Bill will make scams harder

MATT NIPPERT
Last updated 05:00 22/07/2012

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The Government is fast-tracking reforms to prevent New Zealand companies being used as tools by international criminals.

The move comes after criticism from opposition parties that the Government was dragging its feet on the issue and as the Sunday Star-Times uncovers New Zealand links to a rort of the Ukraine health system, where publicly purchased vaccines were subjected to 300 per cent mark-ups.

As in previous cases of shell company abuse, the vaccine scam relied on New Zealand-registered companies using foreign directors - in this case a Panamanian mother - to obscure transactions.

The Companies and Limited Partnerships Bill will require New Zealand companies to have a local director or agent, but after being put on Parliament's order paper last year by outgoing Justice Minister Simon Power it has languished.

Labour commerce spokesman Clayton Cosgrove said the bill was not contentious and it should be progressed as a priority.

“There are risks and dangers in not finding a fix. It's a matter of priority and gumption on the part of Commerce Minister Craig Foss.”

Green co-leader Russel Norman also called for urgent action to clean up New Zealand's “wild west of company registers”.

Foss sidestepped questions over why the new bill hadn't been progressed, and said it was expected to have its first reading “in the next few weeks”.

Company formation agent David Hillary said the bill would merely bring company registration regulations up to the level of noted tax-havens and company shelters like the Seychelles, Belize and the Cook Islands.

But Foss said the select committee process would allow those criticisms to be considered.

Fairfax Media has uncovered numerous cases of shell companies being used as tools by international scammers, fraudsters, arms-traders and drug dealers.

In the past three months alone reports have detailed locally registered companies being used to assist the looting of $1.5 billion from Kyrzstan's largest bank, the hiding of a Moldovian television station owned by a Romanian businessman facing corruption charges, and suspicious financial transfers by New Zealand companies using Latvian banks.

The latest revelation concerns New Zealand-registered company Hostas. It was named as a key entity in a report prepared for the Ukraine Ministry of Finance that outlined how nearly $1b was pillaged from government coffers.

The report described Hostas as a “classic shell company” that existed only on paper. It was used by Ukrainian firms contracted to supply tuberculosis, polio and rabies vaccines to ramp up prices, and the report detailed four instances where the New Zealand-registered company was used to extract $1.5m from the Ukraine Health Ministry by supplying vaccines that were marked up 300 per cent.

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During the period, Hostas' sole director, Panamanian resident Izeth Tapia, filed declarations stating it was inactive.

New Zealand-based company registration firm The Company Net, operated by Albany resident Glenn Smith, provided a service address and filed paperwork to the registry.

Smith said he only dealt with a Latvian company formation agent, and his firm had stopped registering companies with foreign directors after a visit from the Organised and Financial Crime Agency New Zealand.

Smith welcomed the upcoming bill and said the tougher regulations were "long overdue".

Tapia has directed nearly 400 New Zealand-registered companies, and while the Companies Office has culled most from the register in the past 18 months, she remains the sole director and shareholder of Ayron Deco.

London-based investigative organisation Global Witness, which tied Company Net-formed and Tapia-run New Zealand companies to corruption in Kyrgyzstan, received claims of ignorance from the Panamanian woman.

“I live with my little baby in a small town . . . and I have no job . . . I've only been a nominal head of these corporations and have nothing more to say.”

- Sunday Star Times

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