Anti-Money Laundering and Countering Financing of Terrorism Bill — Second Reading 
Anti-Money Laundering and Countering Financing of Terrorism Bill — Second Reading 
[Volume:657;Page:6881] 
Anti-Money Laundering and Countering Financing of Terrorism Bill 
Second Reading 
Debate resumed. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am somewhat tired of listening to the Minister of Justice constantly overlooking the contribution on the bill of the previous Labour Government. If it had not been for the previous Government a cost-benefit analysis would not have been undertaken on the impact of the changes that were proposed in the bill that we were working on when we were in Government. I say “the bill that we were working on in Government” because the Anti-Money Laundering and Countering Financing of Terrorism Bill as introduced looked nothing like the bill our Government would have introduced. I want to know why that is and when we get to the Committee of the whole House stage on the bill I will certainly be asking the Minister of Justice why he took his eye off the ball.  
Every time the Minister gets up in the Chamber and promotes a change to a policy or announces some new thing that is based on a pilot that our Government did or on a discussion document that our Government put out he never ever recognises the contribution we made. [ 
Interruption 
] We never ever did that the other way round. We were working on this issue when we were in Government— 
Hon Steve Chadwick 
: I raise a point of order Mr Speaker. The member opposite keeps pointing interjecting and using the word “you”. 
Hon LIANNE DALZIEL 
: And he is not even sitting in his own seat. 
The ASSISTANT SPEAKER (Eric Roy) 
: I will uphold the point of order. The member should not be interjecting in such a manner and he will desist immediately. 
Hon LIANNE DALZIEL 
: The point I am making is that the bill as introduced was completely and utterly dishonest. The reason it was dishonest was that the regulatory impact statement was based on the cost-benefit analysis that had been done on the bill that we were going to introduce. This bill looks nothing like the bill we were going to introduce. 
Jacqui Dean 
: I raise a point of order Mr Speaker. I understand that members should be speaking on the bill that is before us not on a bill that would have been introduced. 
The ASSISTANT SPEAKER (Eric Roy) 
: My interpretation is that the member is referring to what has happened in the process of this bill. To date I think she has been speaking in the context of the report back of the bill. 
Hon LIANNE DALZIEL 
: The bill as introduced went to the Foreign Affairs Defence and Trade Committee and I can hardly refer to what the select committee did to the bill if I do not describe— 
The ASSISTANT SPEAKER (Eric Roy) 
: I have already ruled; the member does not have to convince me. 
Hon LIANNE DALZIEL 
: I am not raising a point of order; I am just speaking on the bill. The member opposite is very new and does not know how the place operates but that is fine. I am referring to the bill as introduced and the bill as introduced into the House looked nothing like the bill that was described in the regulatory impact statement. People have to take some responsibility for the quality of regulatory impact statements. For the first time in any Parliament we have a Minister for Regulatory Reform and the quality of regulatory impact statements has never been poorer. It has never been worse than it is today and that reflects very interestingly on a Government that says it is interested in quality regulatory frameworks but in fact is not.  
The reason that this bill is now in much better shape is the select committee. I will pay tribute to the select committee but if the chair of the select committee does not want to receive any compliments from me then I am happy to assist in that regard. I will pay tribute to my colleague the Hon Pete Hodgson who took the trouble to get his head round what is incredibly complex legislation. [ 
Interruption 
] This bill now looks like the bill we would have introduced. 
Hon Steve Chadwick 
: I raise a point of order Mr Speaker. The member Jacqui Dean who is not sitting in her own seat is referring to a member not being present in the Chamber. That is not appropriate. 
The ASSISTANT SPEAKER (Eric Roy) 
: I did not hear what the member said but she will desist if that was the case. 
Hon LIANNE DALZIEL 
: The point I am making is that at the select committee hearing we ended up with the situation where the banks were essentially able to assist the select committee through the hearing of submissions. The officials were able to work with members of the committee to get the bill right. But for the Minister to come into the Chamber and simply say that a few changes were made in the select committee is to completely understate how bad the bill was when it was introduced. I blame the Minister of Justice for taking his eye off the ball and we will be asking him questions when we get to the Committee stage. If I was not aware of the Standing Orders I might reflect on where he sits on the matter right at this present moment but of course I would not reflect on that matter.  
The point I make is that a substantial sum in compliance costs was to be inflicted on the banks if we had gone down the track of the bill that was introduced which as I said was completely different from the bill now and completely different from the basis of the work that the cost-benefit analysis was done on. That is why I am saying that the bill as introduced was completely dishonest. It did not accurately reflect the true cost of what would be imposed on Australian banks operating in New Zealand.  
I have some figures here just to give a little example of what the situation would have been if it had not been for the members of the select committee taking a very serious look at what was a completely inadequately drafted bill. In one instance one of the banks identified that the cost of introducing the system that was created in the bill as introduced as compared with the case today would have been between $10 million and $22 million. That was just one bank’s assessment of how much the cost differential would have been. 
John Hayes 
: The NIS paper said $97 million. 
Hon LIANNE DALZIEL 
: On top of that amount. I was saying that for that one bank alone it was between $10 million and $22 million. I do not know whether that impact— 
John Hayes 
: I’m talking the whole cost. 
Hon LIANNE DALZIEL 
: I am getting some help from the chair of the select committee so maybe I will say something nice about him then. The point that I think he is trying to make is that when we multiply that effect across all of the banks that would have been affected by the changes then we are talking in the region of $90 million. That is a substantial sum of money to be imposing by way of compliance costs on the banking sector and on any business covered by the bill.  
