Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill

I want to go straight to “Suspicious activity reports”, new Subpart 2, inserted by clause 18, in Part 1, and speak to the issue in the Committee and ask a few questions of the Minister of Justice, because this was one of the areas of great concern for a number of people and submitters—the question around suspicious activity and the reporting of it—because what we did not want to do was have an obligation for entities to report information and put too much of an onerous requirement on those entities and have such a high burden of cost in terms of compliance. But then, on the other hand, we know how big an issue this is, and we could not let aspects of, you know, this kind of darker society, as it were, be left to their own devices and continue to use transactions which we know, and we have seen overseas—there do not seem to be too many examples in New Zealand, but we know that they must be able to do it here.

By way of specific explanations, we are talking about the means and activity that is carried out by a reporting entity where the reporting entity has reasonable grounds to suspect that the transaction or proposed transaction, the service or proposed service, or the inquiry, may be relevant, and it talks about prosecution of a person for money-laundering, the Misuse of Drugs Act, the Terrorism Suppression Act, and the enforcement of the Proceeds of Crime Act and the prosecution of an offence within the meaning of the Crimes Act.

So the obligation, therefore, is around suspicious activity reporting. At this stage—I will stand up later to ask questions of the Minister—what I think we have achieved here is kind of a middle ground, where you do have an obligation on entities to report what they see as suspicious activities without the onerous requirements of continuous reporting or submissions to appropriate Government departments on a process that can be incredibly onerous. The flip side of that coin is that it is still a reasonably low transaction mark. I would be interested in the Minister’s comments on the burden that that puts on genuine money transfers, especially in the Pacific, relating to, for example, family members here, working in New Zealand, sending money back home.

I am hoping that the Committee comes to a consensus on the values used in this legislation. You will forgive me but I cannot find the dollar value right now. What we are looking for in this conversation tonight is a consensus that the dollar value is right, and then that those transactions under that dollar value will adequately be caught in the suspicious reporting activity.

I just have a point, Minister, on new section 40(5) in new Subpart 2 of Part 2—“A high-value dealer may report a suspicious activity to the Commissioner.” It kind of seems really vague. Why are they reporting directly to the Commissioner of Police? Why have we suddenly gone away from the definition of the suspicious activity?

So just a point of clarification there. Everything else is laid out as you would expect and is well worded. Then we come to that Part 5. It is kind of out there and a bit ambiguous. But I will come to further questions in my next contribution. Thank you.

Tēnā koe, Mr Chair. Thank you for calling me in this short call on the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. I would echo the question that my Labour colleagues have asked, which is why it has taken so long for the bill to get to this stage. In 2009 we had phase one of this legislation. It has been known for quite some time that the financial institutions captured under phase one were not the only parts of the economy that were engaging in money-laundering.

I refer to the report of the Financial Action Task Force, which really brought New Zealand’s reputation into disrepute. We were struck off the EU’s white list of countries, which imposed additional costs on our business and sullied our international reputation. We have had the foreign trusts scandal, investigated by Mr Shewan. In his report he called for far greater transparency. We think there is still a missed opportunity in that that transparency has not been included in this legislation around the beneficial ownership of foreign trusts, which would have been a great improvement.

However, that being said, and even given the delays in this legislation, the Green Party is strongly behind it. We are strong supporters of cleaning up this dirty money that has flowed into our economy, and of cleaning up particularly the incidence of money-laundering in real estate, which we believe is complicit in the run-up of house price speculation in Auckland and other cities.

We have supported this bill through the committee process. We have asked many questions. We have, I think, made some improvements, together with officials and committee members. We are broadly satisfied with the direction that the bill has gone in. We, however, have a number of specific questions.

One of those questions relates particularly to the issue of privacy. We heard from the Privacy Commissioner that there were particular concerns in the draft legislation about a broad concept of privacy. We had, in response, a tightening of the provisions related to privacy. We still have some concerns that privacy provisions do not go far enough in terms of protecting private individuals under this legislation, and we will come back to pointing out exactly where that is concerned. We indicate that we also have some concerns about the clarification of procedures for client privileged information, and we will be raising some questions on that. As I have said, we have some concerns about the non-inclusion of a registry of beneficial ownership.

