Criminal Proceeds (Recovery) Amendment Bill

Members, the House is in committee for consideration of the Criminal Proceeds (Recovery) Amendment Bill and the Criminal Activity Intervention Legislation Bill. We come first to the Criminal Proceeds (Recovery) Amendment Bill and we begin with a debate on Part 1. This is the debate on clauses 3 to 42, and Schedule 1, “Amendments to Criminal Proceeds (Recovery) Act 2009”. The question is that Part 1 stand part.

Thank you, Madam Chair. I acknowledge Minister Kiritapu Allan in the chair. Noting that this is before the committee of the whole House for debate—looking at the amendments—I wasn’t a member that sat on the Justice Committee at the time this bill came before the select committee, but it is noted that when it did, it was referred to the committee on 27 September 2022. Submissions were called for, with a closing date of 26 October 2022. Five submissions had been received from interested groups and individuals, and oral evidence heard from three submitters at hearings in Wellington by video conference. As a result of that, there has been a report filed back to the House by the Justice Committee, identifying that the amendments that had been canvased in select committee were recommended unanimously.

In turning to the committee to debate Part 1, looking at those amendments before the House, I turn specifically to clause 5A, and that is the “Meanings of associate and organised criminal group”. So Minister, there has been some concern, I understand, as to what the term “associate” would mean and how that would connect an associate to either the organised criminal group or the person participating in organised crime. So the meaning of “associate”—and this was a clause that, although I wasn’t at select committee, would have been the subject of considerable debate—means a person who is associated with the member or participant, and is not a mere acquaintance of the member or participant.

I would invite the Minister, if Minister Allan is able to do so—in terms of clarification around “acquaintance”—to explain what that would be. The meaning of “associate”, under clause 5A as the proposed amendment, in subclause (1)(a) “means a person who—(i) is associated with the member or participant; and”—not “or”, but “and”—“(ii) is not a mere acquaintance”. Could we seek some clarification around that, please, Minister?

Well, thank you, Madam Chair, and I thank the member Harete Hipango for her contribution. The member is correct. I just want to acknowledge in particular the submission made by the Law Society in giving their reflections on this particular provision. It wasn’t well contested. I think that the words of the legislation are relatively clear in this sense: “a person who—(i) is associated with the member”, and in clause 5A(1)(a)(ii), is “not a mere acquaintance of the member or participant”. When turning their minds to this particular issue, police, justice, and the like were, I guess, very cognisant to make sure it wouldn’t include anybody that had ever touched the pathway of, and, therefore, not a mere acquaintance but somebody that did have some kind of deeper or additional components to that relationship.

So I note in the departmental report there is a good discussion on the scope and clarity of what an “associate” is intended to mean. On balance, having now heard the submissions—officials and myself included—we considered that the definition balance that need for clarity of what the scope of association was, but we also balance that with the risk of creating loopholes if we were to start listing all and sundry as to who might come within that definition. So that was indeed the intent there.

Thank you very much, Madam Chair. I acknowledge the Minister in the chair, who, as with previous stages of the bill, is no doubt joining us on this side in wanting to examine the way that the bill interacts with fundamental rights, and of course we understand and agree with the Government’s intent in so far as it is seeking to ensure that those who undertake criminal activity shall not profit by it but also to, thereby, deter people from engaging in that activity in the first place.

In Part 1, which I hope we’re in—and I’m about to be told if we’re not—

💬 Matt Doocey: Yes, we are.

We are—thank you, sir. In Part 1, we see the way that the definitions give effect to that intention in the bill. In relation to the human rights, I just wonder if the Minister can help to place on record the fact that we are interested in a civil forfeiture regime, which is to say that there are assets that would, effectively, be able to be confiscated. Of course, property rights are important in their own right, if you know what I mean, but so too is the presumption of innocence in the criminal justice system. The potential connection between those two is that if a person can’t justify having property that is regarded as legitimate property, then, according to this piece of legislation—and existing legislation in a similar space, to be fair—that would be subject to confiscation. But it’s important, I think, for us to all acknowledge and understand in this House—and to anyone applying the law in the courts of the land later—that such a determination can’t be used and be imported into the criminal context to say, “Well, therefore, they must have done something wrong that would meet the burden of proof that is higher.” Of course, in a criminal case, partly because of the onus of proof, where that lies—and, again, we talk about the presumption of innocence and the burden being on the prosecution to make out their case, and also the threshold, which is, of course, beyond reasonable doubt in criminal matters.

