Property deals laundering dirty money
Lawyers, accountants and agents handling proceeds of crime: police
Police research concludes that a legal loophole i s seeing lawyers, accountants and real estate agents increasingly being used to launder $ 1.6 billion in dirty money annually. The money i s helping fuel the booming property market .
“Recent police investigations have exposed the fact that professional services and the real estate sector are closely linked to organised crime and drug offending,” officials said.
That research, sampling freezing orders obtained to seize the proceeds of crime, found 26 per cent of cases involved unpicking the work of accountants and lawyers, and 56 per cent of cases involved property deals where “offenders were ultimately successful in integrating criminal proceeds by purchasing real estate”.
Reports supplied under the Official Information Act — and provided only to the Weekend Herald after a complaint to the Ombudsman — show Justice Minister Amy Adams was briefed last June about police concerns. Policy work to close the loophole began a year later.
Adams yesterday said this briefing was the first time the matter had been brought to her attention, and while she went against the “preferred option” of officials to begin policy work immediately, she had requested scoping work to get to grips with the scale of the reforms required.
“I wanted to move quickly, but quickly bearing in mind this is not an area you want to get wrong,” she said, citing tens of millions of dollars in expected compliance costs for businesses. She insisted her decisions had not slowed the policy process.
The study was cited in documents covering discussions over when to remove an exemption of professional services firms — mostly lawyers, accountants and real estate agents — from anti- money laundering laws passed in 2009. The documents show police estimates of locally- generated dirty money being laundered annually — from drugs, fraud and tax evasion — was up to $ 1.6b.
Labour Party leader Andrew Little said Adams had rebuffed official advice to move quickly on the matter and the Government was “dragging the chain”.
“When you’ve got a red hot property market, as we do at the moment, for criminals laundering money it’s like bees to a honey pot. You put in dirty money, and in the current market you can get it back clean quickly — and with interest.”
Little said John Shewan’s report into i ssues raised by the Panama Papers had called for an immediate end to the exclusion of professional services from anti- money laundering regulations, but this call for action was also ignored by the Government.
Ron Pol, of AMLassurance. com, who is studying the involvement of professional services, said the exemption was a mistake but moving urgently now was not the answer.
“To stop the obvious ‘ displacement effect’, where criminals turn to easier places to launder money, the professions should have been inclu- ded from the outset. But it is complex, and will take some time to get right,” he said.
The regime was first applied to banks and casinos in 2013 — with professional services firms to be brought in at a later date — and broadly requires organisations to ensure they know who their clients are and to actively monitor and report suspicious transactions to police.
In a briefing to Adams in March which included police concerns, officials said the mismatch in coverage meant the professional services sector was now more attractive to criminals and “potentially provides a ‘ road map’ for would- be money launderers”.
It noted officials had long- wished to progress work to close this gap, but these preferences had been overruled. “Work was due to commence in 2014, but was deferred to competing priorities,” officials said.
Adams said this juggling of priorities was not her responsibility. “I wasn’t the minister at that time, so can’t speak to that.”
The removal of the exception was anticipated by officials to attract resistance from the legal, accounting and real estate sectors as it was estimated to impose annual compliance costs of at least $ 76 million.
Police Association president Greg O’Connor yesterday said the exemption was unsatisfactory and the reve- lations in briefings to the ministers should be no surprise.
“I think most New Zealanders will very quickly realise if you are going to have any sort of sophistication about hiding assets you are going to have to involve the professionals. And if you’re going to have meaningful asset seizure legislation, you’ve got to be able to get behind screens,” he said.
Asked about the series of delays, O’Connor agreed opposition from the sector was the most likely cause: “Naturally enough, they’ll fight this tooth and nail.”
This week, industry bodies for the three professions, which declined to talk on the matter and instead issued written responses, accepted they would lose their special status.
The Real Estate Industry of New Zealand said it was “accepting of appropriate vigilance of Ministry of Justice and support the establishment of suitable compliance provisions”.
The Law Society said it “always recognised the case for lawyers being reporting entities under the [ AntiMoney Laundering] legislation and we have not opposed that.”
Chartered Accountants Australia and New Zealand said they had not lobbied to delay the policy, but, while they supported the regime being extended, this “support is contingent on the regime being practical, costeffective and not imposing excessive compliance costs.”