With that said, we will be supporting the bill. We hope that these questions will be answered, and particularly that we will end up with legislation that provides a basis for action. I think the lesson that has been learnt from the UK in its implementation of anti - money-laundering legislation is that the legislation provides the basis for countering money-laundering, but far more than that is required. It is a culture change that is required and it is the proper resourcing of policing services and intelligence services, which would actually complement the legislation itself. We hope that the Minister will give us assurances that those pieces will be put into place, as well as the legislation. Thank you.

I will take a call at this stage just to address one of the recurrent themes that has come up to date, which has been the timing of the legislation and bringing it to the House.

Firstly, before I do that, can I just acknowledge the work that has gone into the bill to this point, both from the officials—who have worked incredibly hard over what I am going to explain to you is a very short period of time—and also the Law and Order Committee. I know we set you a very short turn-around time to get the bill back to the House. I think you did do a very good job. I know, from talking to the chairperson of that committee, that it was a very collegial and constructive committee, and I appreciate you for that work.

This is important legislation. I think the fact that the House, as far as I can tell, has roundly indicated that it supports the legislation suggests that there are no agendas at play here. There is a genuine desire to ensure that we get the bill in the right place. I am grateful for that. I think the committee has made some very useful changes, particularly around the information-sharing provisions that the member who has just resumed his seat, Barry Coates, mentioned, which I will come back to.

But one other point I wanted to make, just as we talk about the timing, is that while the original legislation is of course dated 2009, in fact, the bulk of that Act came into effect in June 2013. So it is a little bit disingenuous to say it has actually been in place since 2009. It has not at all. It has been in operation since June of 2013. I think, actually, that tells us a lot about the complexity of this legislation and the time it takes to work through exactly how we give effect to these sorts of very detailed rules in some complex sectors.

I think the thing that really drove the thinking in the development of this legislation was that this is absolutely a very critical and invidious part of criminal behaviour—the laundering of money. We know they use a number of mechanisms to hide criminal behaviour and to cleanse the money of criminal behaviour and hide it from detection. It is important that we can follow that money trail if we are to disrupt that behaviour. Also, of course, there is the financing of terrorism. I do not think I need, in this House, to emphasise the criticality of disrupting that money flow.

So there is not anyone, I think, who is arguing against the absolute importance of doing this work and addressing it. But equally, we have to acknowledge that the bulk of the transactions that this legislation will apply to—far more than the bulk, actually: the vast majority of the transactions that this legislation will apply to will be law-abiding New Zealanders going about their law-abiding business in a normal way, and not committing any crime. We have to strike that balance between picking up their legal behaviour, absolutely, but without making it so burdensome that—look, this is a made-up percentage, I am free to admit, but let us say 99 percent, which I think is probably not unreasonable—the 99 percent of transactions that are not money-laundering are not unreasonably impeded or slowed down or a big cost burden lands on them.

That is the tension. That is the nature of the complexity that absolutely takes a lot of very detailed consideration. When you have been in the role of having to devise a policy framework for something of this nature, you realise how complex it is to get that right. I have been very open in this House that the first reports of the compliance costs—over 10 years of the framework—were in the order of $1.6 billion on New Zealand citizens. That is a bill that I proceed with great caution in respect of, and trying to get that balance right between enough rigour and oversight and process to catch their legal behaviour, but equally not imposing that sort of cost on the businesses and households of New Zealand, I think is absolutely critical.

It may seem like an easy enough thing to say in passing: “Well, we should just bring these sectors into the regime.” I can tell the Committee it is not. It is very, very complex. As you will have seen—and I know the committee heard a number of submissions from the sectors pleading to be given longer because they could not possibly organise themselves in this period of time—the committee held the line. I think that is appropriate, but we should not be under any illusion that this is some sort of simple thing that could have been done more quickly.