So I hope that the Minister will agree, roughly speaking, with the points that I’ve made. But if she has a different gloss to put on them, that would be useful to know at this point, as well.

I just want to acknowledge the member Christopher Penk’s contribution. As always, it was thoughtful and considered, and albeit we stand on opposite sides of this House, I always appreciate the way that he turns his mind to the fundamental rights and how we’re grappling with these two particular areas. In the one sense here, or on the one hand, it’s upholding that rule of law by enabling forfeiture of illicit assets, and then, on the other side of the ledger, of course, it’s protecting people’s rights with safeguards against undue and unjustified seizure. I think this is a good example of where we’ve grappled with how those two sets of rights rub up against each other.

So, to the first part, I think that this entire committee will be well across the fact that criminal activity depends on the trade commodity. For a lot of the underworld, so to speak, it depends on the trade of illicit assets gained by illicit means, and it is challenging to reach into and obtain that source of property. So, in particular, what the first part of this bill seeks to achieve is: making sure that we can do that, we can crack down on the bosses of the crime, so to speak, those that are benefiting from the illicit profits, but that we do it in a way that also ensures that the State does not encroach too much into the private affairs of an individual. We’ve had to do that by creating a series of safeguards in the bill, as we have created these two new types of forfeiture audits.

So those safeguards that we’ve included to uphold and protect people’s rights are, by and large, four parts. One is that we have to be satisfied that the person or the associate could not have acquired those assets legitimately. We’ve put in a cash threshold there of $30,000—the asset must be over $30,000. Two, that the police must prove the criteria for a new audit. That means that the person has a final opportunity to present evidence showing that there is indeed a legitimate source—and where they do that, there is no worries. Third, that the court must not make a type 2 assets forfeiture order, unless it was satisfied that it would be in the interests of justice to do so. That sits also, of course, within the context of some of the broader overarching provisions that already sit within the Criminal Proceeds (Recovery) Act 2009, so some of these things aren’t new, including that interest of justice test.

So I hope that that helps the committee and the member to understand how we’ve tried to balance those sets of rights: one, upholding the rule of law, enabling that forfeiture of illicit assets sourced from illicit means; secondly, by protecting people’s rights with safeguards against unjustified seizure.

Thank you, Madam Chair; thank you, Minister; and just if I may also thank the officials that are here, because this was a very complicated bill that we went through, and they spent quite some time trying to explain to us how it was going to be effected. So while they’re in the room, I’d just like to acknowledge them.

Minister, at clause 2, on the commencement date, we have within this bill various different dates of when it will come into force. Some of it will be by Order in Council, others will be 12 months after Royal assent, and there’s also a number that come into effect on the day after the Royal assent. These clauses—the ones that will come into effect about a week after the third reading—relate to transitional settings, to KiwiSaver forfeiture orders, returning of property seized but not subject to forfeiture, disputed ownership, and it’s also about when a self-incriminating statement can be used and when it can’t and when there are exceptions.

I’ll begin with the KiwiSaver forfeiture orders, Minister. Can you please advise if I am correct in understanding this scenario—

CHAIRPERSON (Hon Jacqui Dean): Order! Order! The member is making comments around the commencement, so we will come back to that in the debate, but I’d ask her to confine her comments to Part 1—clauses 3 to 42—and Schedule 1.

💬 Hon Kiritapu Allan: I will come back to that, though, in that part.

CHAIRPERSON (Hon Jacqui Dean): Thank you.

OK, thank you. May I carry on—may I seek another call?

