Speech: Anti-Money Laundering and Countering Financing of Terrorism Bill

Anti-Money Laundering and Countering Financing of Terrorism Bill
Te Ururoa Flavell, MP for Waiariki
Tuesday 30 June 2009
Kia ora, Mr Assistant Speaker Roy. Kia ora t
tou katoa i tnei pM.
I have to say that when our caucus looked at this bill on the Order Paper today, the two phrases that stuck out were Anti-Money Laundering” and “Terrorism”.

We were trying to work out what the hang the link was between the two. Be that as it may, we suggest that the Anti-Money Laundering and Countering Financing of Terrorism Bill is a pretty formidable title, and it is obviously for a fairly formidable area of work.

A key strength of this bill is to put in place a process by which we are implementing recommendations from some fairly hefty global documents. Support for this bill will enable Aotearoa to be compliant with three documents, as I understand it: the United Nations Convention Against Transnational Organized Crime; the International Convention for the Suppression of the Financing of Terrorism, to which New Zealand is a State party; and also to progress compliance with the United Nations Convention Against Corruption, signed in December 2003.

It also sets in train a process to adopt and implement the Financial Action Task Force recommendations, which are widely regarded as the international standard. So if the three conventions I mentioned are not significant enough, this task force to all intents and purposes is a body that no one would want to mess with.

I understand it has fairly wide membership: some 32 jurisdictions are involved, including the European Commission and the Gulf Cooperation Council. We—Aotearoa—have been a member of the task force since 1991, and our performance will be on the line in October 2009, just 3 months from now. In fact, it is more than a matter of manners and simple courtesies between countries; the compliance has a slightly more serious shade to it.

The Reserve Bank, in its briefing paper, identified that countries that are non-compliant or partially compliant will be considered by a regional subgroup for inclusion on the Financial Action Task Force International Cooperation Review Group, which can formally blacklist non-compliant countries.

The same briefing paper revealed that New Zealand is yet to be assessed, and our level of compliance is significantly below that of other nations we typically compare ourselves to: Australia, the United States, and Canada, all of whom have made substantial progress in implementing the recommendations. So the question of reputation is at stake. If our response to Standard and Poor’s credit rating is anything to go by, reputation is, indeed, everything.
TE URUROA FLAVELL245

The stage is set to take this bill seriously, by virtue of the fact that we take our international responsibilities seriously as well. If only that was the case in all aspects. The Government’s inaction and, in fact, wilful disregard of the Declaration of The Rights of Indigenous Peoples has often been commented on in this House, in indigenous forums, and in international human rights hui right across the globe.

The M
ori Party, as one would expect, places considerable priority on enhancing our international reputation through showing respect to indigenous peoples, to tangata whenua, and to human rights, and in the commitment to the global call for action to end poverty. We will continue to speak out, as one would expect, about the need to be compliant and to respect our international obligations.

However, we make the point that there needs to be a more robust process so that the Government signs up to such arrangements—indeed, like a Treaty-based process. An important variable in any discussion about domestic and international agreements from the M
ori Party perspective is the priority of Crown consistency with the Treaty of Waitangi.

This is not just a M
ori Party commitment; the relationship in the confidence and supply agreement between the National Government and the M
ori Party states up front that both parties will act in accordance with Te Tiriti o Waitangi, yet this bill is another example of New Zealand’s gaining membership in a forum without Treaty partner dialogue.

The cost of achieving compliance with Treaty justice is a cost that appears to be left out of the costings included in the preparation of this bill, yet we have every detail and more about other costs involved in the implementation of this bill, and Mr Huo spoke about that earlier.

An independent cost estimation undertaken for the Ministry of Justice in 2008 assessed that the start-up cost for financial institutions and casinos were $97 million over a 2-year information period, with ongoing costs of $21 million per year after that. The question of how these costs will be met is expected to be within the banking sector, which will bear 84 percent of the start-up costs and 74 percent of the ongoing costs.

But other costs to the Crown require further attention. There are questions around monitoring and supervising reporting entities, the assessment of money-laundering risks at national and sector levels, the analysis of an increased volume and variety of suspicious transaction reports, and ensuring adequate coordination of regulatory functions across multiple supervisors.

As I said earlier, this bill and the framework proposed are formidable in their scope. This is where it gets relatively tricky, because the costs that banks will pick up will come not just out of the corporate office in Wellington or, more to the point, Sydney.

Adopting the recommendations in this framework will increase business costs to consumers, which will be passed on to all ordinary bank customers—all this, when banks have already been shown to be overcharging their customers.

Rahui Katene, the Maori Party member on the Finance and Expenditure Committee, shared with me some of the extremely critical comments made about the banking sector in its June 2009 report. In the report on the financial stability of the Reserve Bank of New Zealand, the select committee noted its surprise that despite the severe impact of the current recession on business and household liquidity, bank profits declined only marginally in the past year.

The comment concluded: “Some of us consider it vital that banks neither insulate their profit margins nor charge excessively high interest rates at the expense of the real economy and the taxpayers, because of the potential adverse consequences for business and households.”

These sorts of things are very timely reminders to focus on, as we think about the downstream effects of compliance with the Financial Action Task Force’s recommendations on anti-money laundering and compliance financing of terrorism. We clearly have many questions about the bill, its impact on Aotearoa, and the status or need for complying with the international framework in the first instance. We do, however, extend the benefit of the doubt to enable a full and frank response to the issues apparent in this bill, and it is for that reason that the M
ori Party will support this bill to its first reading. Kia ora t
tou.