a Youth Integrity Initiative and,
  • the coordination of joint initiatives to guarantee that the development, purchase and distribution of treatments and vaccines, respect the principles of transparency, accountability, and protection of human rights.

Governance

From my three attendances at AMMs, I have found the TI elections to be an indicator of the movement’s health. This year it was good to see a surfeit of very good candidates standing for governance positions on the Board and the Members Accreditation Committee (MAC). The current Chair – Delia Ferreira Rubio – and Deputy Chair – Rueben Lifuka – were re-elected unopposed.

Chapters supported this, but at the same time, the movement will be holding the whole international Board to account, to ensure that our leaders embody the high standards of governance to be demonstrated as we expect of others.

Brisbane-based Griffith University Professor, A J Brown, known to many New Zealanders, received the highest number of votes for his 2nd 3-year term as a TI Director.

Collaboration

Missing from this AMM were the small group and tea-urn discussions between chapter representatives that generate ideas, collaboration and information sharing. International movements are learning to build alternative ways to communicate, but time differences and virtual formats are challenging barriers. Whilst we carry on the mahi (work) chapter by chapter, and collaborate together where we can, we are all also pining for opportunities to be united in place.

2020 Virtual international Anti-Corruption conference – free attendance!

Due to the pandemic, the 19th International Anti-Corruption Conference will be going entirely virtual and free this year. It runs from 30 November to 5 December on the virtual platform Pathable.

This makes a great opportunity to attend for anyone who is interested in anti-corruption efforts and challenges across the world.  It is the premier annual international conference on this topic.

Peter Kelly, a Transparency International New Zealand (TINZ) Member with Delegated Authority, and former Chief of the Army, will sit on a panel. This will focus on ways to promote transparency and integrity in the defence sector, globally and nationally through anti corruption programmes. 

Former TINZ Patron, Sir Anand Satyanand, is a member of the IACC Conference Council. 

Sign in and register here. Places are filling fast so make sure you register now for your free spot to be a part of this unique premier international event​​​​! 

New Zealand Police

Six arrested, $5 million in assets restrained in major money laundering investigation

New Zealand Police

Recent investigation

The New Zealand police report that “Six people have been arrested and properties and vehicles totalling around $5 million has been seized following an ongoing investigation into alleged money-laundering activity.”

These arrests are the culmination of a long-running investigation launched at the beginning of 2020 by the Police Financial Crime Group – named Operation Brookings – into individuals primarily involved in money laundering offences. The alleged offenders profited from laundering funds overseas that were believed to be generated from criminal offending and illegal gains.

According to the Police, most of the funds laundered into the system were generated by drugs and a significant amount of money went overseas to China. It is unclear from the reporting if the initial sources of this money were domestic or came from overseas.  This is but one example of a widespread problem in New Zealand and globally. 

The big picture

The Ministry of Justice estimates that “about $1.35 billion from fraud and illegal drugs is laundered through legitimate businesses in New Zealand each year. The true cost and impact is many times that figure, however, when you factor in all the crimes that generate “dirty” money and the suffering they cause.” 

“Money laundering is any process used by criminals to ‘clean’ the money they make from crimes such as fraud, dealing in illegal drugs, and tax evasion. By making the money look like it comes from a legitimate source, they can cover their tracks and avoid detection.” 

The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act requires an extensive range of financial, business and professional services sector ‘Reporting Entities’ to be responsible for monitoring for, and reporting of, suspicious financial transactions to the New Zealand Police Financial Intelligence Unit. Three ‘Sector Supervisor’ agencies are required to supervise and monitor the Reporting Entities. 

This recent Police investigation demonstrates that the Act is becoming effective in its aim to detect and deter money laundering activities, so that criminals are not able enjoy the profits of their activity, or reinvest it into further criminal conduct.

Fraudsters exploit kindness; they are dangerous and malicious

Calling on New Zealanders to look out for each other, as scammers and fraudsters step up their attacks on kiwis and kiwi businesses!

This newsletter is being published during International Fraud Awareness Week. Transparency International New Zealand (TINZ) encourages Kiwis to be vigilant to avoid fraud.

“The team of five million has worked together to protect us from a biological virus,” says Suzanne Snively, Chair of TINZ.  “We need a similar approach to protecting our personal financial and our business security.  We are under attack from sophisticated criminal cartels, many based overseas.”

Last year individual New Zealanders reported $23 million dollars of loss according to Netsafe, Aotearoa’s independent non-profit online safety organisation.  Whereas this is reported loss, the actual loss is likely to be many times this. That money represents life savings, house deposits and retirement funds. Older people are being targeted by telephone, or being threatened with extortion. Our youth are being attacked through gaming applications.

Our businesses are also facing assaults – we have seen million-dollar losses through scams, as well as ransomware and extortion efforts.  

Snively urges New Zealand families to make e-security a topic of family discussion and business governance. “Talk with your children, friends and relatives.  Just as we are using the COVID app and wearing masks, we also need to protect our homes, incomes, businesses and our open lifestyle from attacks by malevolent fraudsters.”

TINZ Team

TINZ engages New Zealand and New Zealanders in a broad range of issues related to building stronger integrity systems to mitigate the impact of bribery and corruption. TINZ Directors, Members with Delegated Authority and staff provide subject matter expertise in the topic areas of interest.