CHAIRPERSON (Hon Jacqui Dean): I’m inviting the member to address Part 1 of the bill. The member will certainly have another call, should she wish.

Thank you, Madam Chair. With the KiwiSaver forfeiture orders, can the Minister advise if I’m correct in understanding this particular scenario? If you could picture a hard-working mum with a criminal son. She has $100,000 in her KiwiSaver account. Her son, who is involved an organised crime, deposits $50,000 into his mum’s KiwiSaver account in cash in an effort to hide it, so mum now has $150,000 in her KiwiSaver and it’s earning interest. Investigations are held and mum is found innocent of any wrongdoing, but there is a forfeiture order on her KiwiSaver now, as it’s been proven that while $50,000 of it was a gift, it wasn’t legitimate.

So my first question, Minister: can you confirm that all proceeds found to be legitimately contributed to mum’s KiwiSaver account will be returned to her along with all the interest that she has earned, and that there is indeed a short time frame for which this is to occur—that reintroduction of the money back to her account?

Thank you, Madam Chair, and I thank the member Nicole McKee as well. I know that she’s turned her mind diligently to these issues, and the fact of that example is a clear instance where you are thinking about the practical ramifications of the provisions that we’re introducing, and I just want to acknowledge that.

To clarify, using that example that we’ve just heard, the $100,000 in there—that’s mum’s legitimate, hard-working cash; $50,000 from her son, ill-gotten gains; and together, it’s $150,000. The way that that would need to be separated out is that the $50,000 plus the interest that’s accrued on that $50,000 would need to be returned. That $100,000, plus the interest gained on that, is the rightful property of the mother.

I recall in my original discussions with officials, actually, using a very similar example. The origin of this particular KiwiSaver provision was an interesting one. It was based on a case—I’m not sure if that was provided to the committee, but it was provided on a particular circumstance where a senior public servant had committed fraud. They had then transferred that fraudulent money into a KiwiSaver account, and then there was no way for the police or for the State to be able to reach it, essentially.

So, first of all, it’s not a broad way of hiding ill-gotten gains that we’re aware of, but it was a particular circumstance which created an unjustified result: in the first instance, the resource was taxpayer money, and, secondly, the State couldn’t recover it. So that was what these circumstances were to respond to. But from my discussions with the officials, I was satisfied that—as you’ve rightly described the situation—the ill-gotten gains would be the subject of the forfeiture, but the gains that are rightly sought by the mother would be retained as her property.

Just further to that—thank you, Madam Chair—if we look at the example of where this situation occurred, and it was a public servant, how does that fit into this regime of significant criminal activity based on gangs and the work that they and those in organised crime groups undertake? Will this clause actually allow for instances where public servants do commit crimes like this to also have forfeiture orders placed upon them?

Thank you, Madam Chair, and I thank the member for the question; again, one very similar to the one I asked at the outset. Yes, so the primary purpose for the introduction of the amendments is the seizure of cash that we can identify from organised criminal groups. Assets that they hold, whether those be motorcycles or large quantities of cash that just simply cannot be identified—that’s the primary focus. But there were a number of other, I guess, areas which had been identified by the police as being problematic and that could be tidied up as a part of this bill, as well, because it amends the overarching criminal proceeds scheme. So that’s where you see that particular circumstance of the KiwiSaver being a virtuous hiding hole. We don’t think that’s appropriate, and this bill, through this provision, will seek to circumvent that.

Thank you, Madam Chair; and Minister, thank you for standing and taking a call on that. I do want to just seek some more clarification around it, because I know that during the select committee process there was a lot of discussion around this. It was the fact that we recognise that these gangs, these organised crime groups now are sophisticated and they’re clever in the way that they launder money and hide their money. We also had to recognise the fact that often friends, associates, or family members are intimidated and they feel they have no choice but to allow their own accounts to be used to launder money from the gangs. So I just think that was a very good point that was raised by Nicole McKee, who, of course, is on the Justice Committee with me, and we had wide-ranging discussions on this.