I am so surprised that the Minister of Justice took such a flippant and short call on this matter. The reason I am surprised is that when he refers to minor changes he has completely missed the point of the work the select committee has done. Major changes are contained within the bill. Let me use the example of clause 23 which has been deleted and replaced. Previously the clause dealt with the requirement that the Government wanted to put on the banks: “Before a reporting entity establishes a business relationship or conducts an occasional transaction that involves a customer or a beneficial owner who is a politically exposed person the reporting entity must in addition to the requirements in sections 21 and 22—(a) have approval from its senior management for establishing the business relationship in accordance with the regulations (if any); and (b) meet any other requirements prescribed by regulations and that apply to politically exposed persons.”  
The clause has been completely altered and now begins with the phrase: “The reporting entity must as soon as practicable after establishing a business relationship or conducting an occasional transaction take reasonable steps to determine whether the customer or any beneficial owner is a politically exposed person.” I think some of the members in the House will be surprised to know that everyone in the House is a politically exposed person. We are on the list because we are politicians. A requirement on the banks even to go into an occasional transaction would have required an assessment to be undertaken of the requirements of sections 21 and 22 before that could occur.  
I acknowledge the work that has been done at the select committee. I particularly acknowledge the banks that have made the effort to provide information to the select committee and to others with an interest in this particular area. The costs that would have been imposed if everyone had taken his or her eye off the ball in the way the Minister of Justice took his eye off the ball when he let the bill be introduced in a way that was never intended have been improved by the process at the select committee as a result of all of the work that was undertaken by the previous Government and also by my very good colleague Clayton Cosgrove who required the cost-benefit analysis to be undertaken that underpins quality regulation. I congratulate the select committee but at the Committee stage I will be asking the Minister of Justice some pretty hard questions because he did take his eye off the ball. I am sure others will have some questions about other matters that are associated with suspicious transactions.  
I will leave my contribution there and I ask the House to support the passage of the bill in its new form. 
JOHN HAYES (National—Wairarapa) 
: 
 Thank you for the opportunity to address the House this afternoon on the Anti-Money Laundering and Countering Financing of Terrorism Bill. I say the previous speaker Lianne Dalziel was absolutely off the planet in her assertions that my good friend and colleague the Minister of Justice had taken his eye off the ball. That is absolutely wrong. You had 9 years to sort this out and you did not do so and I know that you had 9 years in which to do it because I was a bureaucrat under your Government. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker.  
The ASSISTANT SPEAKER (Eric Roy) 
: I know what the point of order is. 
Hon Trevor Mallard 
: Well it is mainly for reasons of the member’s health actually. 
The ASSISTANT SPEAKER (Eric Roy) 
: The member did bring the Speaker into his comments. I ask him to please desist from doing that. 
JOHN HAYES 
: I did not intend to do that but I can assure this House that as a bureaucrat who worked under the previous administration I know it stymied the progress of this bill which is in accordance with what is required under our international obligations. This is not the current Minister of Justice’s problem. I would like to put the problem squarely where it belongs: with the outgoing Government. It had 9 years in which to fix the law; it did not. Within 6 months of the election our Minister of Justice had gone through the legislation and brought a very good bill to this Parliament and that is significantly different from the messing around by his predecessors.  
While I am on my feet I want to thank my colleagues on the Foreign Affairs Defence and Trade Committee. I thank the three members who are in the House now from our side of the committee and my colleague Keith Locke from the Green Party. I would have liked to thank the other members in person but they are not here. I would particularly like to thank Pete Hodgson for making a very serious contribution to the work of the committee. He did an extremely good job and I thank him for that. Our committee decided to work very closely together and one of the problems that we had to overcome was the inculcated habit in the bureaucracy of writing things for nanny State. They were far too prescriptive—way too prescriptive in terms of what this country needs. So the main reason that our select committee had to make changes to the bill was that the over-drafting of the nanny State had been inculcated in the bureaucracy for the past 9 years. We had to straighten up that issue.  
In order to do that and given the importance of making sure that this legislation was hand in glove with Australia’s banking legislation because of the Australian connection with our banks we decided to appoint as advisers to the committee four representatives of the banking community. I want to particularly thank them. They brought a degree of expertise to the committee that is not available in the Public Service and that process worked out very well. When we decided on the game plan for reviewing this bill we wanted to return to the House a bill that was future-proofed that was forward-looking and that was risk-based because we wanted to minimise compliance costs for the banks. That was a constant thread that came through from submitters and as far as practicable we wanted the legislation to be in harmony with Australia’s.  
One of the things that we decided after consultation particularly with the bankers appointed to assist us was that the bill as introduced did not give sufficient emphasis to a risk-based framework. Although the Minister had given us a very good bill to work from we needed to move the bill a little further in the direction of a risk-based framework so that we could minimise compliance costs for all concerned. Contrary to the figures bandied about by the previous speaker Lianne Dalziel I say the national interest analysis paper that came to the select committee said the cost of introducing this legislation will be in the order of $97 million. We were quite conscious of it being very expensive.  
Another issue that came through in the work of the select committee was that in Australia there is one entity that manages entirely the operation of monitoring money transactions. In New Zealand we have three entities. One of the informal suggestions we made in our report to the Minister is that consideration be given to setting up one entity in New Zealand rather than having the work spread across three entities. We also wanted to make sure that there were really seamless links with the Australian financial sector and we considered that if we had just one entity here that seamless arrangement could be sorted through.  
The bill is very complex and because of that we think that the financial entities required to comply with this legislation which are not just banks will need a reasonable time in which to develop systems and procedures to comply with the provisions of the legislation.  
The majority of submitters wanted us to adopt a flexible approach. I will give one example of an issue where we have done that. It was on the question of politically exposed persons. For the benefit of members of the House who may not fully understand the detail of this as well as the select committee members do I say the issue goes like this. A Financial Action Task Force grew out of the OECD and the desire to stop corruption in banking systems. As a result of that rules were set up to be applied to all countries. This was done in a mixture of pressure from banking systems which for example resulted in the closure of banks in Niue and the Cook Islands. In New Zealand and globally the rules were going to require all politically exposed persons—that is everybody in this Chamber—to be subject to special scrutiny. The draft that came to us from officials included not just members of Parliament but also their partner their partner’s children their partner’s children’s partners and their children.  
