Bank cracks down on shell company

Kiwibank has closed the bank accounts of an Auckland operation which has created around 2500 shell companies - including one for an illicit North Korean arms smuggler.

Vanuatu-registered GT Group, headed by accountant Geoffrey Taylor and sons Ian and Michael, specialise in creating companies which use nominees to hide the beneficiary owner.

It set up SP Trading Ltd of 369 Queen Street which last year chartered a plane to fly North Korean arms to Iran which was later intercepted in Bangkok.

A Chinese resident in New Zealand was later convicted of making false statements over SP Trading whose actual owner was notorious Kazakh arms dealer Alexander Zykov.

International authorities have warned New Zealand's easy company formation system, which can be done for $100 on the internet, was making the country open to money laundering and other illicit activities.

Kiwibank fraud investigator, Damian Perry, wrote to Ian Taylor telling him the bank was closing their business and personal accounts and that if they wanted to dispute this "you will need to provide reasons why Kiwibank should continue its banking relationship with you".

Kiwibank confirmed a letter was written but would not discuss it.

Oddly, the letter was forwarded to Fairfax Media by Taylor, along with his written reply to Kiwibank in which he said the bank was closing him down because "you simply do not like fact that I provide incorporation services to international clients and provide personal nominee services to the same clients.

"Interesting that your bank willingly provides accounts for people who represent petty criminals, paedophiles, murderers, rapists and other such people who pay funds to their legal representatives, which are then banked into Kiwibank."

Taylor said that if Kiwibank wanted to treat him like a criminal, then he would act like one, without breaking the law: "I will have new accounts opened by people other than myself, I will use nominee directors and such."

Last year Commerce Minister Simon Power said he would amend the Companies Act to tighten on-line registration, making it harder for criminal activity to take place.

His office yesterday said the legal amendments were being drafted and would be in Parliament by the end of the year.

A US diplomatic cable, leaked this week by Wikileaks, shows the Americans are also concerned at company creations here and cited Auckland-based Maritime Mutual Insurance Association NZ (MMIA) claiming it was providing cover for North Korean ships.

Wikileaks revealed a secret cable written by the US Embassy in Wellington in 2005 about MMIA said the New Zealand government did not consider it to be an insurance company as it did not meet legal requirements for issuing insurance.

MMIA director Paul Rankin, whose registered address is in the Channel Islands, said that it acted in accordance with New Zealand law.

He said Wikileaks were being viewed with scepticism "because of the apparent simplicity or mistakes in the analysis".

The cable said the Security Intelligence Service was investigating MMIA after it became involved in insuring North Korean ships.

"The New Zealand government recognises that it needs to change its law, which as now written does not allow it to halt MMIA's activities or withdraw its incorporation," the cable said.

It quoted Gavin Quigan of the Ministry of Economic Development's Insurance and Superannuation Unit who compared MMIA to three New Zealand-incorporated companies prosecuted in the United States for selling insurance fraudulently.

"Quigan said the government does not want the name of New Zealand misused in this way," the cable said.
MMIA is still registered in New Zealand, earning around $10 million a year in premiums from "captive insurance", an arrangement to spread risk. It is owned by Maritime Mutual Association of Gibraltar.

The company was also working with a government taskforce investigating the creation of a financial hub in New Zealand, Rankin said.

He confirmed that at the time of the Wikileaks cable, the company was providing protection and indemnity insurance for North Korean ships carrying cargoes in Asia.

"For your information, due to commercial reasons cover is no longer provided and, in fact, this business relationship terminated in 2006," Rankin said.