McClay Todd: Anti-Money Laundering and Countering Financing of Terrorism Bill — First Reading 
McClay Todd: Anti-Money Laundering and Countering Financing of Terrorism Bill — First Reading 
[Volume:655;Page:4784] 
TODD McCLAY (National—Rotorua) 
:  
I rise to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill in its first reading. This bill will ensure that New Zealand’s laws against money-laundering and its laws to counter the financing of terrorism are up to international standards. 
We have heard from other speakers tonight about what money-laundering is. It involves transforming money gained from crime into money that appears to be legitimate. It is a process whereby funds gained illegally are cleaned to gain the appearance of having come from legitimate sources. It means that money gained from criminal origins is often difficult to trace. But there is another part to money-laundering; it directly includes legally gained funds of money that are channelled to illegal bodies or organisations or that are channelled for illegal intent. In particular this part is directed towards those people around the world who are involved in terrorism. Not all money that is spent by terrorists is gained illegally. In many cases if one reads the newspapers or looks at the news one will see that there are legitimate companies that pay their taxes but that support unworthy causes that harm and kill people. In 1996 the International Monetary Fund (IMF) said that the aggregate size of money-laundering in the world could be somewhere between 2 percent and 5 percent of the world’s GDP. Those 1996 statistics would indicate that money-laundering ranged in the size of NZ$1 trillion to NZ$2.5 trillion. Let us put this in context. The lower figure of NZ$1 trillion roughly equates to the value of the total output of an economy the size of Spain. 
Fraud and financial crime have changed significantly and increased dramatically as the world’s economies have come closer together. They have come closer together largely because of international agreements and technology. This in turn means that in particular as a result of rapid technological development our laws have become and continue to become quickly outdated. Criminals and terrorist organisations are increasingly becoming technologically competent and increasingly harder to track. 
We have heard in this House the horror stories of the increase of the P trade in New Zealand. It is a trade that harms too many of our people young and old and that does devastating damage to far too many of our families. P is a huge business and it seems to be awash with money in this country. This drug—as with other harmful and illegal drugs and the precursors to manufacture these drugs—is largely imported from countries overseas. The moneys gained from this disgusting trade must moreover move across borders and therefore they must be laundered so that these horrible people can pay others overseas to have these drugs sent to them. 
In August 2005 the IMF put together a report based upon observing the standards and codes in place in New Zealand. This of course was the Financial Action Task Force report which others have spoken about to some degree. I notice when it came to the general situation of money-laundering and financing of terrorism particularly in New Zealand it said that “The main sources of illegal proceeds are considered to be the cultivation manufacturing or dealing in illicit drugs traditionally cannabis but more recently methamphetamines. Fraud offences have also produced significant proceeds.” Well there is money-laundering in New Zealand. I am not sure of the size and scale of it but any that comes from the illegal drug trade is too much and we must do much more about this. 
This legislation is a powerful tool to combat drug trafficking and drug money that is laundered. I think it will add an extra tool to the box that our law enforcement and customs agents can use as they trace and confiscate the proceeds of drug trafficking. Many other countries of the world and blocs of countries have implemented similar legislation to counter terrorism and money-laundering. The European Union countries of the Council of Europe the Caribbean Asia other parts of Europe and South Africa have all created regional task forces or similar organisations to combat money-laundering. Pacific Island countries have also worked closely together on this important issue and the US administration has had laws in this area for many years. 
My colleague John Hayes who has great experience of the Pacific region has raised the issue of a number of small countries. A number of Pacific countries—Cook Islands Niue Vanuatu and a few others in particular—were criticised by the IMF and others as far back as the year 2000. Largely the issue was I think a lack of accountability and not having the proper procedures to control some of the bodies—the companies or banks—that they allowed to be established for use overseas. For example I will look at the issue of Niue. With the help of the New Zealand Government and support from the IMF Niue put in place a number of changes to its domestic laws to outlaw offshore banks and to change their companies’ regimes. At the time one could not—and still to this day one cannot—establish a company in Niue. In fact if one wants to trade in Niue and one wants a company one must establish a company under New Zealand law. But Niue did allow overseas companies—offshore companies and banks—to be in place. When I was the Niue Ambassador to the European Union some years ago the Belgian police called me — 
Hon Member 
: What? Niuean ambassador? 
TODD McCLAY 
I was the Niue ambassador as well as the Cook Islands ambassador but that is not the best part of the story; that bit is coming now. The Belgian police called me and said that somebody had contacted them purporting to be a Niue diplomat. It was not me. When we looked a bit closer we saw that in fact the person seemed to be involved with offshore companies and the money-laundering trade. Through some swift work on the part of the Niue officials and with help from the New Zealand Government and of course Niue’s ever-diligent proper ambassador based in Brussels this man was arrested and is now one hopes in jail. In the case of Niue it was not that the country had any particular intent to flout laws; it was just that as a small country it was difficult for it to control the overseas companies that it had put in place.  
I want to draw to a close because I believe the sooner we get this report to the Foreign Affairs Defence and Trade Committee the better it will be for all of us and the sooner those who see New Zealand as a place where they may be able to launder their illegally gained funds will realise that we are taking this issue seriously. I want to touch just for one moment on another part of the report from the IMF that I raised earlier. In 1989 the then G7 countries came together to create the Financial Action Task Force. This was in response to the threat that they perceived to countries of the world. In that report the task force evaluated New Zealand and said that there was more work to be done. Generally our laws in place were reasonable but in particular to make sure that we were meeting international standards we needed to put in place additional measures. This legislation will do that. I support it and I cannot wait until it gets to the select committee. Thank you.