When we stood back and looked at this issue we thought that trying to apply one rule to all politically exposed persons across many countries was nonsense. I do not particularly want to annoy any other country but let us say that if there is a deep dark African country where the standards of accounting law and other issues are not as well developed as they are in New Zealand then one might want to implement rules on the basis of the legislation that was given to the committee. In practice however we decided that New Zealand had very high standards of accounting practice legal practice and public scrutiny and that what would apply in say Nigeria did not necessarily need to apply in New Zealand. For that reason the committee decided to recommend to the Minister and to this Parliament that we should not include politically exposed people as part of this legislation unless they are foreigners who are making financial transactions in New Zealand. We made that a very strong recommendation.  
Those are really the points that I would like to make to the House at this time. I again thank my colleagues who contributed to a very serious work programme. I thank the bankers who advised us because without their help we would not have ended up with the excellent report on this bill. Thank you very much.  
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I think it is wonderful timing on the part of the Government to bring the Anti-Money Laundering and Countering Financing of Terrorism Bill into the House after so long and under urgency because the bill deals with the role of the Department of Internal Affairs which includes Ministerial Services. The bill deals with suspicious transactions and there are a few of them going on at the moment. It deals with politically exposed persons and clearly there is one of those in the case of Bill English. It deals with the United Nations Convention against Corruption.  
I tell the House that if what was going on here—public money going to hidden trusts—was going on in Zimbabwe then we would call it corruption in Zimbabwe. What is the difference when there is an absolute lack of transparency? What is the difference when taxpayers’ money is going to trusts about which the details are not public other than the fact that they are involved with a politically exposed person as defined in this bill as introduced? The term “politically exposed person” is in this bill as introduced and we have taxpayers’ funds going to that person in New Zealand.  
We are working towards ratifying the United Nations Convention against Corruption and this country is regularly seen as the cleanest country in the world. But how can we maintain that reputation when we have a Minister of Finance under a cloud in the way that that Minister of Finance is under a cloud at the moment?  
This bill goes to the question of whether there are sufficient details on a customer with which those organisations are dealing. I want to know whether the Department of Internal Affairs has within Ministerial Services sufficient details on its customer the Endeavour Trust with whom it has a transaction that can probably be described as a suspicious transaction; something that has been set up in order to qualify for— 
John Hayes 
: I raise a point of order Mr Speaker. I draw your attention and the House’s attention to the fact that the Endeavour Trust is not a subject of this bill and does not form any part of this bill. 
Hon TREVOR MALLARD 
: Speaking to the point of order I make it clear that under the bill as it was introduced—and I am looking at areas where people have beneficial interests—there is no doubt that family members of a Cabinet Minister have a beneficial interest and therefore the trust is an area that comes within the discussion on this bill. 
John Hayes 
: I raise a point of order Mr Speaker. This bill specifically excludes all politically exposed persons in New Zealand domestically. This bill excludes every domestic politician from its consideration. 
Hon TREVOR MALLARD 
: Mr Assistant Speaker— 
The ASSISTANT SPEAKER (Eric Roy) 
: No I will rule now. I kind of anticipated from the member’s interjections that he would pursue this line and I am listening very carefully to what the member says. I do not want to be seen as dancing on the head of a pin in this regard but I am trying to find in his speech the purpose of the bill and some relevance about that. I am not sure that the member has transgressed yet but he is getting fairly close to it. I am listening carefully. 
Hon TREVOR MALLARD 
: Thank you Mr Assistant Speaker. I disagree absolutely with John Hayes. The Endeavour Trust was caught by this bill as it was introduced. If the Endeavour Trust is involved in a suspicious transaction as it does seem then I have no doubt whatsoever— 
Jacqui Dean 
: I raise a point of order Mr Speaker. You might be able to help me. I understood that the debate today was addressing the bill as reported back by the Foreign Affairs Defence and Trade Committee not the bill as introduced. 
Hon TREVOR MALLARD 
: Mr Assistant Speaker can I speak to that point? 
The ASSISTANT SPEAKER (Eric Roy) 
: No I have already ruled on that. The bill was introduced and if it changes its form in the select committee then that is still relevant to the debate—because the debate is still subject to the way in which the committee dealt with the bill. 
Hon TREVOR MALLARD 
: Thank you Mr Assistant Speaker. Clause 43 deals with the disclosure of information. As far as the Endeavour Trust and its suspicious transaction with the Department of Internal Affairs is concerned I want to know whether all relevant information has been disclosed. It certainly has not been disclosed to Gerry Brownlee who is the Acting Minister responsible for Ministerial Services and the Minister responsible for that part of the department. That suspicious transaction— 
The ASSISTANT SPEAKER (Eric Roy) 
: I will just ask the member to choose his words a little bit more carefully. Instead of saying “suspicious” the words “allegedly suspicious” are probably more appropriate.  
Hon TREVOR MALLARD 
: No— 
The ASSISTANT SPEAKER (Eric Roy) 
: No—I have ruled on that. 
Hon TREVOR MALLARD 
: I raise a point of order Mr Speaker. The term “suspicious transaction” in itself carries a wide range of things some of which may be illegal and some of which may be suspicious but not illegal. I have not alleged that these transactions are illegal but certainly they are suspicious. One cannot say “allegedly suspicious”. They are either suspicious or they are not. 
The ASSISTANT SPEAKER (Eric Roy) 
: I accept the member’s point but we are not accepting them as proven. 
Hon TREVOR MALLARD 
: No. 
The ASSISTANT SPEAKER (Eric Roy) 
: The member may continue. 
Hon TREVOR MALLARD 
: No there is a long way before the court proves that those suspicious transactions are illegal. There is a long long way before Mr English’s Endeavour Trust of which he was a trustee last year and which is now involved in the suspicious transaction— 
Hon Lianne Dalziel 
: I think he had a pecuniary interest in that.  
