Mallard Trevor: Anti-Money Laundering and Countering Financing of Terrorism Bill — In Committee 
Mallard Trevor: Anti-Money Laundering and Countering Financing of Terrorism Bill — In Committee 
[Volume:658;Page:6942] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I am pleased that we have got to Part 2 of the Anti-Money Laundering and Countering Financing of Terrorism Bill which is the substantive part of the bill. I found it interesting to look through the bill when we dealt with it before the adjournment last month during the adjournment and subsequently today. I have a series of questions for the Minister as to how Part 2 applies and where it is appropriate. 
I note that one of the entities with responsibility for reporting suspicious transactions is the Department of Internal Affairs. I think all members are aware that the Department of Internal Affairs is the organisation that is responsible for Ministerial Services. I want to know how much of a responsibility the department has and where within the department the responsibility lies for reporting suspicious transactions that involve Ministerial Services. I would appreciate an answer on that. 
I see that under clause 9 “Customer due diligence” due diligence must be conducted on “any beneficial owner of a customer”. I want to know whether the Endeavour Trust is a customer of the department and of Ministerial Services. I think it is important that we find out whether the Endeavour Trust is in fact a customer because if it is the next question would be about beneficial ownership. I think it is interesting that this bill concerns that—and “bill” is the appropriate word in this case; there are a number of bills involved in this: there is the legislative bill there is Bill English and there is the unpaid bill for a decade of cash—and I want to know whether the beneficial owner under clause 9(1)(b) is a direct beneficial owner of a customer or is someone with a discretionary beneficial interest in a customer where that customer is a trust. It would be good to work through that. 
Clause 12 talks about reporting entities and their establishment of business relationships with new customers and particularly in paragraph (e) about when in relation to an existing customer there is a change in the level of risk involved. That is stated under subparagraph (i) for example as being where “there has been a material change in the nature or purpose of the business relationship;”. I want to know whether in the particular case where a trust goes from being the owner of a house for which an allowance is paid to being in an arrangement whereby that trust leases a house to the Crown that is regarded as being a material change in the nature or purpose of the business. 
Hon Pete Hodgson 
: Very good question. 
Hon TREVOR MALLARD 
: My colleague Pete Hodgson says he thinks there is a material change in the nature and the purpose of the business relationship. What I then want to know is how that is caught under this legislation and whether in anticipation of this legislation the Secretary for Internal Affairs has issued the appropriate notices with regard to the Endeavour Trust. 
Moving through the bill I jump—I know that within this part we are allowed to go back and forward and it is my intention to do that during the debate on the bill—now to clause 20 “Circumstances when enhanced customer due diligence applies”. Subclause (1)(aa) states that due diligence applies “if the reporting entity establishes a business relationship with a customer that is—(i) a trust or another vehicle for holding personal assets:”. I would have thought that not many cases were clearer than that of Bill English where the Endeavour Trust is an organisation for the holding of personal assets. I want to know what triggers that. Is the trigger the setting up of the trust is it the development of the relationship between the trust and other organisations or is it particular commercial transactions? 
I now go to clause 23 which is a completely new clause on politically exposed persons. It is a rewrite of the legislation. I can accept that the Foreign Affairs Defence and Trade Committee had a look at this area and for reasons that I do not think have been very well explained by my colleagues some changes have been made to the bill. I am willing to hear over a period of time their explanations for the changes that have been made. I want to know what the relationship is between this legislation and overseas legislation. I understand that the relationship is going to be sorted out at a conference and there will be an attempt to pass this bill in time to follow a particular timetable. So I ask whether this legislation has been shared with overseas jurisdictions and if it has been—for example if this legislation applied in Australia and if the Australian legislation was the same as this—whether Bill English would be deemed to be a politically exposed person when he leaves the country. 