I think you’ve gone part-way towards—for any members of the public that are watching the committee stage this evening—explaining how there are safeguards in place, but maybe you could just go a step further, Minister, in explaining that the example that Nicole McKee gave was a mother of a gang member who had her KiwiSaver account that had $100,000 of legitimate savings in it that then had a further $50,000 of ill-gotten gains, laundered money from her son, who is a patched gang member, and how do you anticipate the legislation will be used by the police in terms of determining whether or not that $100,000 from the mother was legitimate?

Because, sadly, there will be cases where a family member is actually complicit in the laundering and has agreed to that and allowed their account to be used in that way. I would anticipate that that would then mean that there would be a full seizure of those funds. But how do you anticipate, as our justice Minister, that the police will treat this legislation in terms of how they’ll deal with those often complicated and sophisticated sort of instruments that these gangs have put in place, so that we’re not capturing innocent people that have been used as tools, who have been coerced and often, sadly, in some cases threatened? Thank you.

Thank you, Madam Chair, and, look, I do just want to acknowledge the member. I know that he spends a lot of time thinking about the way in which we get these issues right. It comes back to probably some of my comments that I made to the member Chris Penk that we’ve got the two sets of rights rubbing up against each other. One is they’re upholding the rule of law by enabling the State to chase illegally gotten gains, so seize those assets. So that’s the upholding the rule of law. So against that, unreasonable search and seizure and making sure that people that have, justifiably—you know, they’ve worked hard, they’ve done what they should have, making sure that they don’t get entangled in a measure, an instrument that wasn’t intended for them.

So I won’t go through the safeguards again, but I’ll probably just highlight one of the final prongs of the test that’s in the interest of justice. So the way that the legislation is set out now is that the clean money, the money that belongs to the mother is hers and it’s—I mean, there may be some investigations that find she was complicit and that will be part of determining whether she comes to the table with clean hands, so to speak. That will be a test that will be subject to investigation and inquiry, and where it finds that those hands aren’t clean, well, that may result in a different treatment of the money that was in there if it was found to be in any way tainted because it was received through ill-gotten gains or something otherwise. So they have to treat it in a particular way.

But what the legislation requires, though, is that they have to be assured that the asset—like I said, it had to be acquired illegitimately and it had to be over that threshold of over that $30,000, and it would not be in the interests of justice to not forfeit that resource. So there are a range of checks and balances.

This has been challenging. I, too, want to acknowledge the officials who had to diligently step through that balancing act. I was surprised, if I’m frank, that we only got five submissions on this bill—just noting the nature of the rights and the intersect at play—but I think that probably said to me, in the round, that where we’ve landed is probably about right in terms of whether we’ve treated those two sets of rights appropriately.

Thank you, Madam Chair. Minister, I was looking at new section 5B(1)—inserted by clause 5—followed by 5B(1)(a), followed by 5B(1)(b). When I looked at 5B(1)(b), I got quite confused, so much so I had to stop looking at the screen for a while because I thought I was interpreting (b) incorrectly. What it states in the bill is that legitimate property—at 5B(1)—means all property regardless of whether it’s been gifted, whether it’s been loaned, even if you’ve got it by way of credit, it’s something purchased by another for another, but also for the benefit of the respondent. But new paragraph (b) then says it does not include property acquired as a result of “activity that’s engaged in by the respondent or any other person and is an offence.” I had to keep looking at that, because I thought “and is an offence.”? Well, maybe it should be “is not an offence”. But I looked at it in a different way, thinking there’s a double negative that we’ve got going on there. Maybe I’m reading it incorrectly, so I just want clarification again, Minister: is this new section saying that if you’re a criminal identified as being part of an organised criminal group and you’ve acquired property through crime and that property isn’t legit, we’re going to take it—meaning the Government will take it if it’s not legit—but if that property, that perhaps a criminal has put in someone else’s name, was paid for from legitimate income earned by that criminal and this can actually be proved, then the house is safe? Is that what it’s saying?