Hon TREVOR MALLARD 
: Last year he had a pecuniary interest. There is another area—and it may be that Mr English might want to rely on it—and that is the immunities from criminal or civil liability.  
In fact in this particular area Duncan Garner has made a suggestion for immunity for civil liability for Mr English. Mr Garner in a very good blog has suggested that if Bill English accepts now that he has been falsely claiming in this area then he would not have to repay the taxpayer the $300000 or $400000 that he has claimed in the past. I disagree. I think it would be inappropriate for there to be immunity from civil liability in the case of Mr English in this particular area. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
Hon TREVOR MALLARD 
: As I was saying before the dinner break this bill has to do with anti-money laundering. I want to know which member opposite hates Bill English so much that he chose to put this bill forward this week. Was it Simon Power the Minister in charge of the bill who wants to be the Deputy Prime Minister? 
H V Ross Robertson 
: Gerry Brownlee! 
Hon TREVOR MALLARD 
: Was it Gerry Brownlee who hates Bill English because he put him out of his position? He wants the Deputy Prime Minister job back. Or was it Steven Joyce who wants the job of Minister of Finance?  
There are some real gifts in this bill because under the bill as it was introduced both Bill English and the Endeavour Trust are caught as politically exposed persons for the purposes of corruption and anti-money laundering. On the subject of corruption I want to ask this question: what is the difference between New Zealand and some other countries? What is the difference when someone sets up a trust and changes the trust deed in order to hide getting money for him or herself or persons he or she is associated with? If it was happening in Zimbabwe we would say it was corruption. If it was happening in Nigeria we would say it was corruption. Why are we not saying it here? Is it because we are an English-speaking country? Is it because we speak English here that it is not corruption?  
Anywhere else in the world that sort of arrangement—to hide one’s money; to pretend one is not getting it; to say “It’s not for me.”; to have a third person as defined in the Act ordering money into accounts—would be caught by this bill. In this particular case there are also very good definitions of suspicious transactions and the Department of Internal Affairs which of course includes Ministerial Services is responsible for identifying those suspicious transactions. I want to know whether they are responsible for reporting on themselves. Would the head of the Department of Internal Affairs say: “I laundered money to the Endeavour Trust.”? Is he responsible for saying that? Certainly if that is not the case then we need someone else to look at that particular area.  
There is a question of verification of identity. People are not allowed to hide their identity. They have to make their identity clear. Under the money laundering legislation people cannot hide behind trusts. There are systems for verification of that. I want to know what sort of principle Simon Power has. Did he order the change of this bill—to take Bill English out—in order to protect Bill English or was he ignorant?  
There is one final point I want to make about corruption and that is about the control of the media. I think it is absolutely corrupt for a Cabinet Minister to ring a television official swear at that official and use a seven-letter word followed by a four-letter word twice or three times in that conversation. Following that Television New Zealand took down the link to the television item. Not only do we have a politician acting to intimidate the media but also worse still we have a State-owned organisation for which the very Minister is a shareholder ordering it to take down a link and it does. That is the sort of corruption we see in Zimbabwe. It is the sort of corruption that used to happen in Russia—although I do not think we see it now. It also happens in China and it is not good enough to have that sort of approach in New Zealand. 
JACQUI DEAN (National—Waitaki) 
: 
 It gives me a great deal of pleasure to rise to speak to the second reading of the Anti-Money Laundering and Countering Financing of Terrorism Bill. I follow in the footsteps of the most excellent Minister of Justice the Hon Simon Power who very succinctly elucidated the purpose of the bill and of the chairman of my Foreign Affairs Defence and Trade Committee John Hayes who followed on with a very good exposition of what was contained in the bill.  
Unfortunately we have had several contributions from the Labour side of the House that have been embarrassing and sadly lacking. Firstly we had Lianne Dalziel who spent the first 5 minutes lamenting the fact that Labour is no longer in Government. Well hello I tell that member to wake up—it is not. She was lamenting the fact that the bill was not a bill that a Labour Government would have introduced. I am sorry but this bill is an excellent bill that was worked on by the National members of Parliament of the Foreign Affairs Defence and Trade Committee and we made some good changes to the bill. Then of course Trevor Mallard went on and on about trust.  
I find it sad that Labour members do not trust their colleagues to speak on this bill. The two Labour members who have spoken on this bill so far do not even sit on the select committee. Talk about trust! I think it is a shame because this select committee worked very well on this bill. It is a shame that Labour has seen fit to put up two speakers who were not even on the select committee and quite frankly do not understand the content of the bill. They have been fixated on the bill as it was introduced. Luckily the select committee did some very good work and we have moved on from that point to where we have reintroduced the bill to the House with some excellent changes to it in order to make it more closely fit the needs of today and New Zealand’s obligations under the Financial Action Task Force regime.  
This bill is designed to enhance New Zealand’s legislation against money-laundering and the financing of terrorism. Close and careful attention has been paid to ensuring it is in line with the recommendations of the Financial Action Task Force. It will enhance New Zealand’s financial system.  
I want to go over the key objectives of the bill. They are to improve the detection and deterrence of money-laundering and the financing of terrorism within the New Zealand— 
Dr Paul Hutchison 
: This is a serious matter. 
JACQUI DEAN 
: My colleague raises a very good point. It is a serious bill and it is regrettable that the Labour members of the House have not read the bill. They are fixated on what they would have done if they were still in Government. New Zealand has moved on from that. I regret that the good work of the select committee is not being reflected in the House this evening. I know that my colleagues on the select committee will continue with the exposition of this bill.  
To continue with the key objectives this bill will enhance New Zealand’s international reputation and indeed it is critical that New Zealand’s legislation comes in line with overseas legislation. A number of changes were made by the select committee and I will go through some of them. Implementation will be staggered to reflect the difficulty and the complexity for those who are affected by the imposition of this bill—that is the banking system. I note the cooperation and great help the committee received from representatives from the banking industry from both here and across the Tasman.  
