Adams AmyHon AMY ADAMS (Minister of Justice): I noted in listening to the Speaker when he granted the urgent debate that he made particular reference to wanting to clarify the comments of the Prime Minister when he talked about most of the recommendations being given effect to. I want to speak specifically to that point because the comments the Prime Minister made were around simply the way in which the changes to the anti - money-laundering laws (AML) were going to be delivered and I want to be really clear about that. There was certainly no intention that we will not be making the changes to the anti - money-laundering law but actually I think this urgent debate gives us a very good opportunity for me to clarify to this House exactly how that process is intended to happen and why we do think that there is a need to depart not on substance but on process from what the report said in this regard. Mr Shewan in the report indicated that in his view to bring lawyers and accountants into the AML regime was a reasonably simple matter of issuing an Order in Council (OIC) to remove the exemption from the definitions regulations. Although I can understand that that might have an attractiveness in its simplicity it simply is not workable and primary legislation is required. Let me just explain how that works. Currently under the anti - money-laundering law we have a requirement that all financial institutions are reporting entities under the legislation—as in fact are all trust and company service providers which I will come back to later—but because by nature the definition of financial institution" is a very wide brief that could encompass a lot of things it is then spelt out by the types of activities that they perform. To make it clear that it was never intended that lawyers would be included in that first phase the regulations simply made it very clear that lawyers were not caught by that definition of "financial institution". It was never intended that they would be no one ever expected that they would be and the exemption does not do that—simply to carve them out of the legislation just makes it very clear what we had in fact passed at that time. To bring lawyers and accountants and real estate agents for that matter into the framework as we are absolutely committed to doing—as I have announced and the Prime Minister has announced—you do need primary legislation and that is the one point where we have a slight difference of approach from Mr Shewan. It cannot be done by his simple OIC process although as I say I can understand the initial attraction of that as potentially an option. It simply does not work and one of the core reasons is that you need to work out who the supervising agency is and you need to work out how that is put in place but most importantly you need to deal with matters like legal professional privilege. That cannot be done simply by an OIC process. Legal professional privilege is enshrined in the Evidence Act it is enshrined in the Lawyers and Conveyancers Act and I am sure this House will understand very simply that to have an anti - money-laundering regime—to have mandatory reporting requirements on lawyers and conveyancers and accountants and real estate agents but the lawyers in particular—you have to have a framework that makes it very clear for them what their obligations are to report information that would otherwise be covered by legal professional privilege. That can be done only by primary legislation so that is why there is a distinction. The point the Prime Minister was making was that actually although we are absolutely committed to bringing the reform in the OIC process will not work. We are committed to the legislative reforms. We have already announced that we are accelerating those. I have said publicly that it is my intention that we will have a bill coming into this House by the end of this year and subject of course to the processes of Parliament I want to see that legislation in place and in force by July of next year. That is working at some pace and let me just be very clear with this House that although we are working at pace we do have to be careful to make sure that we get this right. This is a regime that will impose significant compliance costs on not just the sectors but actually the New Zealanders who pay the bills of those sectors. Every time you buy a house there will be more cost. Every time you go to your lawyer or your accountant there will be more cost. That is OK. We need to have a regime—we have all accepted that this is an important part of transparency and good accountability in financial oversight—but we have an obligation to ensure that the system works well that it covers what we need it to cover and that those costs are no greater than they need to be. Every single New Zealander has an interest in seeing that happen as do we. We have absolutely committed to the fact that we want to get this regime in place quickly but no New Zealander would thank us if we imposed cost that was unnecessary and unwarranted and if we could do it more efficiently. Let me just talk about one other aspect which is that although the focus today is of course on foreign trusts as a response to Mr Shewan's report when we are talking about these amendments to the AML laws—and it is relevant because this was the very point that the Prime Minister said was the one that we needed to go on a slightly different road to get to the same place—actually foreign trusts are only one part of what we need to deal with AML legislation. When we bring lawyers accountants and real estate agents into the framework it is as much about the criminal activity of gangs and the like in New Zealand and the laundering of criminal proceeds and the police have a real interest in ensuring that we can get access to far more of the suspicious financial transactions. So when we are working through these matters although I know the focus today is on simply how the foreign trust part works actually it is incumbent on us to make sure the regime works for all its intended purposes and for that reason it is not simply a case of carving something out and you know we have got an instant result. So that was the only point the Prime Minister was making. Yes we agree with Mr Shewan's recommendations on AML and the need to change. Yes we have already committed to making those changes. Yes we are accelerating them. But to suggest that it could be done by Order in Council was where we disagreed and the process that we are on the time frame we are on—actually I am comfortable—is as quick as we can get it without running the serious risk that the regime is incredibly expensive not workable or not comprehensive and I do not think anyone would thank us for that. As part of that I do want to see a select committee process in place. I think it is important that there is a full opportunity for people to test the framework and I think this House would want to see it. So at this stage it is not my intention to seek that the bill be pushed through all stages in urgency. I do think that there is benefit in having a select committee process. As this House knows there is a trade-off in that regard in that that is extra time before it is in place but that is certainly my view at this stage. I want to talk about one other aspect of this in regard to the anti - money-laundering component of the recommendations and that is to make it very clear that although lawyers and accountants and real estate agents are not in the regime as of right at the moment what is in the regime automatically are these things called trust and company service providers. I can tell you that currently there are 109 trust and company service providers that are being supervised across New Zealand and a number of lawyers and accountants who do this work are also voluntarily agreeing to be subject to the regime although they are not required to do so. So to suggest somehow that there is no oversight at all is not right but we do accept that there are a number who are not currently being covered because the work is being carried out by a lawyer in the ordinary course of their business as a barrister and solicitor. We do agree that those need to be brought within the framework and as I have said to this House in this contribution and as I have said publicly that is something that we have already made very clear. So the process of the work now is to work through with those sectors exactly how the oversight will work where the regime touch-points and levers are best set and exactly who that supervisory agency should be. That is a process that is progressing as I say at some pace. I get a lot of questions about whether somehow there has been some big campaign from these sectors that they do not want to be in the regime. I can certainly tell this House that I meet regularly with the New Zealand Law Society as you would expect of a Minister of Justice. It has been well aware that this is coming at them and actually as an organisation it is very comfortable with that. I am not going to say that every one of its 12000-odd members might not have a view—I am sure some of them do—but the organisation that speaks for them the New Zealand Law Society has been very relaxed and accepting of the fact that an anti - money-laundering regime is going to come into place for lawyers and in the time frame we have discussed. It is worth mentioning that there is already the Financial Transactions Reporting Act which applies to them so they are not completely without oversight at the moment but certainly the AML regime is significantly more comprehensive. The real estate agents similarly have certainly not raised any concerns with me. I have not met with them on it directly yet. That process is getting under way now with the consultation but they have certainly seen the media reporting and they have made no representations to me whatsoever that they do not think they should be in and neither have the accountants. So there is simply no truth to the sort of implied argument that somehow we are getting a lot of pressure from the sector to leave them out. They all know it is coming. They are up for that. They do have an interest in ensuring it works well and is efficient as do we. But just to be very clear the one point where the Prime Minister said there were most of the recommendations—it is around that. We say yes to the substance and yes to the recommendations but to simply suggest that the OIC process would work in place of primary legislation is unfortunately not right and I believe the time track we are on is the most responsible and effective one."