Dalziel Lianne: Anti-Money Laundering and Countering Financing of Terrorism Bill — First Reading 
Dalziel Lianne: Anti-Money Laundering and Countering Financing of Terrorism Bill — First Reading 
[Volume:655;Page:4770] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I welcome the introduction of the Anti-Money Laundering and Countering Financing of Terrorism Bill. I thought I would begin with a little story about a bank in the UK and it begins with headline news over a weekend from I think  
The Times.  
One of  
The Times 
’ reporters had managed to undercover the fact that this particular bank had sought assistance from the Bank of England and was receiving that assistance. Instead of having the story led by the bank itself and the fact that that assistance was shoring up the bank because of the headline news it was a bad story for the bank. So then began the weekend from hell for the bank where everyone went online and tried to withdraw as much money from that bank as possible. Of course the server crashed; it was not used to coping with that amount of traffic over a weekend. On Monday morning people went down to the bank and began to queue. This was a very small bank and it had only two tellers in each of its branches so it did not take very long for the queue to form. That queue formed because of the Financial Action Task Force requirements; the anti - money-laundering question the bank had to ask everyone who wanted to pull their money out of their account took a considerable amount of time. 
I raise that example with a certain degree of humour in what I am saying but I think it raises a substantial issue; that is that a combination of events led to what we all now know as the Northern Rock debacle. But part of the problem was the perception of a queue that was created by the questions that had to be asked at the counter. I would like to ask customers—not the customers who turned up to take out their money but the ones who did not turn up—why the hell they did not turn up because people were terrified that they would not be able to get their money out. All I am saying is that when the Labour-led Government contributed to the development of the policy in this area a huge issue was compliance costs and the impact that that would have on the market—and I will leave a lot of that to my colleague the Hon Clayton Cosgrove who was the Minister in charge of that. 
Hon Simon Power 
: A lot has changed since then. 
Hon LIANNE DALZIEL 
: I am pleased that the Minister of Justice is saying that a lot has changed since then. 
I want to put on record that I fully accept the need for New Zealand to meet its obligations even though they are not legally binding in a strict sense. We are a member of the Financial Action Task Force on Money Laundering and we voted in favour of the revised recommendations in 2004. In my view we are absolutely obliged to proceed down that pathway. The approach we adopted when we were in Government though—and I think the Minister has really picked that up in his contribution—concerned those three guiding principles we developed. One was cost effectiveness. The industry should bear the minimum cost necessary to facilitate the effective detection and deterrence of money-laundering. The second was best fit for New Zealand and I think that that is a huge issue. The regime should reflect New Zealand’s unique economy and the actual anti - money-laundering and countering financing of terrorism risks. The third is one near and dear to my own heart: concordance as far as possible with the Australian regime. New Zealand and Australia obviously have a close economic partnership and there should not be unnecessarily disparate obligations. 
One of the things that my colleague Clayton Cosgrove will talk about is the question of cost. The Deloitte’s report was commissioned in order to ensure we had the best possible take on the cost of compliance. That report was developed in probably a slightly more unusual way because we were so concerned to try to get to the bottom of how those costs might pan out but it was intended to provide a guide to key areas of cost sensitivity and also to try to draw from industry itself an indicative response to what the compliance obligations might be. We were flying a little bit blind in that we were not going out there and saying specifically where we were going to end up. We put out some recommendations and some overseas models for people to draw on and some preliminary thoughts on policy direction. Deloitte then solicited costing estimates through a series of interviews with the private sector and again it was asked to work with a hypothetical regime which I think creates an issue about the robustness of the result. However it was quite a significant result and the figures are mentioned in the regulatory impact statement which I will come to in a minute. But essentially the first phase of the reforms relating to bank and non-bank financial sectors and casinos was estimated to cost those industries a total of $96.84 million in establishment costs and $20.67 million per year in ongoing costs. Of the affected sectors the banking sector was expected to bear 84 percent of the start-up cost and 75 percent of the ongoing cost. But again when we look into the trans-Tasman issue we know that the fact our banks are Australian banks means they are already having to comply in some of those jurisdictions. Therefore that does reduce the cost and that was something we took into account when we were considering those facts. 
One of our concerns though was that we wanted to have this bill introduced into the House just a little bit earlier than this. We had the idea that it would be before the Foreign Affairs Defence and Trade Committee when the Financial Action Task Force on Money Laundering team came here. We thought that March or April would have been a really good time to have it there but obviously the Minister is just a little bit behind where we had hoped to be. 
Hon Simon Power 
: I’ve had a bit on. In fairness I’ve had a bit on. 
Hon LIANNE DALZIEL 
: I tell the Minister that he has had that portfolio for what is it 7 long months now? 
Hon Simon Power 
: That’s right; I’ve had a bit on. 
Hon LIANNE DALZIEL 
: Give it back! 
Anyway I want to raise a serious question because I think this is the first time that I have ever seen in a regulatory impact statement as part of the bill’s explanatory note the words: “information deleted in order to maintain the effective conduct of public affairs through the free and frank expression of opinions between officials and Ministers”. I do not think that I have seen that phrase specifically used in that context before. Sometimes when it is used and it is used several times in the regulatory impact statement I can kind of weigh up the sorts of things that maybe officials are providing advice on and that maybe the Minister and Cabinet would not want to have on the public record particularly in relation to some of the options that may have been looked at. 
The one thing that I find really really difficult to understand concerns the question of cost. I refer to page 28 of the explanatory note where the regulatory impact statement states: “The reform is estimated to entail a significant net direct quantifiable cost across industry and government in each of the 2 establishment years of approximately [information deleted in order to maintain the current constitutional conventions protecting the confidentiality of advice tendered by Ministers and officials] per year. However while difficult to quantify the benefits of introducing and passing legislation in 2009 are substantial particularly in terms of protecting New Zealand’s international reputation and associated medium-term trade and other economic objectives.” I think that at some point the Minister will have to explain why that information is being withheld even from the select committee. It may well be that that information will be made available to the select committee in private or in secret but I feel very uncomfortable looking at a regulatory impact statement that provides so little information. That is particularly so when it is followed by a paragraph that refers to “the net quantifiable benefit of the proposed reform” which “could range substantially” so we are told “between a net cost of $17 million and a net benefit of $59 million …”. In my view that is just too wide a breach. I think there has to be some substantial debate in the select committee and again in this House over the cost of the proposals that have been brought before members. With that comment in mind I tell the House that we are happy to support the passage of this bill to the select committee.