New Zealand’s Strategy To Combat Financial Crime & Corruption: Two Steps Forward And Three Steps Back

Asia Pacific AML
Opinion: Kerry Grass

Twenty-five years ago I took on a full-time role as an investigator for New Zealand’s National Enforcement Unit (NZ NEU). The NZ NEU operated under the umbrella of what was then referred to as the Ministry of Economic Development.

The primary role of the NZ NEU was to detect persons operating in businesses and/or corporations that were banned or should be banned to operate in business. This included investigations of persons who were breaching bankruptcy laws and operating a business in breach of their bankruptcy or insolvency status.

The NZ NEU remit also included securities fraud under the Securities Act and fraud offences under the Crimes Act. As a small unit it achieved significant outcomes in terms of investigations, prosecutions, and convictions.

Beginning of World’s Knowledge of Financing of Terrorism

During my 3 years at the NZ NEU, I learnt about the 9/11 attacks that occurred in September 2001 and in 2002, I undertook my first financial crime course. At the end of 2003, I had a thirst for financial crime investigations and ventured over to Sydney, Australia. For two years I worked as an Investigator at the Enforcement Directorate of the Australian Securities and Investments Commission (ASIC).

At the end of 2003 and before I left New Zealand, I had gained significant knowledge and insight that taught me the country, my country New Zealand, was doing very poorly in its efforts to protect investors’ funds.

New Zealand’s government then lacked governance and oversight for protecting investors and protecting the integrity of NZ’s financial markets.

This knowledge and experience I gained was amplified during the two years I worked in Australia as a corporate investigator at ASIC’s Enforcement Directorate. ASIC’s Enforcement Directorate handled all major investigations and litigation relating to criminal misconduct by company officers and individuals.

At this time (2003-2005), Australia had an advanced financial market framework that. Included governance and oversight. Financial markets participants were require to be qualified, demonstrate integrity and operate under codes of conduct for managing issues such as conflicts of interest. In comparison, New Zealand did not even have a licensed financial services system in place.

Not having any financial service licensing or registration system in place results in attracting the wrong people to participate as a financial broker or investment adviser. It was not until late 2008 that New Zealand began the introduction of a registration and/or licensing framework for financial market participants.

Ever since leaving New Zealand in 2003, I have continued to watch its pitiful display of adequate oversight and monitoring to reduce financial crime and corruption. But of the most concerning observation that I have witnessed is the erosion of the governance and adequate oversight of the Anti-Money Laundering and Countering Financing of Terrorism Act (the AML/CFT Act).

The AML/CFT Act was New Zealand’s most capable law for making a dent on detecting financial crime and corruption, but once again New Zealand is taking two steps forward and three steps back. The NZ Police Financial Intelligence Unit (NZ Police FIU) has been identified as not performing in its statutory role of analysing and disseminating Suspicious Activity Reports that businesses feed to the NZ Police FIU. Whereas businesses have restricted and invested in systems to detect money laundering and financial crime, the NZ government has chosen not to.

Now we are soon to hear about New Zealand’s self-identification that the country needs a Minister of Organised Crime. Evidently the soon to be released report has identified the NZ Police tried to establish a unit to combat Organised Crime but failed due to resourcing problems. No news there really.

All this political puff on making a difference to Organised or Trans-National Crime is becoming too embarrassing.

Who in New Zealand has been responsible for this loss of trillions of dollars of the country’s capital. Where does one point the finger – Minister of Justice? Minister of Police? Minister of Serious Fraud Office? State Services Commission? Minister for Treasury? Where does the finger-pointing start and where does it end?

Research Report to Recommend Minister of Mafia

New Zealand’s government is about to publish a research report to corroborate New Zealand has a history of retrospectively managing threats arising from - financial crime’, ‘corruption’, ‘transnational crime’ and ‘organised crime’.

I will be reading the report with a lot of interest and wonder how in-depth, or otherwise, it reports on New Zealand’s history of government lacking motivation or will to invest in technology and make a difference where it counts the most.

It is not possible to tackle threats arising from organised crime, transnational crime, corruption and fraud, without investing in intel-technology. It is for this reason sophisticated criminals succeed in removing capital from New Zealand. This includes capital from serious frauds.

Spending $1M to save $1T is not a difficult decision. Why then does New Zealand have this glaringly obvious void? How many more research reports will New Zealand government order before it makes a positive step forward?

© Scoop Media