Another purpose of this bill was to align our legislation as closely as possible to legislation in Australia. For those members opposite who have not looked at the bill I tell them that it looks like this by the way and they can get a copy of it from the Table. Clause 3 makes it clear that one of the purposes of the bill is “to detect and deter money laundering and the financing of terrorism;”. It is designed to facilitate cooperation—and the select committee took great care over this point—between reporting entities supervisors and Government agencies particularly law enforcement and regulating agencies.  
I know I have a couple of good speakers following me so I will leave it at that. I recommend this bill to the House. 
KEITH LOCKE (Green) 
: 
 I endorse the comments of the previous speakers in that the Foreign Affairs Defence and Trade Committee did work very well on the Anti-Money Laundering and Countering Financing of Terrorism Bill. The committee’s Government members including the chair saw the serious problems in the bill and listened closely to the submissions particularly from the banks. The Labour members and myself as the Green member worked cooperatively to address those problems. The bill that came back from the select committee is quite transformed from the original bill. I congratulate the Minister on not heavying the members of the select committee to go along with the original conception and also on listening to what were obviously sensible suggestions from the submitters and banks. 
The Greens support the bill because it helps to deal with money-laundering which is a serious criminal problem around the world. The Financial Action Task Force whose prescriptions the bill is implementing has put pressure on some tax-haven countries including some Pacific countries to be a bit more transparent and to do proper checks on dodgy transactions. That has reduced the use of money-laundering for crime in the world but there is still a gigantic problem of money escaping into tax havens and also escaping tax in the home country. That is a significant element in the world’s financial crisis. 
I read the October 2008 issue of the  
New Internationalist 
. It estimates that the world’s wealthy have parked $11500 billion offshore. That is $11.5 trillion. By doing so they dodge about $250 billion in tax each year which is an amount that far exceeds what the United Nations has asked from the rich countries for its millennium projects in order to tackle global poverty. I do not think we should necessarily look to the Financial Action Task Force to totally get rid of the tax havens partly because the task force is a creation of the richer nations. It was set up by the OECD—the rich nations—rather than the UN and to a significant extent it represents the interests of big investors in the rich countries including in its aim to make the world safer for investors in and from the OECD countries. 
The reason why we are discussing the bill in urgency tonight is the Government was desperate to get the bill enacted in time for the October plenary meeting of the Financial Action Task Force and the investigation that it will be doing into New Zealand. The fact that we have the bill was not good enough for the Government apparently; the bill has to be enacted in time for that meeting. One of the reasons behind the Government’s decision was that if we do not get a good Financial Action Task Force endorsement then foreign investors will perhaps think we are a little bit dodgy in terms of a home for their investments. 
The work of the Financial Action Task Force helps to reduce corruption which is a big problem but as other speakers have said not so much in New Zealand. The problem of corruption is behind the extra scrutiny that banks are supposed to put on the transactions of politically exposed persons as listed in the bill. It makes sense to look at the transactions of top Government people and judges in places like Nigeria where there is serious corruption if my email is anything to go by. I am getting a hard-to-refuse offer from Nigerians by email every day. The select committee rightly thought that to apply such hard scrutiny to New Zealand’s politically exposed persons would be a bit over the top given our other stringent accountability mechanisms. 
Another particular problem of some interest was the undermining of the traditional independence of the judiciary from the Government. Under the bill as it was originally the New Zealand Government through its different agencies would have a licence to conduct an extra poke into the financial affairs of Supreme Court judges and their families. Of course it is unlikely that here in New Zealand in 2009 a police finance crimes unit would obey a Government directive to search the accounts of judges and their families in a political vendetta but law has to be written for worst-case scenarios when we might have a less benign Government. As we have seen in places like Pakistan and Fiji over the last year or two when Governments start moving in a more authoritarian direction they try to restrict the judiciary. The authoritarian regimes sometimes trump up charges against the judiciary so that they can override the law. Judges are the protectors of democracy against excessive executive power. 
It is quite clear from what was discussed in the select committee that some excessive bureaucratic prescriptions have been coming out of the Financial Action Task Force which were included in the original bill. They are partly a result of the post-2001 war on terror and the prescriptions to try to make sure that no terrorist anywhere in the world transacted over $10000 although I have not seen reports on how much terrorists have actually been restricted by the measures. Terrorists tend not to go down to the local bank and conduct transactions under their own names. They are probably the smartest people in terms of getting round any regulations such as are set up here. 
I asked the bankers and the officials at the select committee who would actually filter the international transactions coming into New Zealand to see whether a terrorist was involved somewhere and I asked whose terrorist list would be applied. Essentially I found out that it would not be a New Zealand list as New Zealand does not have much of a list; it would be an American list. The American Government has a slightly different definition of who is and is not a terrorist from New Zealand and it has quite a few more names on its list. In fact the tracking is done through a United States Treasury - CIA initiative called the Terrorist Financing Tracking Program. The programme with its list is linked up to an international financial transaction system called SWIFT. Virtually all international banking transactions pass through the SWIFT system including most of New Zealand’s international financial transactions. There has been a big fight between the United States and the European Union over the Terrorist Financing Tracking Program in terms of its pulling all the names and transactions off the SWIFT system and running it through the terrorist database. 
The FBI has a terrorist screening centre with hundreds of thousands of names on its database. The Associated Press recently gave the figure of 400000 names of people associated with terrorism on this FBI list. At the moment a shaky accord has developed between the EU and America to try to protect the privacy of people conducting banking transactions. But there is also a huge inconvenience factor of people wrongly caught up in the excessive list that the Americans have. That is a side problem associated with this bill but it is good that the banks particularly the Australian banks engaged with the select committee to try to get away from an overly prescriptive approach whereby they would spend all their time trying to find out the names and details of ordinary New Zealanders engaged in financial transactions. 
