New Zealand’s Russia Sanctions Act 2022 is an important statement on what our country feels about the current war; however, our laws here in Aotearoa make it near-impossible to discover who owns some companies and trusts. This legitimised secrecy means that government agencies and the public have little idea of the nature, extent, and ownership of oligarch assets and those of other wealthy people. Wealth is hidden in the convoluted structure of companies and trusts. Entities are set up so that minimal tax is paid and no one knows who owns what and where the real owner is located.

Russians and other oligarchs use sophisticated systems to achieve their aims – “Londongrad”, otherwise known as “Moscow-on-Thames”, is just one example of a city providing such services.[i] As the International Consortium of Investigative Journalists (ICIJ) notes “there is a global industry of professionals who specialise in providing rich clients with shell companies, trusts, and other secretive vehicles.” Corruption is often the aim and the result.

What is New Zealand doing about this lack of transparency? Back in 2018, the Ministry of Business, Innovation and Employment (MBIE) released a discussion paper proposing that basic data be collected about the real owners of companies in New Zealand (that is ‘beneficial owners’) - including such basic details as identity.[ii] The paper noted that complex ownership structures can enable criminals to launder money and generally make it difficult to hold individuals who are behind corporate entities to account.

Submissions were invited on the MBIE proposals. Tax Justice Aotearoa supported and made recommendations for improving them: we strongly advocated for rules on beneficial ownership to be extended to trusts as well as companies.[iii] Transparency International (New Zealand) made a similar submission.

What has happened to progress the government’s proposals since 2018? Exactly nothing, despite the MBIE’s briefing to the incoming Minister of Commerce in 2020. This said that identification of beneficial owners was crucial information for law enforcement about suspect assets and the wider intelligence community.’[iv]

Again, in May 2021, the NZ Institute of Directors pointed out that the Financial Action Task Force (the inter-governmental global money laundering and terrorist financing watchdog) had advised: “one of the priority actions given for New Zealand was to improve the availability of accurate and up-to-date beneficial ownership information on legal persons and domestic trusts.”[v]

In the meantime, other countries have taken at least some action to ensure greater transparency about the dealings of wealthy people and their assets. Work on asset registers and public access to knowledge of beneficial ownership has been underway for several years in the European Union, Organisation for Economic Co-operation and Development and in some countries. One example is Ukraine, with its beneficial ownership register. The United States has its ‘Enablers’ (Establishing New Authorities for Business Laundering and Enabling Risks to Security) Bill in progress.

The understanding of how secret wealth contributes to corruption has been accelerated by recent events. ICRICT (Independent Commission for the Reform of International Corporate Taxation) reports on Boris Johnson’s recent (March) promise to rush forward a public register.

We, as Tax Justice Aotearoa, call on our government to dust off its 2018 proposals, then improve and implement them: urgently. We need to know now who has what wealth, what those assets consist of, and how they are managed. It’s crucial that MBIE’s 2018 proposals apply also to trusts, given that trusts are cleverer than companies at hiding assets.

New Zealand must contribute to national and global transparency on financial and taxation systems. This would be one step towards eroding the pernicious influence of oligarchs and creating a more civilised society.

References:

[i] Along with Moscow-on-Thames, Londongrad is a well-merited nickname for the British capital, which has been a hub for Russian money since the fall of the Soviet Union. The rise and fall of Londongrad | The Economist: March 5, 2022

[ii] Ministry of Business, Innovation and Employment Consultation Document: Increasing the Transparency of the Beneficial Ownership of New Zealand Companies and Limited Partnerships (June 2018)

[iii] Tax Justice Aotearoa’s position paper on beneficial ownership (August 2018)

[iv] Ministry of Business, Innovation and Employment. Briefing for the Incoming Minister of Commerce and Consumer Affairs (November 2020)

[v] Institute of Directors New Zealand. Improving the transparency of beneficial ownership. (May 2021)