The legislation, obviously, came to the House in March; it has been off to the select committee, which, as I said, I think did a very good job. It came back to the House and was available for debate last week. So the suggestion that it has been “repeatedly pushed down the Order Paper” is quite wrong. It was available last week, it is being passed this week, and with the consent of this House it will be law by the end of this week. So we have moved at pace to bring the legislation together, to bring it into the House, and to pass it.

I do want to make reference to the Shewan report, which suggested that somehow we could just remove an exemption in the phase 1 legislation and lawyers and conveyancers would come in. While I understood the intention, the advice I had very, very clearly was that it could not be done that simply, and I would have thought the committee that worked on the legislation would be very well aware that it is a much more complex exercise than simply saying they are no longer exempt, and the complexity with which we work through issues like information sharing and legal professional privilege and the issue of conveyancers and non-legal people employed in law firms tells us that there is much more to it than simply doing a quick repeal and removing a line out of the exemptions. So I think it is a little disingenuous to pretend that that could have happened that simply.

I would agree with the Minister in the chair, the Hon Amy Adams, on the complexity of the legislation; of that there is no doubt. I would disagree respectfully with the Minister on the fact that 99 percent of the transactions are by law-abiding citizens. What we are trying to set up here, and rightly so—just to backtrack a bit, of course we support this legislation, there is no doubt about that, but we do have some questions, so I just do want to put that on the table. The officials did an incredible job with very short turn-round times and I was pleasantly surprised at how thorough they were in their requests from the committee. But we do have some questions and there were some areas of debate.

This is not about 99 percent of the transactions, because if it was, then the complexity would just make it far too hard for any law firm to do its business, or any accountancy practice or any real estate business to do undertake business in a way that was meaningful. What we are trying to do here is capture activity or capture business that, in fact, stands out, which is—to use a word—suspicious. For example, if someone comes in—and I talked about this last night—with $10,000 worth of cash and tries to buy something, that would, I would assume, according to the Act be a suspicious activity, but if someone comes in with a credit card and swipes $10,000 because they are buying a nice bit of furniture, well, that is not a suspicious activity. But it is quite difficult to determine what suspicious activity is. When it is dealing with cash, obviously that is pretty obvious, but the other areas are not as obvious.

So there are two areas that I would not mind talking about to start off with. One is suspicious activity reports, and the other bit is around privileged communication, which we debated long and hard in the select committee, I must be honest. I will say here and now that I think we might have been able to streamline the process, certainly with regard to conveyancing lawyers and maybe real estate agents if we had something in the general sale and purchase agreement—if there was even a box to tick that real estate agents or lawyers could sign off; a box saying: “Has this gone through AML legislation or is there a need to go through AML legislation, or was there any suspicious activity?” With a simple tick for no, then that is ticked off and we know.

I suspect that might be an easier way forward, but anyway, let us get back to the suspicious activity reports. I am talking about section 39A, “Interpretation”, in clause 18. I know we have got to have this sort of thing in here, but it is arbitrary. Section 39A(b) states: “where the reporting entity has reasonable grounds to suspect that the transaction or proposed transaction, the service or proposed service, …” etc., etc.. We are talking about suspicious activity and the arbitrary bit here is what constitutes reasonable grounds. For one person reasonable grounds could be very easy; for another person it might be slightly different. My concern when we have something like “reasonable grounds” in there is that that definition will end up being decided by the courts. I hope we do not get to that but “reasonable grounds” is one of those ones where it does mean different things to different people, even though I know “reasonable” is a legal term.

I go down to section 40 “Reporting entities to report suspicious activities”, also in clause 18. Again here, subsection (3) states: “If this subsection applies, the reporting entity must, as soon as practicable but no later than 3 working days after forming its suspicion, …”. Again, I come down to what is the definition of “forming a suspicion”. It can be very obvious if cash is handed over, for example, but there are other areas where I may think that something is suspicious and therefore I have formed an idea around suspicion, whereas someone else might not.

💬 Hon Ruth Dyson: There are huge inconsistencies.

This is a thing we debated in the select committee, Ms Dyson: how the courts or how the police or the person themselves will determine whether in fact it is suspicious. There is the slight concern—and I am not casting any stones—that some will say: “Well, I personally did not think this was suspicious, therefore it’s not.” That may hide a multitude of sins, if you know what I am talking about.