We now have a regime in Australia and New Zealand where through the computer systems the banks will focus only on truly risky people. That is a step forward. Although the Greens have often had a lot of criticisms of the Australian banks in terms of interest rates profits and all kinds of things it was interesting to be in a select committee where in some ways the Greens were allied with the banks in trying to bring more sense to the system. It is largely because they did not want the huge cost on their administration that the original bill would have put in. Thank you. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 It might surprise members but I am going to address my comments to the Anti-Money Laundering and Countering Financing of Terrorism Bill. I start off by saying that the bill as reported back from the Foreign Affairs Defence and Trade Committee is pretty much the same bill that a Labour Government would have introduced. 
Hon Simon Power 
: It’s not the one I saw. 
Hon PETE HODGSON 
: It is not the one the Minister saw; that is the point. I direct some initial comments to the Minister in charge of the bill the Hon Simon Power. I know a bit of a blame game is going on here but here is my insight in case it is of any use to the Minister. I think that Labour would not have gone with the bill that the Minister saw. In the months leading up to its introduction a certain amount of ministerial pressure came from my colleague Minister Cosgrove and I am sure Minister Dalziel had a hand in the matter as well who was pretty keen to get costs down. For that reason a delay was put on the legislation in our time in Government. With respect to the Minister I think frankly officials got away on him a little bit because the bill that we had introduced had too much prescription too little future-proofing too much unnecessary transaction cost on the economy too big a difference with Australia’s system and not enough of a risk-based approach. Officials were in too much of a hurry. I will come back to the business of being in a hurry in a minute.  
The committee across all parties roughly came to the view that its aims would be to deliver legislation that was compliant with the Financial Action Task Force or at least compliant with its essential aspects and with some but not all of its desirable aspects; to keep transaction costs low to be consistent with the first aim; and to have as much harmonisation with Australia as possible given our history in CER and now our single economic market. When we applied those criteria to the bill in front of us we saw it was not any good. Further the submitters informed the committee in quite a lot of detail of what they thought was wrong with the bill; indeed a number on the committee were lobbied in private especially by the banking sector. The message to the Minister is that when Ministers take their eyes off the ball—and I think this probably inevitably happens in the lead-up to an election and in the immediate aftermath thereof—they can end up in a situation where officials get away on them. Not that officials are bad people or do things behind someone else’s back; they have a view of what is best and it may not be shared by the people who are being regulated and in this case it was not shared by the select committee.  
On the business of being in too much of a hurry I have a sense—and I do not offer it up as a truth so much as an opinion—that the Government got somewhat panicked by the recent arrival in the country of officials from the Financial Action Task Force. The Government decided it wanted to make serious progress on this matter so that when the report finally came out it could hold its head up high present the legislation and say that it is now part of New Zealand law and that all problems had gone away. I can understand that. I can understand a Government being a little bit defensive about the fact that the New Zealand system at the moment is not compliant with the task force. In fact it is not very compliant with the task force at all. This bill is necessary. This is good law. It is important that we do this but it is not important that we do it at breakneck speed in order to lay to rest some of the concerns of visiting folk from overseas. Of course they will find this legislation an improvement. But the fact is until it has been implemented which will take years they will not give us a good vet. That is not their job. Their job is not to predict how good the country will be when the legislation has been fully implemented; their job is to take a look at the country now. If one is in any doubt about that then one needs only to look at the task force’s report as it applied to Canada.  
We had a situation where in my view officials found themselves delayed including delay caused by the previous Labour Government which wanted to get transaction costs lower than they were at the time and wanted to make sure that having suffered the delay its members were able to rush around and assure the task force officials that good legislation was on its way even though the task force officials were not interested in legislation; they were interested in how it worked when implemented. That meant a good deal of pressure was put on the committee. As it happened the committee responded. I am sure the chairman of the committee has made the remark—I may have not been in the House at that time so I will make the point again—that the committee worked very very well on this bill. All members on the committee from the chair across to all other members ought to be congratulated on the way we got down got the job done and got it done in time. I still hold the view that we were panicked. I still hold the view that it was a dumb timetable to operate to. I still hold the view that we should have gone to the Business Committee and it should have given ground. But the advice received was that if we did that the bill would come back unamended and would have to be amended in the Committee of the whole House which is not ideal.  
I think there are some lessons to be learnt. I say that because another issue is coming. The new United Nations Convention Against Corruption legislation is coming before the House in due course this year. In fact the national interest analysis is in front of the committee already. We will see as we have seen with this legislation the issue of domestic politically exposed persons come forward in that legislation and again we will have a bit of a scrap over it.  
The reason we had a scrap in respect of the legislation in front of us is simply that the officials decided that that would make them wonderfully compliant with the task force even though it made them completely different from Australia. Those officials did not have the right frame in which to look at the legislation; they were simply building something to a bunch of people called the Financial Action Task Force so that they could tick their boxes and go out to dinner and be told that they had done a fine job. It is not good enough. It is not good enough when those two economies Australia and New Zealand are moving as inexorably close to each other as they are.  
The other aspect of the select committee process that I think should be put on the record—I am sure it already has but let me give the House my variant on it—is that a group of the submitters became ancillary advisers. That worked well; it need not have. It might have turned to custard. It was a bit of a risk. The New Zealand Bankers’ Association agreed when the idea was proposed by the chairman that they would come up with four people to help us that those people would work in confidence and that they would work with officials. It needs to be said that the officials initially surprised by the action taken by the select committee very quickly got the idea and worked very well openly and honestly and that is how we ended up with the legislation that is before us now. In the course of that process one financial institution might have tried to pull rank on another but I am not aware of that happening. One financial institution that was not represented in the gang of four might have got its nose out of joint but I am unaware of that happening. That process which was risky—or could have been risky—turned out to work very well.  
