Nash StuartSTUART NASH (Labour—Napier): I would agree with the Minister in the chair the Hon Amy Adams on the complexity of the legislation; of that there is no doubt. I would disagree respectfully with the Minister on the fact that 99 percent of the transactions are by law-abiding citizens. What we are trying to set up here and rightly so—just to backtrack a bit of course we support this legislation there is no doubt about that but we do have some questions so I just do want to put that on the table. The officials did an incredible job with very short turn-round times and I was pleasantly surprised at how thorough they were in their requests from the committee. But we do have some questions and there were some areas of debate.This is not about 99 percent of the transactions because if it was then the complexity would just make it far too hard for any law firm to do its business or any accountancy practice or any real estate business to do undertake business in a way that was meaningful. What we are trying to do here is capture activity or capture business that in fact stands out which is—to use a word—suspicious. For example if someone comes in—and I talked about this last night—with $10000 worth of cash and tries to buy something that would I would assume according to the Act be a suspicious activity but if someone comes in with a credit card and swipes $10000 because they are buying a nice bit of furniture well that is not a suspicious activity. But it is quite difficult to determine what suspicious activity is. When it is dealing with cash obviously that is pretty obvious but the other areas are not as obvious.So there are two areas that I would not mind talking about to start off with. One is suspicious activity reports and the other bit is around privileged communication which we debated long and hard in the select committee I must be honest. I will say here and now that I think we might have been able to streamline the process certainly with regard to conveyancing lawyers and maybe real estate agents if we had something in the general sale and purchase agreement—if there was even a box to tick that real estate agents or lawyers could sign off; a box saying: Has this gone through AML legislation or is there a need to go through AML legislation or was there any suspicious activity?" With a simple tick for no then that is ticked off and we know.I suspect that might be an easier way forward but anyway let us get back to the suspicious activity reports. I am talking about section 39A "Interpretation" in clause 18. I know we have got to have this sort of thing in here but it is arbitrary. Section 39A(b) states: "where the reporting entity has reasonable grounds to suspect that the transaction or proposed transaction the service or proposed service …" etc. etc.. We are talking about suspicious activity and the arbitrary bit here is what constitutes reasonable grounds. For one person reasonable grounds could be very easy; for another person it might be slightly different. My concern when we have something like "reasonable grounds" in there is that that definition will end up being decided by the courts. I hope we do not get to that but "reasonable grounds" is one of those ones where it does mean different things to different people even though I know "reasonable" is a legal term.I go down to section 40 "Reporting entities to report suspicious activities" also in clause 18. Again here subsection (3) states: "If this subsection applies the reporting entity must as soon as practicable but no later than 3 working days after forming its suspicion …". Again I come down to what is the definition of "forming a suspicion". It can be very obvious if cash is handed over for example but there are other areas where I may think that something is suspicious and therefore I have formed an idea around suspicion whereas someone else might not.Hon Ruth Dyson: There are huge inconsistencies.STUART NASH: This is a thing we debated in the select committee Ms Dyson: how the courts or how the police or the person themselves will determine whether in fact it is suspicious. There is the slight concern—and I am not casting any stones—that some will say: "Well I personally did not think this was suspicious therefore it's not." That may hide a multitude of sins if you know what I am talking about.This is something that I want to talk about as well. Section 40(4) states: "Nothing in subsection (3) requires any"—and what we initially put was "lawyer" and that has been crossed out and we put "person"—"person to disclose any information that the person believes on reasonable grounds is a privileged communication." So what we have done there—and again we debated this long and hard in the select committee—is we have carved out privileged communication from being subject to this legislation.We had concerns and I certainly had concerns that a lawyer—and initially we did have "lawyer" then we realised that there may be a person who is not a registered lawyer or something who may come under this Act—or someone might hide under the definition of "privileged communication" and say: "Hey I didn't have to disclose this because I believed it was privileged." So what is the definition of "privileged communication"? This is in the legislation and I am not going to read the whole lot out because that would be meaningless but let me just give an indication. I am quoting here from section 42 "Privileged communication defined". It states: (1) A communication is a privileged communication if—(a) it is a confidential communication (oral or written) (including any information or opinion)—(i) that passes between—(A) a lawyer and another lawyer in their professional capacity; or (B) a lawyer in his or her professional capacity and his or her client; …"—and there is more—"(ii) that is made or brought into existence for the purpose of obtaining or giving legal advice or assistance;".The concern I had about this which I thought was allayed by the officials is that as mentioned a lawyer could say: "No no this was privileged communication. I did not have to disclose this." But what we actually determined was that if a client came to a lawyer and said: "I'm thinking about doing this sort of transaction or undertaking this sort of deal." then the lawyer could actually say: "Well I would advise you against that because you may be breaching AML legislation." So what we determined was that just advice or assistance did not come under this piece of legislation. However if the client or the person then went ahead with that transaction or the deal then the lawyer was under an obligation to in fact disclose that under a suspicious activities report. I think I have got that right. I see the officials looking at me slightly but I think I have got that right and that is why we have put it there.We spoke to the Law Society about this. The Law Society submitted on this and I did question it and said: "Could you hide under this—under a hypothetical situation?". It said it needed that ability to advise a client that in fact this may fall under the legislation. That sort of makes sense but I would say that what we did is we carved out something that said this is not privileged communication if it is given in bad faith or for a dishonest purpose. This is because what we did not want is for lawyers to say: "Well I'm disclosing this in a suspicious activity report." when they were doing it in bad faith or to make some sort of financial gain or they were being disingenuous in the way they were disclosing it.I hope that does not sound complicated but what we wanted to ensure is that no one could hide any sort of deal or any sort of transaction behind privileged information when in fact also what they might have been trying to do was disadvantage a client or another lawyer or scuttle a deal. I know that is a little bit confusing but lawyer-client or professional-client privilege is a big thing in the legal fraternity—I understand that. So what we were trying very hard to do was to ensure that we did not break the lawyer-client privilege rule which has been around for I do not know as long as lawyers have been around—centuries I think. I think prostitution is the only profession that has been around as long as lawyers.The CHAIRPERSON (Hon Chester Borrows): Just be careful; there are a few lawyers in the room.STUART NASH: Ha ha! I have a Master's degree in law myself and my father was a lawyer so I do not mean to disparage all the good lawyers out there who are doing a good job.I suppose what I am saying is we had to walk a very fine line here to ensure that lawyers were able to act with integrity without doing something in bad faith or without having to put forward a suspicious activity report when there was only a sniff of something—where they were allowed to advise a client either to do or not to do a deal or a piece of business when it could have fallen under legislation if you know what I mean. What could have ended up happening is that whenever a client spoke to a lawyer for 30 seconds it might have actually forced a lawyer to put in a suspicious activity report and we just thought that that was probably too onerous and probably did not reflect the intent of the Act. I think the Minister Amy Adams knows what I am talking about here. I think I have expressed that in a way that might sound slightly confusing but I hope I have expressed it in a way that makes sense.I will actually leave it at that now and talk a little bit more a little bit later."