This is something that I want to talk about as well. Section 40(4) states: “Nothing in subsection (3) requires any”—and what we initially put was “lawyer” and that has been crossed out and we put “person”—“person to disclose any information that the person believes on reasonable grounds is a privileged communication.” So what we have done there—and again we debated this long and hard in the select committee—is we have carved out privileged communication from being subject to this legislation.

We had concerns, and I certainly had concerns that a lawyer—and initially we did have “lawyer”, then we realised that there may be a person who is not a registered lawyer or something who may come under this Act—or someone might hide under the definition of “privileged communication” and say: “Hey, I didn’t have to disclose this because I believed it was privileged.” So what is the definition of “privileged communication”? This is in the legislation and I am not going to read the whole lot out because that would be meaningless, but let me just give an indication. I am quoting here from section 42, “Privileged communication defined”. It states: (1) A communication is a privileged communication if—(a) it is a confidential communication (oral or written) (including any information or opinion)—(i) that passes between—(A) a lawyer and another lawyer in their professional capacity; or (B) a lawyer in his or her professional capacity and his or her client; …”—and there is more—“(ii) that is made or brought into existence for the purpose of obtaining or giving legal advice or assistance;”.

The concern I had about this, which I thought was allayed by the officials, is that, as mentioned, a lawyer could say: “No, no, this was privileged communication. I did not have to disclose this.” But what we actually determined was that if a client came to a lawyer and said: “I’m thinking about doing this sort of transaction or undertaking this sort of deal.”, then the lawyer could actually say: “Well, I would advise you against that, because you may be breaching AML legislation.” So what we determined was that just advice or assistance did not come under this piece of legislation. However, if the client or the person then went ahead with that transaction or the deal, then the lawyer was under an obligation to in fact disclose that under a suspicious activities report. I think I have got that right. I see the officials looking at me slightly, but I think I have got that right, and that is why we have put it there.

We spoke to the Law Society about this. The Law Society submitted on this, and I did question it and said: “Could you hide under this—under a hypothetical situation?”. It said it needed that ability to advise a client that, in fact, this may fall under the legislation. That sort of makes sense, but I would say that what we did is we carved out something that said this is not privileged communication if it is given in bad faith or for a dishonest purpose. This is because what we did not want is for lawyers to say: “Well, I’m disclosing this in a suspicious activity report.” when they were doing it in bad faith or to make some sort of financial gain or they were being disingenuous in the way they were disclosing it.

I hope that does not sound complicated, but what we wanted to ensure is that no one could hide any sort of deal or any sort of transaction behind privileged information when, in fact, also what they might have been trying to do was disadvantage a client or another lawyer or scuttle a deal. I know that is a little bit confusing, but lawyer-client or professional-client privilege is a big thing in the legal fraternity—I understand that. So what we were trying very hard to do was to ensure that we did not break the lawyer-client privilege rule, which has been around for, I do not know, as long as lawyers have been around—centuries, I think. I think prostitution is the only profession that has been around as long as lawyers.

The CHAIRPERSON (Hon Chester Borrows): Just be careful; there are a few lawyers in the room.

Ha, ha! I have a Master’s degree in law myself, and my father was a lawyer, so I do not mean to disparage all the good lawyers out there who are doing a good job.

I suppose what I am saying is we had to walk a very fine line here to ensure that lawyers were able to act with integrity, without doing something in bad faith or without having to put forward a suspicious activity report when there was only a sniff of something—where they were allowed to advise a client either to do or not to do a deal or a piece of business when it could have fallen under legislation, if you know what I mean.

What could have ended up happening is that whenever a client spoke to a lawyer for 30 seconds, it might have actually forced a lawyer to put in a suspicious activity report, and we just thought that that was probably too onerous and probably did not reflect the intent of the Act. I think the Minister, Amy Adams, knows what I am talking about here. I think I have expressed that in a way that might sound slightly confusing, but I hope I have expressed it in a way that makes sense.

I will actually leave it at that now, and talk a little bit more a little bit later.

