NZ called a haven for illegal Indian cash

23:15, Feb 13 2012

New Zealand has been cited by India's top corruption fighter for allowing a large share of India's black money to be sheltered here.

Central Bureau of Investigation (CBI) director A P Singh told a conference in Delhi that Indians hid US$500 billion ($602 billion) in tax havens outside of the country.

He said 53 per cent of countries said to be least corrupt by the Transparency International Index are offshore tax havens, where most of the corrupt money goes.

"The tax havens include New Zealand ranked the least corrupt country, Singapore ranked No 5 and Switzerland ranked No 7," Singh said.

He did not specify how much was hidden in New Zealand or how, but it was likely to involve the myriad of shell companies that can be formed on-line from anywhere in the world.

He linked shell companies to the CBI investigation into millions of dollars that went missing from the Delhi Commonwealth Games two years ago. Money went through several tax havens.


"For the criminals all it involves is setting up of a few shell companies and then making layered transfers from one account to another in a matter of hours as there are no boundaries in banking transactions," Singh said.

For investigators, tracking the money through judicial channels can take years.

"There is a lack of political will in the leading tax haven states to part with information required to trace such assets, as they are all too aware of the extent to which their own economies have become geared to this flow of illegal capital from the poorer countries."

Last year, a New Zealand Justice Ministry paper said shell companies registered here were being used to launder around $1.5 billion in the proceeds of international and domestic crime.

"While New Zealand has robust domestic laws and law enforcement, low levels of corruption and high levels of international engagement, it is not immune to domestically and trans-nationally generated organised criminal activity," the multi-agency prepared report said.

The justice paper said the amount of laundered money passing through New Zealand entities was difficult to quantify "but is thought to be significant, in the order of $1 billion to $1.5 billion."

That kind of laundering was a "critical facilitator of economic crime.

"It can in its own right represent a risk to individual entities, and have a destabilising influence on economies."

The paper said over 1000 New Zealand company and limited partnership arrangements were "implicated in serious offending overseas over the past five years".

It said they were used to facilitate "trafficking of illegal drugs, people and illegal arms, money laundering and large scale frauds".

They warned it was detrimental to New Zealand's reputation and the global rule of law.

"Criminals prosecuted both here and abroad have utilised what might appear to be legitimate business arrangements, comprising a legal entity or arrangements of multiple legal entities such as companies, trusts and building societies."

Sunday Star-Times investigations over the last two years have linked shell company operations to the Russian mafia and Mexican drug cartel money, as well as North Korean arms trading.

New Zealand's role in the laundering process revolves around easy on-line company formation.

It was first exposed in 2009, when a Georgia registered cargo plane touched down at Bangkok from North Korea and was found to have 35 tonnes of sanction-busting arms aboard.

A Queen Street shell company, SP Trading Ltd, chartered the plane. Its director, Burger King cook Lu Zhang, 29, was later convicted of 75 breaches of the Companies Act for giving false addresses.