Thank you, Madam Chair. Let’s just go to and fro and see if I’ve got you right, and then, if I haven’t, feel free to ask me again. So, as I understand it, the way that those two provisions are separated out, (1)(a), where the resource has been gained in a legitimate way: I, a person that is also involved in an organised criminal group, go to work every single day, I pay tax on that money; I’m a builder, who knows—you know, I’m doing something every single day that is all as a consequence of legitimately obtained funds. The rule is that the State can’t reach into those legitimately acquired funds. Where, however, through my organised criminal activities I have then gotten ill-gotten gains and I have put those into the same pool, whatever that may be, that’s where that subsection 1(b) applies.

Thank you very much, Madam Chair. I’ve been listening carefully to an excellent debate, actually, if I may say, across the House, and I just had a brief comment which includes a couple of questions along the way, if I may, regarding new section 24A, as it will be, within the Act, so that’s clause 15 within Part 1. I think this is probably my final contribution on Part 1, but my eye was drawn, actually, initially on seeing this—it might have been at first reading but, if not, then during the select committee process—to the phrase “restraining order”, and, of course, in the law, restraining order usually has a different meaning and it’s what you might think of, of course; it pretty much does what it says on the tin which is to stop an individual having contact and, you know, restraining him or her from—usually him, actually, to be fair—having contact with another person, for pretty good reasons, and that’s sound public policy basis for that meaning and effect of restraining order.

In this legislation, of course, it’s property itself that would be restrained, so that would be the specific property of the “respondents”, to use the phrase in the legislation. I’m just interested in the way that determination would be made, and I see it’s set out actually very clearly, I think—and a bit of a nod to the drafters there, and also the officials who have advised you, Minister—because I think using the formulae to determine what meets the threshold as to value, and also the tests involved along the way is actually really helpful. I think this is quite readable legislation and that’s a very good thing.

So we see that that an order restraining a particular piece of property can be made if there’s reasonable grounds to suspect or believe that the respondent was an associate of one or more members, and, you know, you can imagine how the word “associate” itself can be quite vague—others will have comments to make on that, and, indeed, already have, including my colleague and friend Harete Hipango—but those members or participants have, in that capacity, been involved in significant criminal activity, or unlawfully benefited from significant criminal activity.

The unlawful benefit, I guess, is a bit circular, in the sense we’re saying it’s on a level—property is illegitimate or unlawful if it was the result of unlawful activity. In a way, that might sound intuitive, but it’s important, of course, to be clear in the law. So that’s fine. The question that I have along the way is whether there is any guidance that the Minister can give as to what significant criminal activity might be, whether that’s examples or just maybe an underlying philosophy—the way that she might think that that would play out. Instinctively, of course, significant criminal activity—probably some very learned judge would say “criminal activity that’s not insignificant” and that would be about as helpful as these things always are when they’re quite circular in nature. So any guidance the Minister can give in that regard would be helpful.

I guess for the sake of completeness, it’s worth noting that the effect of property being restrained means that it can’t be flogged off, in the vernacular—that is to say that it can’t be disposed of or dealt with other than as provided for in the restraining order. I suppose the restraining order might set out a way in which it can be dealt with, and it would be under “the custody and control of the Official Assignee” who is—you know, that’s an office or an institution, if you like, even, that we’re used to having control of assets for those who society or the law has deemed aren’t appropriate to be handling them. Of course, in an insolvency context, that’s reasonably familiar to practitioners of the law, and some poor souls are all too familiar with it on their own account. But, in any case, that’s obviously part of the architecture of the law that we have already.

So I’m interested in the fact that the legislation is making use of these existing mechanisms and ways of thinking, and, really—just to reiterate before I resume my seat, probably for the final time in Part 1—that I would be keen to know any guidance that the Minister can give the committee on the subject what might be “significant criminal activity” for these purposes.

Again, thank you for those insightful questions, and particularly with respect to the distinction that the member has observed, at clause 24A(1)(b)(i) and (ii). So there, for the committee’s benefit: “all or any of those members or participants have, as members of or participants in the group,—(i) been involved in significant criminal activity at any time; or (ii) unlawfully benefited from significant criminal activity”.