I have two issues that I would like to canvass. The first relates to new section 43 in clause 18 of the bill, which deals with allowing auditors to report suspicious activities to the Commissioner of Police. I am not too concerned with new section 43(1)(a), (b), (c) and (d)—I will read out the first part to make this clear. “Despite any enactment or any rule of law, this section applies to a person who, in the course of carrying out the duties of that person’s occupation as an auditor, has reasonable grounds to [believe], in relation to any activity, that the activity is relevant to—” and then there is a list of things that it could be relevant to. And if you fall within that list, the auditor can report the activity to the commissioner.

Paragraph (a) says that that would apply in the situation of it being relevant to the investigation or prosecution of a person for money-laundering—clear enough. Paragraph (b) is the enforcement of the Misuse of Drugs Act—could be quite wide. I mean, enforcement of the Misuse of Drugs Act could be someone being prosecuted for smoking a marijuana cigarette, so that is pretty broad. I do not know why that needs to be that broad. Enforcement of the Terrorism Suppression Act is probably fair enough. Enforcement of the Proceeds of Crime Act or the Criminal Proceeds (Recovery) Act 2009—seems fair enough.

The one I have got a question about, in particular, is paragraph (e), which says where it is relevant to “the investigation or prosecution of an offence (within the meaning of section 243(1) of the Crimes Act 1961).” I go to section 243(1) of the Crimes Act and it says that “offence means an offence (or any offence described as a crime) that is punishable under New Zealand law, including any act, wherever committed, that would be an offence in New Zealand if committed in New Zealand.” That is an incredibly broad definition—incredibly broad definition.

I would like the Minister in the chair, Amy Adams, to explain why it is necessary, in new section 43(1)(e) to have such a broad definition of “offence”. That seems to me to be saying, effectively, that even the most minor of offences is something that allows an auditor to say: “Oh, well, I am going to be a policeman here, and I am going to pass that information on.” So that is my first question.

The second one is just referring to the Minister’s statement to the Committee, just a few minutes ago, recognising that these laws need to be practical. It deals with a situation that was recently brought to my attention by a lawyer I know well, which goes to the identification of people. My understanding—and the Minister will know more about this than me, and can correct me if I am wrong—is that one of the ways in which this legislation is operationalised is that people who are caught within its ambit have to verify the identity of people. Even if they do not think this is a suspicious transaction they have to go through the hoops to verify the identity of people these days.

I experienced this recently for myself in respect of going into a sharebroker that I have dealt with for decades, with people who know me by face, and yet they still had to tick off and—you know, these people were in a position to certify they knew me, but they still had to get a copy of a passport or of a current driver’s licence from me. So I was talking to this lawyer about the same situation for him, and he said that with some elderly people it is just about impossible, because if you have not got a driver’s licence because you are too old to drive and you have not got a current passport because you have stopped travelling—

💬 Hon Ruth Dyson: What about your SuperGold card?

I do not think the SuperGold card qualifies you. I would like to have some assurance from the Minister, Amy Adams, that there are practical means for identification of people where the professional person who was dealing with them, who knows them well, can certify who they are—they might have had their will for the last 30 years, and they have got someone who comes into their place—and that we are actually not creating an undue burden for that person to have to prove who they are. I think that if that is the bureaucratic tangle we have got ourselves into, then this regulation goes too far. So I would be pleased if the Minister could provide answers to those questions.

I am pleased to take a call on this bill, the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill. Obviously the intent of the legislation is very clear, and we are supporting it on this side. Just listening to the contributions from my colleagues—I too have concerns around the practical application of firms being able to adhere to the requirements set out in the bill. It seems to me that when you look at all of the potential offences and the reasonable grounds that, say, a law firm may have to check off—I am just querying how practical a compliance programme with a law firm, or any other of the entities that have to do reports, is in practice and whether they will be able to adhere to their obligations under the bill.

We are talking about misuse of drugs, terrorism suppression, and money-laundering legislation. Each one of those pieces of legislation is a highly technical piece of legislation, and not only that, we are yet to see what the prescribed form will be in the regulations, as to the nature of what they have to report. I am not too sure whether the regulations have been drawn up yet or whether they already exist—well, they probably would not exist under the existing legislation already.