I just say to the Minister that I hope we do not have too much trouble with the United Nations Convention Against Corruption legislation but if we do we look forward to his giving us the room to move that he gave us last time. I thank the Minister for that latitude; he need not have given it but we have better legislation in my view because he did. I think we might have a replay with that other legislation but I would not want to—touch wood—damn anyone before we see what the legislation looks like.  
I make one final point: when the legislation came into the House it had a regulatory impact statement that I think was out of order. It removed the compliance costs or the estimates thereof. It did so because it wanted to maintain confidentiality with the Minister. There is some ability to understand that and I do understand it. But it is not a sufficient reason. The Minister is a servant of the House. The Minister must allow the House to have a compliant regulatory impact statement. This one was not. We saw that before dinner. We had a compliant regulatory impact statement in respect of the legislation considered the Climate Change Response (Moderated Emissions Trading) Amendment Bill and we saw what good honest— 
Hon Member 
: Robust. 
Hon PETE HODGSON 
: —and robust advice looks like. In this case we were denied that advice at the introduction stage. That is a very bad look and in my view ought never to happen again. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you for the opportunity to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. I note that the version of the genesis of the bill given by the Hon Lianne Dalziel and the Hon Pete Hodgson is quite different from the facts as I know them. The Labour Government had 9 long years to bring this bill to enactment and it failed to do so. 
It is highly relevant that in the first reading debate on the bill the Hon Simon Power pointed out that the cost to New Zealand is between half a billion dollars and $1 billion. That is a very significant amount of money lost in terms of money-laundering. I also understand that the situation is endemic right throughout the South Pacific if not throughout the world. There is no doubt that there is a great need to ensure that this bill becomes enacted and that New Zealand fulfils our international obligations and the requirements of the Financial Action Task Force. 
The Hon Pete Hodgson said that he believes that the Government was panicked into getting this bill through reasonably quickly. But once again I say that the Labour Government had 9 long years and failed to do anything whatsoever. 
I think John Hayes is quite right in suggesting that the Hon Lianne Dalziel is off the planet with regard to the bill. I note that the particular issues have been without reform since 1996. In that time there has been a rapid change in the technologies that criminals can use in order to launder money. That really backs up the total negligence and slackness of the previous Labour Government; it failed to do anything over those 9 years. I look across at the Hon George Hawkins a former Minister of Police and I think that at least he would have done something about this situation. But no he failed. 
The Foreign Affairs Defence and Trade Committee was extremely ably led by the chairman Mr John Hayes. I very much acknowledge that the Hon Pete Hodgson was very interested in the bill and that he took a great deal of notice of the detail particularly when it came to politically exposed people and various other aspects of the bill. There is no doubt that the committee set out to be forward-looking and to ensure that the bill was future-proofed that it was risk-based to minimise compliance costs and as far as is practicable that it harmonised with the Australian legislation. I believe that the initiative undertaken by the chairman John Hayes to get members of the banking profession to come in and have a dialogue with the Government officials was quite a unique process. It was something I had never seen before in my time in Parliament and it was very productive indeed. Four experts from the bank floor had a dialogue with the officials who obviously did not have the practical experience in relation to this very complex bill that the experts did. 
Although it is beyond the scope of the bill it is important to note that Australia has a single supervisory agency the Australian Transaction Reports and Analysis Centre—known as AUSTRAC. One recommendation that we thought was preferable was that the supervision arrangements of the four New Zealand entities—the Reserve Bank of New Zealand the Securities Commission the Department of Internal Affairs and the Police which are all involved at present—could in the future be wrapped into one body. That would ensure that there would be a smoother enactment of this bill. 
I will finish by making one technical point about Western Union which was one of the submitters on this bill. It was very concerned about the fact that in terms of designated business groups its 700 sub-agencies in New Zealand would all have to go through exactly the same transaction reporting that the central agency did. Fortunately that matter was solved in the select committee process and that is very very satisfactory. 
I am very glad to support the bill which does the things that we set out to do. It is forward-looking it is risk-based to minimise compliance costs and it is as far as practicable harmonised with the Australian legislation. 
Hon MARYAN STREET (Labour) 
: 
 I rise to take a call on the Anti-Money Laundering and Countering Financing of Terrorism Bill. My colleague Pete Hodgson has put to the House quite eloquently some of the difficulties in the process around this bill and I want to allude to some of those myself. The bill as it arrived at the Foreign Affairs Defence and Trade Committee had a number of very substantial problems with it not least the definition of “politically exposed person” in the legislation. But with a decent amount of goodwill in the select committee we were able to work to make improvements. John Hayes as chair of the select committee was keen to do what the Minister of Justice required and took with some equanimity our grumbles at the kind of pace that we had to move it at and I compliment him on that. It is a shame that that had to be the case.  
There has been some opinion expressed that this bill should have been in place some time ago under the Labour Government’s watch. This was a work in progress. When the bill first emerged in its draft concept it was taken up by my colleague the then Minister Clayton Cosgrove because he had particular responsibility for small business. His special concern was that the compliance costs for small businesses would be so great that the bill would be onerous and extremely difficult for small businesses to comply with it. As Associate Minister of Justice he also took up the role in much the same way as the current Minister of Justice Simon Power is now doing. But he required that a regulatory impact statement be made and that was the point at which some of the work then had to slow down because the regulatory impact statement was insufficient. The bill that appeared before the select committee was also insufficient.  
I also believe that the Government has been panicked into addressing this issue in a way that did not give the select committee the dignity of an appropriate amount of time to consider the legislation given the huge defects in it. However the select committee did take that time by working out of hours and working extremely hard to meet a timetable that the Minister of Justice was not required to impose on the select committee. The fact that the Financial Action Task Force was due to do a report on New Zealand’s compliance with anti - money-laundering requirements was certainly a prompt and I acknowledge that. But the bill did not have to be rushed in that way resulting in an inadequate piece of legislation that required a major overhaul. There would not be one person on the select committee who does not agree that what the select committee did was a major overhaul of significant provisions of this legislation. That overhaul would not have been necessary if we had not been under considerable pressure from the Minister who himself clearly was panicked by the requirements of the Financial Action Task Force.  
