In a move targeted at unveiling corporate secrecy that has seen companies and trusts act on behalf of shadowy foreign figures, the New Zealand government has committed to the establishment of a public beneficial ownership register. The register had been earlier proposed by the Ministry of Business, Innovation and Employment (MBIE) in 2018 with efforts to enact it stalling until now.
The concern was reignited by the Pandora papers report last year that demonstrated that NZ businesses were being used by people wanting to hide their wealth and were linked to overseas political corruption and frauds. Amongst the notable cases was that of fugitive Moldovan politician Vladimir Plahotniuc, who is accused by Moldovan authorities of having stolen some $1 billion and was reported to have a New Zealand trust that was active until May 2021.
When the Panama papers came out in 2016, NZ had already been portrayed as a tax haven through its registered trusts that were exploited by various criminal elements. Efforts were subsequently made to address the weaknesses in trust laws. However, in the 2021 Pandora report, it was noted that New Zealand registers only appeared to record the company service providers or anonymous trusts rather than the real beneficiaries of the transactions.
Commerce Minister, David Clark, has confirmed that the cabinet has now agreed to introduce the legislation by the end of 2022 under its new transparency bill. He said that the register was intended to ensure New Zealand businesses knew exactly who they were transacting with as it would become possible to link individuals with all the entities they associated with. He added that this would act as a hindrance to those that sought to use New Zealand for tax evasion, money laundering, and financing terrorism.
Many trust providers and company directors have allegedly pushed back against public registrations. However, the government has appeared to compromise by allowing for only the service addresses of directors of such companies to be published on the Company Register, rather than their residential addresses.
Clark said that the new changes were intended to allow for a complete picture of company ownership structures that would allow for easy identification of the beneficial owners. The measure will also see each beneficial owner, director and general partner of limited partnerships assigned a serial number so that they can be easily linked to all the entities they are associated with.
This register is also expected to help identify foreigners that have been skirting around the foreign home buyers ban. The ban that was imposed in 2018 has relied on the honesty of lawyers that set up trusts and companies to facilitate these transactions. However, the Overseas Investment Office (OIO) has noted that some investors have been using these trusts and companies to conceal property ownership. The OIO is hoping that the new transparency measures will act as a deterrent to those looking to circumvent the ban.
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