New Zealand leaves door open to enabling foreign bribery, OECD warns

Commerce Minister Andrew Bayly said progressing a beneficial ownership register - as recommended by the OECD - was not a high priority. Photo / Mark Mitchell

A recent assessment of New Zealand’s efforts to fight foreign bribery has found glaring holes in law enforcement and criticised successive governments over failing to deliver a long-promised register of beneficial ownership.

A group from the Organisation for Economic Co-operation and Development (OECD) - a multilateral group of developed countries - last year assessed New Zealand’s compliance with its Anti-Bribery Convention and drew attention to an inability of the Serious Fraud Office - or civil society or other agencies - to determine who really owned or benefits from companies and trusts.

“Although New Zealand has recently contemplated further legislation to improve beneficial ownership transparency, the situation remains that there is no general requirement for companies to disclose beneficial ownership information, therefore limiting the ability of the SFO to access such information without having alerted the relevant company,” the assessment said.

The Convention was signed in 1997 - and later ratified by New Zealand - to clamp down on companies and individuals offering bribes to government officials in other countries.

These bribes are typically used in criminal schemes to secure market access or government contracts, with detection and prosecution made more difficult by finances and relevant legislation crossing multiple jurisdictions.

Such a register would require corporate entities - largely companies and trusts - to disclose who they were ultimately owned and controlled by.

At present the use of nominee directors or holding companies based in opaque jurisdictions can make finding this information difficult or impossible.

Commerce Minister Andrew Bayly this week said while the OECD recommendation for a beneficial ownership register remained on the agenda it was not a top priority.

“Due to its complexity and the high level of attention it warrants, a beneficial ownership register for companies is not currently being progressed. However, I intend to pick up the beneficial ownership work for companies in time once my team has some more capacity,” the minister said.

Proposals for such a register were first floated in 2016, by then Justice Minister Judith Collins, but actual progress since has been stop-start and ultimately static.

In 2022, following a stinging rebuke from another multilateral anti-crime body - the Financial Action Task Force - to “explicitly require” such a register, then-Commerce Minister David Clark said he had secured Cabinet approval to progress enabling legislation and would make the register publicly available.

This law-making, however, did not occur and the 2023 general election saw a change of government and Bayly taking over ministerial responsibility.

Last year Bayly presented a package of reforms to the Companies Act to Cabinet, but decided not to include establishing a beneficial ownership register.

Bayly said other reforms of the Companies Act he was progressing - including improving uptake of the New Zealand Business Number by companies - would “go a significant way towards addressing [OECD] recommendations”.

In Cabinet papers officials recorded that the omission of a beneficial ownership register concerned some branches of government: “Ministry of Justice, New Zealand Police, Serious Fraud Office, New Zealand Customs Service, Ministry for Primary Industries, and the Public Service Commission expressed concerns about not including proposals for a beneficial ownership register as part of this package of reforms. They consider a delay in implementation has implications for law enforcement in combating corruption, money laundering, terrorist financing, fisheries and trade-related crimes, and tax evasion and for better tracking beneficiaries of the proceeds of crime.”

Transparency International NZ chief executive Julie Haggie said Bayly’s decision to put the register on the back-burner was “very concerning”.

“We have been told we need to pull our socks up to maintain that reputation. This includes being more transparent about who controls companies and trusts operating within our financial and legal systems,” she said.

“Further delay offers a free pass to those wanting to hide their name and their assets within our shadows.”

Haggie said a register - ideally publicly-accessible - was “absolutely important” given the limited resources of police and the Serious Fraud Office.

“We know internationally the place people like to hide and shift money, and hide it in layers, is in places where there is less transparency. That’s the case in New Zealand.

“It’s better than what it used to be when we allowed foreign trusts to be set up with impunity, but having these tools made publicly available will reduce the use of New Zealand trusts and the financial system by those wanting to hide ill-gotten gains - whether they’re oligarchs or tax-evaders,” she said.

The OECD working group also raised concerns over the lack of any prosecutions by the SFO of any foreign bribery cases in New Zealand, signaling this was more likely evidence of a lack of detection than a lack of crime.

The working group said: “Concerningly, a number of foreign bribery allegations initially reported by foreign media were not detected by New Zealand and instead were brought to New Zealand’s attention by the Working Group”.

The SFO said in a statement foreign bribery has been a “strategic focus” since 2023, and it had recently created news roles to better monitor reporting overseas and follow up New Zealand links.

“We encourage stakeholders, including investigative journalists to share information about relevant criminal activities. These contributions are invaluable in supporting our mission of disrupting and deterring serious fraud and corruption,” the SFO said.

Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won more than a dozen awards for his journalism – including twice being named Reporter of the Year – and joined the Herald in 2014 after having spent the decade prior reporting from business newspapers and national magazines. He was consulted by the OECD Working Group as part of its assessment of New Zealand’s compliance with the Anti-Bribery Convention.