Suzanne Snively and Ferdinand Balfoort
Chair Transparency International (NZ) and Partner, BIA Investor Relations
Transparency International (NZ)
Suzanne Snively. Transparency International New Zealand Chair for the last four years, was a joint Co-Director with Murray Petrie of the Integrity Plus 2013 NZ National Integrity System Assessment. Previously a Partner at PwC, she is a Director of public, private and NGO organisations.
Ferdinand Balfoort. (MCA,CA,CIA) is an international governance expert with academic and professional expertise and interests in cross cultural impacts on corruption, fraud and financial reporting. He has managed numerous forensic investigations, including corruption and fraud reporting. He currently specializes in ethical investor relations.
Shining a light on foreign trusts, guiding our professionals
The Panama Papers have identified that there are hundreds of thousands of offshore corporate vehicles domiciled in countries other than the principal residences of the beneficial owners. Yet, in many countries, depending on the type of offshore vehicle that is registered, the only formal, and often limited, records are held at a lawyer’s office in the relevant offshore financial centre.
Offshore trusts and companies can and have been misused for criminal purposes including tax evasion, money laundering and corruption, For example, the World Bank Puppet Masters report found that over 70% of grand corruption cases involved the use of offshore vehicles. This finding was also highlighted by Transparency International. In spite of these observations and other reports, we should equally recognize that offshore vehicles can also be used for legitimate asset protection or other purposes.
The Financial Action Taskforce, FATF, has been working for over 25 years to make the beneficial ownership of offshore entities transparent, in order to prevent their illegal misuse. However, implementation by jurisdictions can be improved as many countries do not have effective mechanisms to identify the ultimate beneficial ownership of corporate vehicles set up in their jurisdiction. For example, anti-money laundering (AML) legislation in many countries doesn't currently apply to lawyers and accountants. In New Zealand the professional coverage of accountants and lawyers is planned to be included in Phase 2 of the AML reforms.
The development of beneficial ownership registers is equally being pushed globally, to varying degrees. Unless all countries globally are aligned we will experience a race to the bottom whereby where arbitrage will occur between jurisdictions for the registration of offshore entities that are used for inappropriate and illegal purposes.
- The New Zealand AML/CFT Act (2009) should be extended to cover all professionals, including lawyers and accountants that are engaged in setting up New Zealand corporate vehicles.
- New Zealand should establish a corporate registry that includes beneficial ownership of relevant corporate to enable review and audit by law enforcement and compliance bodies.
- The entity operating the corporate registry should be adequately resourced and funded to be effective.
- New Zealand should equally ensure similar transparency of trusts to understand the ultimate beneficial owners. To achieve this, New Zealand should consider establishing a similar registry for trusts.