One of the things we did quite successfully was to take one of the completely unworkable bits out of the legislation which I think John Hayes referred to earlier in his speech this afternoon and it was about the definition of “politically exposed person”. In the original legislation there were domestic politically exposed persons as well as foreign politically exposed persons. The truth of the matter is that there are already in existence databases that retain information about people who have caused financial institutions or casinos for example anxiety about exactly where their money has come from. That anxiety is alleviated by those huge databases that in fact the financial institutions and banks in particular compete for. To have domestic politically exposed persons added a layer of complexity that was completely unnecessary given some of the data that already exists and is already available to financial institutions. The problem that existed in the legislation as it came to the select committee—that a bank would not know from the moment that a person walked through the door that that person whose name was different from the Prime Minister’s was related to him—was taken away. That is an improvement that has been made. I think also that that will be something we will return to when it comes to the Committee of the whole House stage of this bill. In the meantime this bill could have been introduced at the beginning of this year.  
A question remains that the Minister of Justice needs to answer and it is why there was this slip and why the eye was taken off the ball with this bill as I think one of my colleagues characterised it earlier. The legislation had real problems. I think everybody on the select committee would acknowledge the work that my colleague Pete Hodgson did. I also pay tribute to the officials and the way they worked with the Bankers’ Association advisers. I think that that was not a marriage made in heaven but it was one that worked under the circumstances. I think all parties are to be congratulated on the fact that they saw the problems with the legislation as it had been presented and they set about trying to fix them in a way that meant that this legislation could be implemented and then in time—because it will take time—the Financial Action Task Force will be able to examine whether it is doing the job that it is meant to do. That will be the subject of a report from the Financial Action Task Force in due course.  
In the end I think between us my colleagues and I have made the point about the inadequacy of the legislation in the first instance; however it has been vastly improved. Although we have been critical of process and at times a little resentful of the pressure in the select committee we have stumped up rolled up our sleeves and done the work in the time that the Minister required and I hope he acknowledges that in due course also. Thank you. 
TODD McCLAY (National—Rotorua) 
: 
 It gives me pleasure to rise to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. Before I do as it is the first time that I have had an opportunity to speak today as the member of Parliament for Rotorua I mention how greatly saddened I was to learn of the death of Sir Howard Morrison. Sir Howard was a great great man and his passing will be felt widely not only in Rotorua but also I believe around the world. He was an exceptional entertainer a real statesman and a man who led by example. Rotorua has lost one of its proud sons today. Along with other members of the House my thoughts feelings and sympathy go out to Sir Howard’s family at what must be a very difficult time.  
The bill before us today after having come back from the Foreign Affairs Defence and Trade Committee is very different from when I first stood in the House to speak about it at the first reading. That is because the committee took the position and the approach that the legislation should not be overly prescriptive and it should not provide additional burden and cost upon those who would implement it. We asked whether there could be a better approach. There has been a lot of soul-searching but in a very short time frame we came to the position we see before us today and I recognise the work that all members of the committee put in.  
I noticed that there was a lot of self-congratulation from the Opposition earlier. I would say that if it was as simple as Labour members suggested they might have introduced such legislation. Indeed as the Minister said they might have drafted legislation before the last election put it in adopted it and of course we would have already been meeting some of these obligations. Having said that I point out that our chairman John Hayes worked very hard as did all members of the committee. There was quite some consensus. I would say in relation to the Opposition members of the committee who have just spoken that we worked well together. They have a very good understanding of the issue and where we ended up and it was good to hear them speak tonight in comparison with those who spoke earlier who perhaps did not spend as much time focusing on the issues and therefore there was a lot of rhetoric as opposed to forward movement.  
What does this legislation do? What did the committee decide in the end? Well it decided that it must be future-proof. We do not want to change it again in a hurry. It should be risk-based so that we can minimise compliance cost and so that a great cost is not imposed not only on financial institutions but also on those they serve—their customers. As far as possible it should be similar to the Australian legislation. Our approach was not to reinvent the wheel but to look at the good things that are happening in Australia and where our laws and systems were similar to see whether we could emulate them and there were a lot of areas where we could.  
I want to touch very briefly on a number of issues. I do not want to speak on this bill at great length tonight. I believe that the sooner we get it into law the better we will be and the safer we will be from people who would launder money—in particular drug dealers and others who prey on those in society who are more innocent.  
We looked at a risk-based approach and I will give one example that showed the committee very clearly why it was important for us to make these changes. Let us say that a bank has a relationship with a customer who is say a lady in her 70s or 80s who has always banked with that bank perhaps for 40 years. As the legislation was drafted when it came into force the bank would have had to do additional due diligence on that elderly person. She would have needed to prove who she was where she was living and so on. A cost would be involved in that and it would mean that possibly every single bank customer in New Zealand would receive a letter asking for additional information. The bank knows who that lady is; it has had a relationship with her for 40 years. Therefore if all she does is get a pension and pay her rent and nothing greatly changes how would she be a risk? The risk-based approach that will be possible under this legislation allows a bank to do additional due diligence and collect more information on that lady only if her relationship with the bank substantially changes. So if instead of having just the pension she shows up with $1 million in cash from having done really well at the casino or something like that then it would do additional due diligence on her. I think that is a very good approach.  
I too would like to recognise the officials who worked closely with representatives of the banking sector to help us get it right. It is a very good piece of legislation. We have changed it greatly. It was good to have the Opposition onside. I am sure that my colleagues and I worked harder than they did although they worked very hard none the less. I am glad we have brought the bill here and I am happy to support it. Thank you. 
Bill read a second time.