It comes down to putting more compliance on to businesses, which just really want to provide their services to clients. Obviously we want to stamp out the money-laundering activities that do go on, but it just seems to me that for any trader, or even just a sole practitioner—I mean, in addition to providing the legal service to the client or facilitating the transaction, there is the actual consideration that that lawyer or sole practitioner would have to take, to come to form that opinion as to whether their particular client is bona fide or whether they indeed have to report to the commissioner. It just seems to me that it can be a bit—I guess it is finding the right balance between what is practical and what is necessary, and then, are we actually achieving the ultimate objective whereby we want to root out the bad guys and report them to the police.

So I guess it is trying to find that right balance within the obligations that are imposed in the legislation, and it seems to me, based on a very quick, cursory look, that it is quite technical. There is a range of different legislation. I would hope that the Law Society is going around its members as we speak and giving seminars on how they are to treat the obligations that will be imposed on them once this legislation is enacted, because it is quite onerous.

I just want to conclude by saying that when we look at the exemption around privileged communication—it seems like, apart from the exemption, if it is really dishonest, all communications between the client and the lawyer concerned are privileged. It is a very wide definition, and it could very well fall within that ambit. I guess the point I am trying to make is that if people are going to break the law, they work around what the requirements are. If there is a risk of a certain person, fitting a certain description, committing an offence—I mean, a criminal will look to work around whatever the risk is. So it will be interesting to see, once this has bedded in, how it is working in practice and whether we actually are catching the bad guys. But I certainly hope that we can achieve this through the passage of this legislation. Kia ora.

I apologise to Mr Nash. That is twice I have pipped him at the post. Sorry about that.

Again, I thought I would take just a brief call to address some of what has come up in the spirit of a constructive and open debate, and also to speak briefly to the Supplementary Order Paper (SOP) that I have tabled to get on the record what that covers. It is interesting that the last few calls in the debate since I took my last call have talked to some of the very complexities that I talked about in my first call. So while the first few calls sort of said “Why didn’t this happen sooner?”, we have then had some very thoughtful calls from Mr Nash, Mr Parker, and Mr Tirikatene actually talking about some of those very complex issues that are really difficult and that have to be worked through in some detail.

I was really grateful that the Law and Order Committee did spend a bit of time on the issue of privileged communication and legal professional privilege, because it is one that the officials and I debated at some length over a long period of time. Obviously, I have a legal background myself. I am very aware of the importance of the extent and the criticality of legal professional privilege, but at the same time this is a system that relies on suspicious activity being flagged and reported through, and getting that balance right between saying “If you see something that’s clearly untoward, we need you to say something for the good of the country.” versus “We can’t destroy the system of privilege that is critical to the operation of the legal system.” is a hard one. I do not pretend that it is an easy resolution.

This is one of those—I do not like to say “rare”, but potentially rare situations where Ministers really do hope the select committee will add a lot of value in teasing and testing that out with submitters in a way that I think adds real value to the bill. I think, as I said in my opening remarks, the position that the select committee has left it in is as good a position as we can hope to get it in, and I say that in a slightly caged way because, of course, in time we might find that there are situations where we have to be tougher—speaking to Mr Tirikatene’s point. It is not always going to be easy to identify exactly what it is and draw a fixed line in the sand. But our job as legislators is to try to anticipate and design a framework that is as good a balance between critically important and very complex objectives as we can get it.

I want to just respond to Mr Parker’s point around new section 43(1)(e) in clause 18 and the width of the Crimes Act within that. Of course, we have to bear in context what that clause requires to be done, which is—well, actually, it does not require it, but it says that the auditor may report indications of criminal behaviour. Of course, any of us at any point in time, about any legislation, have the ability to report it to the police if we think there has been criminal behaviour. Often there are debates making it very clear that we think that that should be the case, and that is certainly the case here.

