Anti-Money Laundering and Countering Financing of Terrorism Bill; Third Reading

Te Ururoa Flavell, MP for Waiariki
Thursday 15 October 2009

Tena koe te whare. Kia ora tatou katoa.

The Maori Party is pleased to support this Bill at its final reading, and we welcome the move of the House to do so, in time for World Poverty Day coming up this Saturday 17 October.

The 2009 observance of the International Day for the Eradication of Poverty focuses on the plight of children and families living in poverty – a goal very close to the heart of the Maori Party.

In the relationship agreement we signed just on eleven months ago, there is a commitment to achieve significant outcomes in whanau ora through eliminating poverty.

And so the question that we come to this Bill with is, how will the law that we pass today, make a difference in lifting people out of poverty?

In the context of Aotearoa, the failure of many investment companies, the possibility of fraudulent banking and investment practice, and the lack of confidence in our financial system has robbed investors of savings – and that in itself is a very good reason why this Bill has surfaced.

But probably the most direct impact on reducing poverty is at a global level and some of the speakers have spoken about that already.

An International Monetary Fund estimate back in 1998 placed the value of global money laundering, including that of corrupt funds, at between $800 billion and two trillion dollars annually.

So we’re talking about huge amounts of funding resulting from the practice of bribery and corruption – and that’s a decade ago, so we can only imagine the extent of the damage that happens now.

When you start talking about trillions of dollars it all becomes a bit of a Beagle Boys operation, manufacturing wads and wads of illegal notes.

In its most basic form money laundering transforms what we might call ‘dirty money’ – that’s money from crime – into ‘clean money’.

Clean money is nothing to do with the crispness of the notes of course –but it’s all about the whakapapa.

Clean money to all outsiders eyes looks like it comes from a legitimate source, and thereby makes it almost impossible to trace the criminal origin of this sort of money.

By using this form of changing money, this process of transformation, criminals are able to benefit from their crimes as it becomes extremely difficult to develop a case for prosecution.

But it becomes even more complex when we find the menu of ways in which money laundering can take place.

According to the Ministry of Justice’s helpful anti-money laundering website, there’s almost a beginner’s guide to money laundering.

There’s something called smurfing – that’s the process of depositing cash across a range of institutions in amounts that don’t need to be reported to government, and then eventually transferring them all into a central account.

There’s currency smuggling when funds are moved across borders by mail, courier of body packing as a form of disguise.

There’s exchanging transactions - where foreign currency is bought that can be transferred to offshore banks.

Or prospective money launderers could purchase assets with bulk cash – that’s building up an inventory of assets such as cars, boats and real estate; then selling them to deposit the funds.

And if all else fails, there’s the casino where a pile of gambling chips can be purchased, and then redeemed for a big fat cheque.

The more we read in fact, the more complex and the more sophisticated this whole industry of money laundering becomes.

And so, initially, that seems a pretty good reason for passing legislation to make it easier to detect and investigate money laundering activities.

One of the issues that interested us when this came before the Select Committee was an observation made by the National Council of Women. They suggested that the claim that the Bill will contribute to public confidence in the financial system seems contrived.

It was their view that in the absence of hard evidence that our banking system is threatened by money laundering or terrorism, it is difficult to know how the public will feel more confident if this Bill is passed.

Instead the National Council of Women saw the reason for this Bill being indirectly, in the public interest, in terms of complying with international obligations.

Basically, the government is obligated to pass this legislation to maintain the viability of our economy in global eyes. It’s about keeping faith with the Financial Action Taskforce - a body to generate political will to combat money laundering and terrorist financing.

That last part is the real reason why there is so much momentum focused around this particular bill.

It’s driven from American legislation such as the Patriot Act which amends the Bank Secrecy Act in response to the attacks of September 11, 2001. The Patriot Act is intended to strengthen measures to prevent, detect and prosecute international money laundering and the financing of terrorism

So here ends the lesson of whakapapa!

Having established the source and the context for why we are rushing this legislation through today, in this third reading, I want to return to the specific impact of this legislation for us.

The briefing paper from the Reserve Bank puts this bill into the context as an essential component of the Government’s programme to tackle organised crime.

That paper estimated the profits from methamphetamine and cannabis at between $1.4 million and $2.2 billion per annum. The anti-money laundering framework will allow the flow of such funds to be tracked and seized.

And I just want to raise a note of caution that emerged from a paper by Dr Jackie Harvey in the Anti-Money Laundering Bulletin, a publication from the Newcastle Business School. She said,

“Without facts, legislation has been driven on rhetoric, driving by ill-guided activism responding to the need to be "seen to be doing something" rather than by an objective understanding of its impact on pedicate crime.

The social panic approach is justified by the language used - we talk of the battle against terrorism or the war on drugs”.

I think this advice is useful to bear in mind when we talk about things such as money laundering, so that we focus on the crime at hand – the fraudulent use of funds – rather than promulgating fear.

And as we return to the Maori Party focus on the most effective ways to eradicate poverty I can not leave this debate without noting that adopting the recommendations will increase business costs to customers – which will be passed on to ordinary bank customers.

This at a time when as the Finance and Expenditure Committee report makes clear, banks have already been shown to be overcharging their customers.

And so we are concerned that this legislation will place additional costs on businesses and customers when they are most under strain. There is little clarity in the Bill about the extent of these costs, but it will cost and there’s no doubt about that.

So the Maori Party will continue to speak out about the absolute need to address poverty - and if addressing bribery and corruption will help to make life easier for the working poor and the poverty-stricken, then we will certainly support that aim.

We do not believe this Bill goes anywhere near an effective response to the problems of income distribution, but it does make an honest attempt to ensure we are aligned with cleaning up the international financial system and so as global citizens, we are pleased to support this third reading of the anti-money laundering and countering financing of terrorism bill.

ENDS

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