Transparency International NZ says the Government's foreign trust inquiry fails to address fundamental issues

Transparency International New Zealand has hit out at the Government's review of the disclosure rules covering foreign trusts registered in NZ, labelling its limited scope extremely surprising and disappointing.

On April 11, the Government bowed to a week of demands for an inquiry into NZ's overseas trust disclosure rules in the wake of the Panama Papers. Former PwC Chairman John Shewan was appointed to conduct an independent review of disclosure rules by June 30.

However, Transparency International says the Government has not gone far enough.

"The terms of reference mean the inquiry will merely investigate foreign trusts rather than tackle the broader spectrum of financial crime risks associated with New Zealand companies and trusts. The limited scope, apparently because of the short deadline set for the inquiry, ignores substantial government policy work already done in this area that the inquiry could build on," Transparency International says.

"The transparency of all corporate vehicles, including foreign trusts, is essential to prevent and detect serious crime potentially involving billions of dollars such as money laundering and ill-gotten asset transfers and other forms of international corruption."

Among other things, Transparency International recommends the Anti-Money Laundering and Countering Financing of Terrorism Act be extended to cover all professionals including lawyers and accountants engaged in establishing and managing NZ corporate vehicles. It's also calling for a corporate registry that includes beneficial ownership of relevant business structures to enable review and audit by law enforcement and compliance bodies.

"The Shewan Inquiry will have a material impact on the future of New Zealand's standing in the world and on our collective prosperity. Transparency International intends to fully cooperate with the inquiry to ensure the best outcome given the limited scope and timeframe."

Labour Party leader Andrew Little said Transparency International's criticism follows revelations about the influence of Prime Minister John Key’s lawyer "and advisor" Ken Whitney on the Inland Revenue Department’s decision not to clamp down on foreign trusts.

“It adds further weight to Labour’s calls for an urgent and fully independent inquiry with the ability to call witnesses and subpoena evidence. Only such a robust inquiry will restore public confidence in the fairness of our tax system," Little said.

“The Prime Minister must stop trying to minimise any examination of these tax-dodging vehicles. Most New Zealanders are appalled that the mega-rich can hide their wealth here and want him to take action now,” said Little.

Transparency International NZ's patron is former National Party deputy leader, and ex-Deputy Prime Minister, Don McKinnon.

The Ministry of Business, Employment & Innovation is also currently undertaking a review of misuse of NZ's Financial Service Providers Register. See more on this here.  And here's my take on our anti-money laundering laws here.

Here's Transparency International NZ's full release

The limited scope of the Government inquiry into foreign trust disclosure rules fails to address fundamental issues brought to light by the Panama Papers 

Transparency International New Zealand (TINZ) is extremely surprised and disappointed at the limited scope of the Shewan Inquiry. 

The Panama Papers have highlighted a range of fundamental transparency and risk areas many which New Zealand policy makers are well aware of.  

The terms of reference mean the inquiry will merely investigate foreign trusts rather than tackle the broader spectrum of financial crime risks associated with New Zealand companies and trusts. The limited scope, apparently because of the short deadline set for the inquiry, ignores substantial government policy work already done in this area that the inquiry could build on. 

The transparency of all corporate vehicles, including foreign trusts, is essential to prevent and detect serious crime potentially involving billions of dollars such as money laundering and ill-gotten asset transfers and other forms of international corruption. TINZ recommends that:

● The New Zealand AML/CFT Act (2009) be extended to cover all professionals, including lawyers and accountants that are engaged in setting up and managing New Zealand corporate vehicles.

● New Zealand establish a corporate registry that includes beneficial ownership of relevant business structures to enable review and audit by law enforcement and compliance bodies and is consistent with international efforts.

● The entity operating the corporate registry be adequately resourced and funded to be effective.

● New Zealand equally ensure similar transparency of trusts to understand the ultimate beneficial owners by establishing a similar registry for trusts. It is important that New Zealand is actively involved in international efforts to combat misuse of trusts and companies in cooperation with countries and NGOs globally. Furthermore, our reputation for integrity requires an active New Zealand role in discussing and implementing workable remedies. 

On May 12 (British) Prime Minister David Cameron is hosting an Anti-Corruption Summit for governments that genuinely want to tackle corruption make the change happen. The coincidental timing of this Summit with the Shewan inquiry has the potential to add much value to the inquiry’s observations, conclusions and recommendations. TINZ will be represented at the preceding “Tackling Corruption” conference in London. 

The Shewan Inquiry will have a material impact on the future of New Zealand's standing in the world and on our collective prosperity. TINZ intends to fully cooperate with the inquiry to ensure the best outcome given the limited scope and timeframe.