In the context of this, the reason it is important in the anti - money-laundering context is the necessity of identifying the predicate offence, and the predicate offence is more often than not a critical part of proving and identifying that whole money-laundering framework. It does not in and of itself go beyond what an auditor could do in many situations in any event, but what it does make very clear is that if there is identifying predicate offence behaviour that they are concerned about, then there is a very clear pathway to report it through to the Commissioner of Police. Again, I know that that is something that the select committee will have looked at very carefully in that context of privileged communications and of identifying where we set that framework so that we do enable genuine good-faith indications of behaviour that is of concern while protecting the privileged communications that many business activities rely on.

The final point that I wanted to make in this contribution is, just as I said, in reference to SOP 352, which I have tabled and I have circulated to all parties, and I hope they have had an opportunity to look at it. Parties will be aware that most of the changes in that SOP are very technical drafting cross-referencing checks that the Parliamentary Counsel Office picked up after the revision-tracked version came back. I do not think there should be any concern; I have not heard of any.

The one change that I have made that is of some substance to the select committee position—which I flagged in my second reading speech yesterday—is simply the change to make it clear that for a law firm or an accountancy firm that operates in a partnership, there is not an expectation or a requirement that every single partner should have to report as an individual entity. For tax purposes, accounting and law partnerships operate as a collective, and are recognised as such and deal in that way. I think there is some real benefit in that, because it means each partner remains liable for the behaviours of others, and that oversight of other partners—because they know they are liable for what you do—believe me, is a very real safeguard on proper behaviour. From a compliance perspective—again, to Mr Tirikatene’s point—we want to make sure that these things do work as smoothly as possible, and in my view it does not make sense to say that every single partner needs to report in their own regard or needs to be an individual reporting entity.

So I am recommending in the SOP that we reinstate that provision of the bill as drafted, which makes it clear that when a professional partnership is formed and is operating as a single entity, although not a legal person in the strict legal definition—as the lawyers in the room will know—it does make sense for this purpose to recognise it as a single reporting entity. With those few comments, I hope the Committee will move to support the bill.

I would just like to very briefly make one more point with regard to my last rather laborious point on privilege—

💬 Hon Amy Adams: Oh, not at all!

Ha, ha! That is actually new section 159A in clause 51A, and it does actually state here that “If any person refuses to disclose any information or document on the grounds that it is … privileged …”, then what can happen is “the Commissioner, an [anti - money-laundering] supervisor, or that person [can] apply to a District Court Judge for an order determining whether or not …” it is privileged. So there is a higher authority that the authorities can go to if, in fact, the lawyer or another person claims privilege.

There is one other point. Mr Parker actually brought up an interesting point. If we go to new schedule 2 at the very back of the bill, and this is just under the heading “Details to be contained in domestic physical cash transaction report”, there is actually quite a lot of information there that must be contained in any report—and this is on the very last page of the bill. For example, it is their date of birth, their ID document number, the type of account, the physical address, the phone number, and any other identifying information, or, in fact, if it is someone acting on behalf of a customer, then there are other unique identifiers that do need to be outlined as well. This makes sense, because what we are attempting to do here, of course, is to stop the crooks from laundering money, and if this type of information is the sort of information we need to stop that, then so be it.

One thing I would like to talk about in a little bit more detail is, again, something that we debated in our select committee a reasonable amount and for quite a while, and not just between the officials and the committee members but also with submitters. This was who had the ability, or what entity had the ability, to determine whether information sharing was to be allowed. I am looking at new section 139A here, but if you look through the bill from about clause 38 all the way through to nearly the end of the bill, but certainly through to clause 51, there is a whole lot of stuff that has been taken out from the original bill as it was presented to the Law and Order Committee. The reason for that is that initially in the bill, what was determined was that officials had the ability to determine whether information could be shared. So when the bill was at the select committee, we said that the commissioner, the New Zealand Customs Service, or an anti - money-laundering supervisor may disclose information supplied or obtained via the exercise of the powers and performance of its functions.

