Statutes Amendment Bill

Members, we come now to Part 2. This is the debate on clauses 8 to 12, “Amendments to Anti-Money Laundering and Counter Financing of Terrorism Act 2009”. The question is that Part 2 stand part.

Thank you, Madam Chair. Look, just in terms of the Minister’s earlier, original speech, she did observe that this is a non-contentious bill and that it’s bundled together because they might not get the legislative attention they need. I must say it’s surprising to see this being done in urgency, because I think that is the definition of a non-urgent bill. Having said that, we are here in urgency, and one of the jobs of an MP—all MPs—is to scrutinise. So that’s exactly what we will do as we go through these various parts.

I want to talk about clause 9 because it’s actually a really unusual clause, because clause 9 deals with occasional transactions. The original section 5(1) identifies a number of transactions which are one-off transactions which raise red flags, and therefore kind of fall within the anti - money-laundering regime. Then, further paragraphs carve out things, and one of the things they carve out was cheque deposits. Now, in 2009, a one-off cheque deposit was unexceptionable. I can understand that’s why it was carved out, because if someone gets even a large cheque, sells a car, gets $20,000, it could be paid for by cheque if you were a trusting person back in the day, and you deposit it—a transaction which is occasional but doesn’t really cross the threshold of suspicious.

However, where we’re revisiting this definition, which is what we’re doing, by adding “made at a registered bank or non-bank deposit taker.”, which is a strange addition because they’re the only places at which you could deposit cheques, anyway, the fact of the matter now is that you can’t actually deposit cheques at a bank. If you are going to somewhere which accepts cheques, you’re doing something which is truly odd. It may be that you could make a special arrangement or there may be non-bank deposit takers out there which will, essentially, take your cheque and, essentially, buying it off you at its face value and then clearing it through a unique system, because there is no clearing system for cheques any more. Cheques are gone. So I would have thought that if someone’s bandying about with a cheque for $20,000 now, that is a red flag.

In fact, I’m interested to understand why we are making provision for cheques deposited at a registered bank or non-bank deposit taker when that is not a system that actually exists, and someone going around with these negotiable instruments is, in fact, I would have thought, something which the police and their financial team would want to know about because it’s a suspicious transaction.

Thank you, Madam Chair. I thank the member for his comments and for his question, because I admit, when I first looked at it, I thought very much the same thing. But, actually, there are banks that still honour bank cheques, and what has been the status quo is now actually just being tidied up. So the whole reason for this is because there are still bank cheques out there that are still being captured by these, as well.

I’m sorry, members, but the time has come to break for the dinner break.

Sitting suspended from 5.58 p.m. to 7 p.m.

Kia ora, everyone. The committee stage is resumed.

Thank you, Madam Chair. Just following on from my colleague Duncan Webb’s questions to the Minister, which were, I believe, around clauses 8 and 9, I wouldn’t mind moving on to clauses 10 and 11 in Part 2. These are also in relation to the changes that are proposed under the amendments to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. The question in relation to clause 10 is just really a very quick question—both in relation to subclause (1) and subclause (2). They seem to be just reorganising the same information. I can’t recall specifically discussing that or the rationale for that, but if the Minister has anything to add, I’d be interested in that.

Then, in relation to clause 11, which makes changes to section 40 of the Act, I do have some more substantial questions for the Minister, because, in this particular part, there appears to me to be more substantive—I’m not saying it’s substantive in the sense that it goes against what the bill is trying to achieve through making minor and technical amendments, but there is a few changes to a couple of things. The first thing I noted was essentially there’s a carve-out, as I can see it, for law firms. When I looked at the original bill that this is replacing, it appeared to me that there wasn’t a carve-out for law firms. I could be wrong on that, but I wanted to know specifically why law firms would have a longer period of time to report suspicious behaviour than other entities. In a way, I would have thought it was the other way around because, I think, law firms are often used to being able to identify suspicious activity. Of course, there’s a carve-out there for privileged information. I suppose a possible reason could be that they are assessing whether the information is privileged and whether they can make that disclosure. I just wondered if there was any further explanation that officials could give as to why that was put in place. That’s my question in relation to clause 11.

Now, in clause 12, there is an additional extension of the period of time—in fact, a doubling of the reporting entity’s period of time—that they have from 10 days to 20 days. Again, it’s a doubling of the time. It’s a longer period of time. I imagine there’s a public interest in having these things reported as soon as practicable, and I don’t know if there was a particular instance that led to wanting to make this period of time longer, but I will be interested to know the rationale for that.

Essentially, those are my questions. Why is the law firm specifically carved out? Why the extension? The other question’s more minor—whether there is any information the Minister has?

