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GRC Professional : GRC Spring 2012
20 GRC Professional • Spring 2012 COVER STORY INTERNATIONAL MONEY LAUNDERERS and tax evaders have been exploiting New Zealand's simple a nd inexpensive company registration process and light-handed regulatory regime through the set-up of sham banking systems for non-residents. The Reserve Bank has warned that websites touting these "offshore finance companies", or similarly described financial services -- either online or from locations outside New Zealand -- are not recognised under New Zealand law. As fast as these commercial hazards are registering them, the Registrar of Companies is striking them off at a rate of more than 1000 per month. But that doesn't stop them from continuing to solicit business on websites they set up for the purpose of offshore banking. The situation has raised eyebrows in the European Union and earned New Zealand some bad international press, particularly in cases where it has been used as a conduit for major criminals and arms traders to hide or funnel ill-gotten gains. Last year New Zealand was removed from the EU's "White List" after kickbacks were channelled to eastern European officials via New Zealand. The list includes Australia, Canada and the US among its signatories. It provides guidance for EU banks and financial institutions about trusted jurisdictions with EU equivalent money laundering and anti-terrorist financing laws. The threat to New Zealand's integrity as a reputable place to do business has resulted in a paper being prepared by the Ministry of Business, Innovation and Employment for Com merce Minister Craig Foss. It revealed the misuse of these company structures has resulted in at least $NZ1.5 billion being laundered annually through New Zealand. Part of the problem lies in the fact that New Zealand is among the last of 132 developed countries to fully enact its Anti-Money Laundering and Countering Financing of Terrorism bill. Passed in October 2010, only parts have been implemented. Its significant provisions will not be introduced until the middle of next year. At that point, trust and company service providers will have to conduct due diligence on clients. Auckland-based Gary Hughes, a partner at specialist litigation and regulatory law firm Wilson Harle, says for a country that is considered largely free of corruption, is an early adopter of AML principles and has been a member of the inter-governmental body the Financial Action Task Force since 1991, the situation "ha s not been good enough". "The problem is that in a newly globalised world of interconnected financial systems, sophisticated criminal groups and money launderers can easily turn their attention to exploiting such well- meaning approaches to trade and investment in jurisdictions like New Zealand," he says. Hughes has been actively involved in the a nti- money lau ndering refor m process since 2007. He is the New Zealand program director for the Association of Certified Anti-Money Laundering Specialists (ACAMS). He says the new act and legislation widening powers of The Companies and Limited Partnerships Amendment Bill will restore New Zealand's somewhat tarnished reputation. The Bill will also give the Registrar of Companies greater powers to strike off an entities not being used for legitimate purposes and to impose stiff fines. ••• NZ a magnet for launderers New Zealand's lag on introducing AML/CTF legislation coupled with a light-handed regulatory regime has brought suspect operators to its door in droves. BY DENISE MCNABB Sophisticated criminal groups and money launderers can easily turn their attention to exploiting such well-meaning approaches to trade and investment in jurisdictions like New Zealand. In preparation for the Anti-Money Laundering/Countering Financing of Terrorism Act,ACI hasbrought together some of the industry's leading experts for a conference in Auckland on 29 November. For more information, visit www.acigrc.com and click on 'Event Calendar'.
GRC Winter 2012
GRC Summer 2013