We have worked it out that there is an attempt in this legislation and in the changes made in the select committee to take out people who are currently Ministers from automatically being deemed to be politically exposed people. But that does not apply to people from other jurisdictions and I want to know whether if people have been involved in activity that results in enhanced customer due diligence where there are suspicious transactions—as in the case of the Auditor-General versus Bill English at the moment—and if they travel overseas this legislation is triggered for them in those jurisdictions. If it is triggered in other jurisdictions I want to know whether there is a reciprocal arrangement whereby it is triggered in this jurisdiction as well. 
I now turn to organisations that have quite an international background and I will speak in particular about the financing by the New Zealand Government of organisations that appear to be involved in fraudulent activities. These are organisations that have inflated their costs and inflated their overheads and that have over a period of several years presented false invoices to the New Zealand Government and received payment on the basis of them. I refer in this to a television company—one that produces a programme called  
Asia Downunder 
. I understand there is one shareholder in that organisation and that person is a member of Parliament. Is there more than one shareholder? 
Hon Member 
: I don’t know—no I think you’re probably right. 
Hon TREVOR MALLARD 
: I think it is one shareholder. We are then left with a question where we have an international organisation but its ownership is in New Zealand. The organisation has basically accepted that over a period of years it has presented fraudulent invoices to the New Zealand Government and unfortunately been paid out on those invoices. 
As a former Minister of Broadcasting I say I am ashamed about that. It now appears that while I was the Minister of Broadcasting NZ On Air was paying out on fraudulent invoices from Melissa Lee’s company. I think that on occasions I was accused of being a micro-manager and of looking too carefully— 
Hon Parekura Horomia 
: That’s right. That’s right. 
Hon TREVOR MALLARD 
: Well I know that Te Mangai Paho thought I was a micro-manager. It was not particularly happy with me on a number of occasions when I was the Minister of Broadcasting for taking too close an interest in the activities of Te Mangai Paho. I note that Maori Television when it is let off the leash for at least a period of time seems to have some more flexibility these days. 
I now go back to the question of Melissa Lee and the money that her company has received fraudulently as a result of a series of invoices that her company presented to New Zealand On Air. She now accepts that these invoices were fraudulent inflated and bloated and she accepts that there is a six-figure I think sum to be repaid. But I want to know whether that money while it is in her possession is regarded as being in effect in a laundry. 
Hon Pete Hodgson 
: I think it’s in the soak phase. 
Hon TREVOR MALLARD 
: It is in the soap phase? No I do not think it is soap. I think the National Government’s handling of this might be described as a soap but my view is that there is nothing clean about this at all and I regard soap as generally— 
Hon Pete Hodgson 
: Soak—s-o-a-k. 
Hon TREVOR MALLARD 
: Oh the word is soak. I thought the member was putting soap into the laundry. I see; it is in the soak phase. I thought it was one of those soap holes that all the dirty stuff goes down after it has been through the laundry. I thought that was what the member was referring to. 
But I want to know at what stage Melissa Lee is caught in this particular area. Is she caught when she admits there is a problem? Was she caught back on 14 June— 
Hon Gerry Brownlee 
: Where’s the relevance to the bill? 
Hon TREVOR MALLARD 
: This is very clearly relevant to the bill. If the member would like to get a copy of it I will point out to him the particular clauses. I would probably start at clause 4A and if the member Melissa Lee took the money offshore as I sure she has on occasions there is clause 5. The conduct of due diligence is in the first part of clause 9(4). There are a lot of areas where there is particular relevance to the activities of Asia Vision and what it is doing with particular large amounts of cash. I want to know for example whether a material change such as someone shifting from what was previously the role of a full-time executive director to that of a part-time executive director and becoming a member of Parliament as well is a material change that triggers this particular legislation. I am happy to take the word of the Minister in this area but it is important and it has to be sorted through. 