Thank you, Madam Chair. In relation to the questions for clauses 10, 10A, 11, and 12 in Part 2 on the anti-money laundering: the amendments have been made because the current provisions are unclear as to what needs to be gathered. As a result, the enhanced customer due diligence is being undertaken everywhere. This is the issue that we’ve had with kids no longer being able to open bank accounts because they cannot provide a letter or a bill that has their name on it and, therefore, they don’t meet the criteria.

Clause 10 was about removing unnecessary customer due diligence in areas where there is no risk—for example, kids trying to open a bank account. But I really like what the Governance and Administration Committee did, which is they basically confirmed that we don’t need to have the minor customer due diligence there but rather have enhanced due diligence where it’s need. So the select committee made a change at that stage, and I’ve accepted it. I thought it actually made it quite tight.

In regard to clauses 11 and 12, which is extending the time frames from three to five working days for the law firms for the carve out, also for the extended time frames for the prescribed transaction reports from 10 to 20 days, this is actually to get better, more well-informed reports, instead of having rushed reports. It allows more time so that the agencies can produce something that is more meaningful.

At the moment, it’s being rushed, and it’s not very high quality. If we’re to really go after the criminal assets—or not criminal assets but the criminal intent, I should say—then having really good, prescribed transaction reports and the extended couple of days’ time frame for the law firms means that they can not only do their due diligence but also come up with some really good quality reports.

Thank you, Madam Chair—couple of different points. The first relates to clause 10A, which talks about due diligence according to the level of risk involved. My reading of it—and I’m happy to be educated about the Act itself—is that there is no real expansion of what level or risk is. I know that this is going to be administered by the Department of Internal Affairs, and they can give guidance and so on, but there’s always a danger when it’s just guidance rather than legislative direction.

Obviously, things like where the funds come from, who the customer is—if it’s a kid, it’s less risky, but there’s still some risk there—the length of time that the customer has been a customer, and all kinds of other matters would contribute to the level of risk. I think that when we’re debating this—and this debate is taken as some guidance as to legislative intent—I’d invite the Minister to talk about what kinds of things would be relevant to assessing the level of risk. The danger is always that people who want to make life easier for their client or customer kind of downgrade the level of risk and say, “Well, I’ve known you for a long time, so you selling me gold bullion isn’t risky at all.” So I’d be interested to know that.

The other question is about clause 11, which talks about suspicious activities, and it has a couple of exceptions. It says in section 40(1), in clause 11, “A reporting entity other than a high-value dealer or law firm must, as soon as practicable but no later than 3 working days …”. I’m really interested in high-value dealers, because if you look at the definition of high-value dealers and you see what they deal in, it seems that bullion, fine art, jewels and jewellery, luxury motor vehicles, and luxury boats are the kinds of things, and these are things that are absolutely the stock and trade of money-launderers. The other thing about it, particularly things like jewels and bullion, is that it moves quickly and is largely untraceable. Cars might be one thing—a bit easier to track down—but if you’ve got someone with a million dollars’ worth of gold bullion, it’s actually not that much gold. If you wait a long time to report it, then you’ve got a problem. So I’m interested in why high-value dealers are put alongside law firms, because law firms deal with known parties, with bank accounts, and with electronic money transfers mainly, whereas high-value dealers are dealing with tangible movable goods, which would seem to me to be an entirely different level of risk. So I’d be interested to know why high-value dealers are put alongside lawyers and law firms in that respect.

Thank you, Madam Chair. Unlike the previous Government, this Government actually wants our agencies, especially in the anti - money-laundering area, to be able to take a risk-based approach on activities. They haven’t been able to do that, and this is the importance of having a single supervisor that will give guidance to how businesses will operate. We don’t need to put everything into legislation. What we actually need to do is allow businesses to get on with doing business and to do it as unhindered as possible. So the risk-based approach means that those agencies will take all things into account. At the end of the day, they are the ones that are going to have to report suspicious activity reports, prescribed transaction reports, and they will understand what it is that they have to do with guidance from the Department of Internal Affairs. And I will note that guidance has been minimal if at all from the three supervisors over the last 12 years. So moving to the single supervisor to provide guidance is freeing up businesses to be able to get on and do business.

In regard to the other businesses that are beside law firms, I think the member might have actually answered his own question about why we have got these high-value businesses alongside the law firms. It’s because they are dealing with high-value commodities, those that are transacted, as the member himself pointed out, in useful money laundering. This is why they have been brought in. I commend the member for answering his own question.

Part 2 agreed to.

Part 3 Amendments to Armed Forces Discipline Act 1971