Bryce Edwards: Political Roundup – Bouquets and Brickbats for Government Against Corruption

OPINION

The government has announced it will legislate to force more transparency around the ownership and control of private companies in New Zealand. This is a positive movement that helps the fight against domestic corruption, money laundering, tax evasion and the general use of New Zealand as a port to hide the money of foreign oligarchs.

Commerce Secretary David Clark announced yesterday that the Cabinet has agreed to introduce legislation to establish a public register of “beneficial ownership of company”. This requires the precise listing of who actually owns and controls businesses here. And it will involve some strong compliance measures.

This is a real blow to rich vested interests who try to keep all wealth and poorly earned profits secret from the public. Corporate New Zealand is set to launch its act.

The fact that the current system has existed for so long should be a major concern for those New Zealanders who want to create a more just society that is less affected by the pernicious impact of the oligarchs and the corrupt. Because although New Zealand is often regarded as the least corrupt and transparent country in the world – and we regularly strengthen the annual Transparency International Corruption Perception Index to reinforce this – current laws make it very easy for wealth and its owners to hide here .

The existing company registers are simply not much to use, something that the recent passage of Russia’s Sanctions Law 2022 has exposed to the public eye. In fact, neither the government nor the public can easily locate the companies in which the oligarchs are hiding their wealth here.

Some call this a “legitimate secret”. According to the NGO Tax Justice Aotearoa, a “convoluted structure of companies and trusts” is established “so that minimal tax is paid and no one knows who owns what and where”. Corruption and money laundering must, of course, flourish in such secrecy.

Those against more transparency cite the need for New Zealand to keep its world-leading “easy business” here. They say compliance costs will also be too great on companies. The government says it has come up with a scheme that balances the privacy and costs of the business versus the right of the public to know and be protected from corruption. Complaints of economic interest regarding this new law should give the public some assurance that this is being done properly. NZ Venture Capital Association protesting against the new law is possibly something the Labor government will celebrate.

The reform is a long time coming

The government will introduce legislation later this year, but it has been a very long time coming. New Zealand has been a signatory for decades to the intergovernmental global money laundering alliance, the Financial Action Task Force, and increasing pressure has been exerted on this country by that body for almost a decade. Judith Collins first made some noise about the implementation of such a law in 2016 when she was Commerce Minister. Then, with the change of government, Kris Faafoi put the ball in the roll, but it seems to have been lost in consultation for years.

This week, the Financial Action Task Force relieved public pressure on countries such as New Zealand, which led to the announcement yesterday. Strangely, David Clark says the cabinet actually made the decision in December, but has kept it secret until now.

Loopholes in the new rules

Along with a bouquet, the Labor government must also take a brickbat to liberate trust. Although this sector with long strife is recommended to participate, the government says it would be too hard work to expand the rules for trust.

The International Financial Action Task Force will be disappointed, as it has strongly advocated for confidence to be included. Similarly, Tax Justice Aotearoa (TJA) and Transparency International will have strongly tempered their excitement about the new initiative. A TJA spokeswoman, Louise Delaney, commented that “trusts are smarter than firms hiding assets”.

Today’s editorial in the Stuff newspapers also condemned this abduction, pointing out that the Ministry of Economy, Innovation and Employment “did not recommend this movement, recognizing that privacy and confidentiality have historically been recognized as an essential virtue of trust. Many culprits would agree. “

So why were trusts removed from the new legislation? Of course, law firms have been hard at work lobbying for relief. Compliance costs for them would be substantial, concerns about privacy for trustees would be highlighted, and the dangers of lengthy legal challenges would make the government think twice about fighting the law firms.

However, there is an impact on trust. David Clark explained that the proposed changes still address cases where shares and companies belong to trusts.

There is good reason to be skeptical about how much change this really represents, following the track record of previous efforts. Herald’s Matt Nippert – a longtime investigator in the field – says: “Herald reporting last October on the Pandora Papers showed, despite past reforms, New Zealand trust and company structures were still abused by wildly controversial figures – including Russian billionaires. of fraud, and a Moldovan oligarch facing sanctions in the United States.

The public will soon have the opportunity to comment on the proposed legislation. As is often the case with such complex legislation, there could be good catches and unintended consequences of this type of regulation.

The consultation period will be a time for those interested in fiscal justice, corruption and transparency to support the reforms, but also to urge the government to strengthen them. Hopefully, there will be a particularly strong focus on the elephant in space – liberation will give hundreds of thousands of trust. If such secret vehicles are allowed to continue to be protected from the sunlight by public inquiry, then confidence in the new system will be more than just a little dented.

– Democracy Project