Yes, on their face, they could include anything and everything under the sun. In the primary legislation—the Criminal Proceeds Recovery Act 2009—at sections 5, 6, and 7, but in particular 6 and 7, “significant criminal activity” is defined and it means “an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending—(a) that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or (b) from which property, proceeds, or benefits of a value of $30,000 or more have, directly or indirectly, been acquired or derived.”, and there’s a little bit more there. Then, to the “unlawfully benefited”, this is defined in section 7 of the primary legislation: “In this Act, unless a context otherwise requires, a person has unlawfully benefited from significant criminal activity if the person has knowing, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).”

Harete Hipango—well, if she still wants the call.

Thank you, Madam Chair. I heard someone else take a call and thought it might go that way, so I appreciate being called.

Minister, I’d like to pick up on some points that are raised by my colleague and friend Chris Penk in relation to the use of the term “restraining order” under new section 24A, proposed as an amendment in clause 15. Not having sat on the select committee at the time that there were these discussions and considerations, “restraining order” for those of us who have worked in the Family Court—and bearing in mind that this is likely to be in the jurisdiction of the District Court criminal court dealing with some aspects of civil proceedings as well.

Has it been considered, Minister, that rather than referring to the term “restraining order”, which in the Family Court is associated with a protection order and the safety and protection of an individual as opposed to property, which is what new section 24A is specifically about; so that there is the absence of confusion, has consideration been given to the terminology as a property restraining order, so that there is that clear delineation in terms of jurisdiction but an understanding by the public as to what this relates to and means?

I thank the member Harete Hipango for the question. Section 5 in the primary Act defines a “restraining order”, so these have been in operation for the proceeds of crime regime since 2009. I’m not sure of its whakapapa prior to then, but the operational provisions are in sections 24 to 27, and there it’s defined, or how these are made. So the court hears an application for a restraining order related to specific property where that court is satisfied on reasonable grounds to believe that property is tainted property and they then may make an order that that property—“(restrained property)”—is not to be disposed of. There’s a range of other provisions there, and then it walks through the way in which the court must treat those restraining orders.

So what we’ve sought to do in this amendment bill is to add no undue—or further disrupt, if you will, the current existing regime, but add, in essence, to what is already there.

Thank you, Madam Chair. Minister, we’re inserting a new section, 24A, which is about making restraining orders relating to specific properties of associates. And at section (2A) of that clause, it talks to formal valuations of property. The Commissioner of Police is not required to provide the court with any formal valuation, and may provide estimates as evidence in regard to property values. And we actually delete section (2B) in the original bill because we’ve got these amendments in at (2A).

What is the expectation of the police here, Minister? What are the number of valuations that should be presented? And if they’re not formal valuations, who actually does do the valuations? And, then, what is the expectation of how property will be valued if it is not done formally, especially when we’re likely to see quite high valuable assets like homes and motorbikes—some in the hundreds of thousands of dollars—being seized?

If we are not to give a formal valuation, then who is giving the valuations? How many of them are to be required? And because we say within that clause that the police “may provide estimates”, will they actually provide estimates or could they just stand up and say, “Well, no, we decided not to today.”? Could you just explain how that clause is actually going to work in regard to the valuations, in regard to the provision of estimates, who gives those estimates, especially for the high value of some of those seizures that we’ll be expecting to make?

Thank you to the member. In consultation with my officials, I understand that essentially it’s a bit of a pragmatic test that’s required to be satisfied. So let’s say that the police have seized a nice Harley-Davidson—one like my father drives or something: you know, a good one. What they are required to do is basically provide the court or provide evidence of that value, so from a reputable, you know, just go online would be sufficient enough. It needs to be “reasonable.” There just needs to be reasonable evidence to support the valuations that are provided for the determination to be valued.

I move, That the question be now put.

The question is that the Minister’s amendments to Part 1 set out on Supplementary Order Paper 318 be agreed to.