Govt ignored foreign trust threat for over 15 years – TINZ

Anti-corruption organisation warned of reputational risks as recently as 2013.

The government has been aware for more than 15 years that weaknesses in corporate ownership and trust legislation expose New Zealand to just the kind of reputational damage that may result from revelations in the Panama Papers, says Transparency International New Zealand (TINZ).

The issues were clearly laid out by the anti-corruption organisation as recently as three years ago in its Integrity Plus 2013 New Zealand National Integrity System Assessment (see RAW DATA below), says TINZ chairwoman Suzanne Snively – but both its concerns and recommendations regarding improvements to trust structures that would have closed now contentious loopholes have been ignored.

The 2013 National Integrity System Assessment noted that creating a new company in New Zealand is simple, low cost and can be completed in 30 minutes online.

Although TINZ acknowledged this is a positive competitive advantage designed to attract good business to our shores, the NIS also noted the following problems:

  • no requirement for permission to register or operate a private company in New Zealand, which opens the door to criminal behaviour

  • no requirement for companies to identify their beneficial owners

  • no trust registry and weak controls on trusts, allowing them to hide beneficial owners, bank accounts and other property that in many cases is not held in New Zealand.

Ms Snively says TINZ has “repeatedly warned that these factors are being exploited by overseas interests” that setting up shell companies and trusts for “those involved in corrupt and illegal activities, including tax evasion and money laundering."

Although a recent amendment to the Companies Act 1993 added the requirement to have a New Zealand director, it still failed to require companies to identify all their beneficial owners, she says.

Ms Snively also points out that, because there’s no transparent mechanism for reporting them, trusts in New Zealand often don’t come to the attention of tax authorities or law enforcement agencies.

"The picture of New Zealand that emerges from the Panama Papers is another huge blow to its reputation as one of the least corrupt countries in the world," she says. "New Zealand's trade – essential to our prosperity and the well being of our country's residents – relies on our reputation for integrity.

As such, Ms Snively urges the government to take “immediate and substantial action ... to demonstrate world leadership in restricting the flow of ill-gotten funds and assets."

RAW DATA: Integrity Plus 2013 New Zealand National Integrity System Assessment

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