Commerce and Consumer Affairs Minister Andrew Bayly's moves to modernise the 1993 Companies Act don't include plans to implement a central beneficial ownership register for companies and limited partnerships.
In a cabinet paper Bayly says the key policy objectives of a long touted but vexed beneficial ownership register are to fight crime such as money laundering, tax evasion and terrorism financing, and help meet New Zealand's international obligations overseen by the Financial Action Task Force (FATF). The FATF, of which NZ's a member, is an inter-governmental body that sets standards and is considered the global money laundering and terrorist financing watchdog.
Bayly says the register would add a small compliance burden to companies, and thus doesn't fit well with the package of measures to modernise the Companies Act. Furthermore he says its complexity would delay the finalisation and introduction of the other reforms.
Instead Bayly plans to work with ministerial colleagues with justice responsibilities to decide the best way forward for work towards a beneficial ownership register. Paul Goldsmith is Justice Minister, with David Seymour and Nicole McKee associate ministers.
"Ministry of Justice, New Zealand Police, Serious Fraud Office, New Zealand Customs Service, Ministry for Primary Industries, and the Public Service Commission expressed concerns about not including proposals for a beneficial ownership register as part of this package of reforms," Bayly's cabinet paper acknowledges.
"They consider a delay in implementation has implications for law enforcement in combatting corruption, money laundering, terrorist financing, fisheries and trade-related crimes, and tax evasion and for better tracking beneficiaries of the proceeds of crime."
"They also highlighted the risk it creates in respect of the upcoming Financial Action Task Force mutual evaluation [of NZ] in 2029 as the lack of a beneficial ownership register was identified as an area of deficiency for New Zealand [in the 2021 evaluation]," says Bayly.
Not collected
Information about the beneficial ownership of NZ companies isn't currently collected by the Ministry of Business, Innovation & Employment's Companies Office, although Companies Registrar Sanjai Raj can request it for law enforcement purposes. The Government has described beneficial owners as "the natural persons who ultimately own or, directly or indirectly, exercise effective control over a corporate entity."
Whilst NZ's cheap and simple company registration system is great for legitimate businesspeople, it has been exploited for nefarious purposes with ethically challenged and/or crooked entities dragging NZ's reputation through the mud in almost all corners of the world. Interest.co.nz has reported on many examples of this over the years.
Criminals can and do obscure the true ownership of a corporate entity using nominee directors and shareholders, a web of shell companies, intermediaries and complex business structures based in multiple jurisdictions. Such ownership structures can be used to enable investment scams, money laundering, terrorism financing, drugs or arms trafficking, tax evasion and to hide assets.
Slow burner
Improving the transparency of the beneficial owners of NZ companies has been talked about in government circles since at least 2016. It emerged in 2017 that MBIE was considering the creation of a public central register of company beneficial ownership information following a commitment made at a London Anti-Corruption Summit in May 2016, which was attended by then-Police Minister Judith Collins.
In March 2022 Labour's then-Commerce and Consumer Affairs Minister David Clark said the Government would introduce a bill to Parliament changing the rules around beneficial owners of NZ companies and limited partnerships, but not trusts, in an attempt to make it easier to tell who the ultimate owner or controller is, and thus reduce misuse of these entities.
The bill didn't, however, see the light of day ahead of the 2023 election and Bayly told interest.co.nz in March improving disclosure on the beneficial owners of NZ companies and limited partnerships wasn't currently under active consideration.
Clark's 2022 announcement followed the FATF stepping up its expectations around beneficial ownership for member countries such as NZ.
There's more on Bayly's Companies Act plans here.
*This article was first published in our email for paying subscribers early on Tuesday morning. See here for more details and how to subscribe.
3 Comments
"the transparency of the beneficial owners of NZ companies has been talked about in government circles since at least 2016." + yesterdays, " The Government says it will act on all 14 recommendations made by the Commerce Commission" = same result. Extend and Pretend.
And for a laugh, how does Bayly's answering above differ markedly from good ol' Sir Humphrey's? Not much.
"There is a well-established government procedure for suppressing unwanted reports 'You discredit them,' How? Stage one: The public interest 1) You hint at security considerations. 2) You point out that the report could be used to put unwelcome pressure on government because it might be misinterpreted. 3) You then say that it is better to wait for the results of a wider and more detailed survey over a longer time-scale. 4) If there is no such survey being carried out, so much the better. You commission one, which gives you even more time to play with. Stage two: Discredit the evidence that you are not publishing This is, of course, much easier than discrediting evidence that you do publish. You do it indirectly, by press leaks. You say: (a) that it leaves important questions unanswered (b) that much of the evidence is inconclusive (c) that the figures are open to other interpretations (d) that certain findings are contradictory (e) that some of the main conclusions have been questioned Points (a) to (d) are bound to be true. In fact, all of these criticisms can be made of a report without even reading it. There are, for instance, always some questions unanswered -- such as the ones they haven't asked. As regards (e), if some of the main conclusions have not been questioned, question them! Then they have. Stage three: Undermine the recommendations This is easily done, with an assortment of government phrases: (a) 'not really a basis for long-term decisions...' (b) 'not sufficient information on which to base a valid assessment...' (c) 'no reason for any fundamental rethink of existing policy...' (d) 'broadly speaking, it endorses current practice...' These phrases give comfort to people who have not read the report and who don't want change -- i.e. almost everybody. Stage four: If stage three still leaves doubts, then Discredit The Man Who Produced the Report This must be done OFF THE RECORD. You explain that: (a) he is harbouring a grudge against the government (b) he is a publicity seeker (c) he's trying to get his knighthood (d) he is trying to get his chair (e) he is trying to get his Vice-Chancellorship (f) he used to be a consultant to a multinational company or (g) he wants to be a consultant to a multinational company"
Well.. they are wanting to create rules to battle the very small minority of cases where these entities are being misused,
The whole purpose of entities is to limit liabilities and risk as well as distribute assets in the future if needed. All of this is going back centuries... so nothing new
It is just a tool... and like any tool it can be used for any purpose - good or otherwise..
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