NZ blacklisted by EU
New Zealand and Russia have been struck off a prestigious European Union banking and corporate "white list" over this country's weak money laundering and terrorism financing controls.
The Russian Federation has been pulled off the list because of the levels of corruption.
The EU has not formally announced why it removed New Zealand, but EU member state Latvia publicly named New Zealand in a letter to Fairfax Media.
"I would like to inform you that Latvia has intended to exclude New Zealand and Russian Federation from the list of countries whose legal requirements of money laundering and terrorist financing prevention are equivalent to legislation of the European Union," Latvia's Deputy State Secretary on financial policy issues in the Ministry of Finance, Arina Andreicika, said in the letter.
She said Latvia had made its decision based on a report from the EU's Committee on the Prevention of Money Laundering and Terrorist Financing.
It maintained that New Zealand no longer had comparable laws to the EU and she added: "Conclusion is based on evaluation of the report on New Zealand laws and regulations of money laundering and terrorist financing prevention in compliance with international requirements and the level of corruption in the Russian Federation."
Being struck off the white list means that banks and institutions in Latvia and the EU "will not be entitled any more to make simplified research for banks and financial institutions registered in New Zealand and Russia".
It also means European institutions can no longer "accept and acknowledge" customer identification and analysis" performed in New Zealand.
Latvia's confirmation it had blacklisted New Zealand comes after revelations over the way New Zealand registered shell companies - which can be created on the Internet for $153.33 - have been used in multi-million dollar money laundering operations involving banks in Riga.
An international investigative reporting group, the Organized Crime and Corruption Reporting Project, published extensive details into a now struck-off New Zealand company for allegedly washing US$680 million ($834 million) through a Riga bank account, with no explanation of where the money came from or went.
After the revelations, Latvia's Economy Minister Daniels Pavluts said he was ashamed that Latvia was increasingly being used in "obvious offshore schemes".
The EU's white list was revised on February 8, leaving Australia on but New Zealand off.
Other countries on the white list included Brazil, Canada, Hong Kong, India, Japan, South Korea, Mexico, Singapore, Switzerland, South Africa and the US.
An associated EU paper on shell companies says "shell companies offer large opportunities for cyber money launderers, and appear to be used primarily at the layering stage.
"Shell companies are enterprises without any business activity, assets and liability. But such an entity possesses a number of bank accounts often conveniently located in offshore jurisdictions."
Commerce Minister Craig Foss, who commented before confirmation of New Zealand's removal from the white list, said the Government was committed to enhancing compliance with international standards issued by the Financial Action Task Force on anti-money laundering and countering terrorist financing."
The Anti-Money Laundering and Countering Financing of Terrorism Act was passed in 2009 which required financial reporting entities to undertake robust customer due diligence measures, monitor accounts to look for complex and unusually large transactions or patterns of transactions and report suspicious transactions to the police.
Parliament will also take to first reading the Companies and Limited Partnerships Amendment Bill which modifies shell company creation rules by requiring companies to have a resident agent.
On the Auckland shell company accused of laundering $680m at a Riga bank, Foss said it was removed from the register in 2010 because it failed to file an annual return.
"As part of these efforts, the Ministry of Economic Development's Companies Office operates a dedicated Corporate Risk Profiling team to mitigate and, where possible, prevent the misuse of New Zealand-registered companies for overseas criminal activity," Foss said.
"Where a potential high-risk company is identified, the Corporate Risk Profiling team verifies the identity of the shareholders and directors concerned, and the residential address of the directors.
"The team also undertakes compliance visits to ensure that high-risk companies comply with the requirements of the Companies Act, particularly around the keeping of company records at the company's registered address."
- © Fairfax NZ News
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