Again the question of whether this is a reciprocal arrangement is something that is subject to further interrogation over a period of time. I still do not understand and my colleagues have still not explained to me why if Melissa Lee travels to Hong Kong or Seoul she is caught by this legislation but if she stays at home she is not. We seem to have a higher standard of behaviour for overseas politicians who come to New Zealand than for New Zealand politicians who stay here and to me that is illogical. Why is it that Melissa Lee can stay at home not go overseas and not be caught by the money-laundering legislation but that a Korean politician who does in Korea exactly what Melissa Lee is doing here in New Zealand will get caught by it if he or she then comes to New Zealand? I generally have a lot of faith in my colleagues and in the work that they do in select committees but I cannot see why they have provided this escape path. 
We have three investigations going now. We have the Melissa Lee investigation the Bill English investigation and the ongoing jobs-for-cash investigation involving Bakshi. We have three people who appear to be benefiting in this particular area and who if they left the country would be in trouble. But because they are staying tight here they are not. I am sure there is a good explanation for that and that Simon Power will be very keen to defend his colleagues and to go on there— 
The CHAIRPERSON (Hon Rick Barker) 
: This is your final call. I am listening very carefully to the member and at times I am struggling to catch where he is actually engaging in debate on Part 2 of the bill. 
Hon TREVOR MALLARD 
: If you like I will keep on referring to some of those provisions of the bill. 
Clause 25 in Part 2 is about wire transfers. I want to know whether if the Endeavour Trust Melissa Lee or Bakshi took some of their ill-gotten gains and attempted to transfer them from New Zealand by way of wire transfer they would be caught under this legislation. That is a pretty simple question. I want to ask the Minister whether this legislation is good enough to catch the money that has been flushed through a company in Melissa Lee’s case or through the Endeavour Trust in Bill English’s case. I do not know how Bakshi handled his jobs-for-cash arrangement: whether there is a trust personal money cash in a jar or how it worked. But I want to know whether if that money was sent offshore by way of wire transfer or more important if it went— 
John Hayes 
: You could ask Taito. 
Hon TREVOR MALLARD 
: The member is saying something about Bill “Taito” English. Why did he say that? Why did he want to bring up Bill English in that way and associate him with Mr Field? I think John Hayes is trying to get into Cabinet. That is why he wants Bill English to be associated with Taito Phillip Field. I thank the member for the interjection. He is laughing; he is happy. He knows that when Bill English goes down there will be a Cabinet vacancy. But I want to tell him that I think it is pretty unlikely that he will become the Deputy Prime Minister and Minister of Finance. I do not really like his chances very much at all. 
The next point I would like to make is around new or developing technologies or products that might favour anonymity. Again this goes right to the case of the Endeavour Trust. What happens when someone takes his or her name off a trust as a trustee and goes from clearly being a beneficiary of the trust to being a discretionary beneficiary of the trust? If there is a new product—a new trust—from which anonymity is gained as is absolutely the case with the Endeavour Trust which Bill English is a discretionary beneficiary of then I want to know why the Government is doing that. Why is it bringing that up now and why are we not hearing from Bill English on this? 
I want to know from the Government whips whether there has been a declaration of interest in this from any National member or whether any of them are at all concerned. I will give the whips an assurance that Labour will vote for this legislation but the question is whether all the National members will. I am pretty tempted to ask my whips for the right to vote against the bill so as to force the vote to be taken in order to see the numbers for National on it. If the legislation goes through on the voices of course we will not be able to tell whether Mr Bakshi Ms Lee and Mr English are all voting for this legislation when there can at least be an argument put that they have an interest in it—and I know they have an absolute interest in this legislation in terms of the differences between the bill that was introduced and the version we now have. So the legislation not generally but in its details affects them differently in different ways. 
The next question relates to reliance on other reporting entities or persons in another country. Again the issue is a very similar one because at least in the case of  
Asia Downunder 
 and in the case of Mr Bakshi Singh there is reliance on people overseas in order to give information back to the New Zealand prosecutorial systems in order to work out whether Melissa Lee and those two individuals should be prosecuted. It is a question of whether other countries are those reporting entities. 
I will leave it at clause 35 which relates to a prohibition on the use of false customer names and customer anonymity. I think if any of the three but in particular Melissa Lee or Bill English were in this area they would be caught by this measure. 
Part 2 agreed to.