The bill originally said that Government officials—paid officials—could determine which information was shared. We came to the conclusion at the end that when there were people who were far more expert in this area than myself and, I suspect, a number of the other MPs around the select committee, to determine that this should, in fact, be an authority that only the Minister has. So what we did is we actually inserted a new clause 38A, which inserts a new section 139A. What that did is that took out the original bill’s new sections 139, 140A, 143, 157, 158, and 159—I think I have outlined all the ones that we actually removed—by saying that officials should not have the delegated power to make these sorts of decisions.

What we actually concluded is that the Governor-General—I am talking about new section 139A here, regulations relating to information sharing—“may, by Order in Council made on the recommendations of the Minister, make regulations for the purposes of … (a) specifying the type of information that may or may not be disclosed: (b) prescribing the conditions under which the information may be disclosed” and how that information can be used. But we also said, and this is what we inserted into the bill, that “Before recommending the making of regulations under this section, the Minister must consult”—so this was not “may” consult. We absolutely put an obligation on the Minister to consult the agencies and regulators that may be affected by proposed regulations. So we thought we were quite tough there. They must also consult the Privacy Commissioner, which we thought was actually a very good idea, because it needs to be tested there, and “any other person or body that the Minister considers may be affected”—so it is not “must” here.

If information is to be shared amongst agencies, then this should probably be discussed around the Cabinet table. The Privacy Commissioner must be consulted to make sure that this is done under the law, all the agencies that are affected must be consulted, and even ones that might not be but are on the periphery must be consulted if they may be affected. The reason around this is that what we are saying in this legislation is, in fact, quite far-reaching. What we are doing here is allowing information, which I am not going to say is privileged but which is detailed and stored in different areas, to be shared, which obviously is important if we are trying to chase down money-launderers or people who are financing terrorism. We do not want that, so we do need to have the complete picture, but we felt that the Minister had to be responsible if, in fact, we were going into new areas around privacy or the sharing of information between agencies.

So we have taken out, as mentioned, a whole lot of stuff that was originally in the bill, and I think we did the right thing. I really do think we did the right thing. There was no one who submitted to the committee who suggested that this was the wrong thing to do. So I just thought I would talk about that, because it is quite important. I might leave it at that, at this point.

I move, That the question be now put.

Having listened to the contribution of Minister Adams, actually I learnt more about the bill than I did reading it. But I want to comment on a couple of things. Firstly, in regard to new section 40, “Reporting entities to report suspicious activities”, inserted by clause 18, and the period of “no later than 3 working days”—it seems to me to be an arbitrary period, but I would be interested in the Minister’s response regarding that time frame, because if the intent of the bill is to gather evidence for prosecution, given the way in which transactions occur so quickly these days, I wonder whether or not it will achieve its intended purpose.

As I was reading this part of the bill, new sections 40 and 41, inserted by clause 18, and considering the contributions that were made by colleagues, one of the things that occurred to me was the issue of an oral report. In new section 41(2) it reads: “If the urgency of the situation requires, a suspicious activity report may be made orally to any Police employee authorised for the purpose by the Commissioner, but in any such case the reporting entity must, as soon as practicable but no later than 3 working days after forming its suspicions, forward to the Commissioner a suspicious activity report that complies with the requirements in subsection (1).” Again, going back to the purpose of that subsection, if an oral report is intended to propel action, then what amount of evidence or what types of things in an oral report could give urgency for action to be taken? It is not that clear to me, and I would appreciate a clarification from the Minister, as it seems to me that while a suspicious activity report is intended to be occurring in a formal way, there is an exception. If the exception is intended to address the issue of time frame or action to be taken within a quicker period, then what are the things that must be captured in an oral report?

The third point that I want to come to, having listened to the contributions of my colleague Rino Tirikatene, is “occasional activity”: whether that definition may be so broad that it may capture the 99 percent that you were referring to, and whether or not that may mean that there could be an unintended consequence of people being captured under that definition. If that is not the case, then I am sure we would all benefit from a clarification, but if that may be a prospect, then what remedy might there be for people who are inadvertently captured under that definition?

Those are just three simple questions to the Minister. Again, I am not going to prolong the contribution, but I think, as people try to figure out the intent and purpose of the bill to ensure that it achieves its objectives, those will be helpful clarifications.

I move, That the question be now put.