Government told to slow down on anti money laundering
By Richard Harman (author)
The country’s accountants and lawyers– even the NZ Racing Board –all say the Government is rushing its introduction of the next phase of the anti-money laundering legislation.
While an Auckland court was sentencing William Yan (Bill Liu) to five months home detention for laundering $43 million Parliament's Law and order Committee sat through a morning of protest about the Government legislation designed to crack down on money laundering.
The Government will have to balance the protests of the professionals against pressure from the Opposition to do something.
Last October, Labour's Finance spokesperson, Grant Robertson, was accusing the Government of dragging its feet and caving into special interests over the introduction of the money laundering legislation.
The outcome of the Auckland case will not help.
And just to make it more difficult, one submitter yesterday said MPs themselves should be regarded as people who needed further investigation when they sought to carry out large-scale financial transactions.
The anti money laundering legislation requires real estate agents, lawyers, accountants, conveyancers, the New Zealand Racing Board, and some high-value dealersto report suspicious activities relating to transactions – particularly cash.
But it is a complex world.
Martin Dilly, an anti-money laundering investigator, told the Committee that one-way money could be laundered into New Zealand was if someone paid cash overseas using illegal money for a high-value car and that was then imported into New Zealand where it was sold.
The seller would walk away with a “clean” cheque from the sale.
Dilly was critical of the Bill before the Committee because it did not deal with non-cash transactions.
He said that it was already possible for New Zealanders to obtain South American credit cards which could be used to launder money.
He said that the Bill should also have extended to “politically exposed persons” which he suggested would be people like the MPs on the Committee.
Both the New Zealand Law Society and the Chartered Accountants of Australia and New Zealand argued that the Government was trying to rush the Bill.
“As currently drafted, the Bill requires accounting practices to have the required systems and processes in place prior to 1 October 2018,” their submission said .
“Much of the success of the regime will rely on reporting entities having sufficient systems in place to ensure they understand and can comply with their obligations.
“We have approximately 2,000 accounting practices, 95% of which are either sole practitioners or firms with two to five principals.
“The majority of our members are likely to have limited resource to implement such a significant change in such a short timeframe.”
And the New Zealand Law Society took a similar approach and argued that there wouldn’t be a problem if implementation was delayed because under the Lawyers and Conveyancers Act (a lawyer must not assist any person in an activity that the lawyer knows is fraudulent or criminal and must not knowingly assist in the concealment of fraud or crime.
However, the Society did clash with Labour MP, Stuart Nash over the question of legal privilege.
The Society’s vice president, Tim Jones, and Nash got into an exchange about the conflict between a lawyer’s duty of privilege to their client and the requirements of the Bill to make information available to the Government.
“But integrity has got to trump everything else,” said Nash.
The scope of the challenge though was defined by the ANZ Bank's Head of Financial Crime for New Zealand and the Pacific, Paula Milne, who said money laundering was a global battle which we needed to fight on a global stage.
She was asking the committee to open up the Bill so that information could be more easily shared among banks and with their overseas parents.
The New Zealand Racing Board has been specifically included in the Bill but its Government Relations Manager, Raj Nahna said that they too needed time to implement the provisions applying to them.
He was concerned that an implementation date of 1 August 2019, would impose too much financial pressure on the Board which would be reflected in lower distribution of betting money to racing clubs.
He suggested that only betting on account be included by then.
Betting via account (either online or over the phone) represents 63% of all betting,” he said.
“It also covers betting by high-value domestic customers which includes individuals with the highest volume and frequency of betting.
“Account customers also represent approximately 80% of transactions above the proposed $10,000 threshold."
And he proposed that implementation for retail and on course betting be held over a further two years.
“An upgrade of our 2,350 betting terminals alone is estimated to cost between $11.8 million
and $23.5 million,” he said.
“Absorbing such a cost in two years would fundamentally challenge the Board’s obligation to deliver steady and predictable returns to the racing industry.
“By contrast, a four-year implementation would allow the Board to spread the compliance costs and thereby insulate the industry from the additional compliance cost through existing capital budgets.”
The Committee's report is due back in Parliament on 24 July.