Hon SIMON POWER (Minister of Justice) : I move, That the Anti-Money Laundering and Countering Financing of Terrorism Bill be now read a third time. This bill will improve our ability to detect and deter money-laundering and terrorist financing, which is vital to our fight against domestic and international organised and financial crime and terrorism.

The proceeds of financially motivated crime—including drug-related crime, property-related crime, fraud, and tax evasion—are significant. Local and international criminals have shown themselves to be willing to use our comparatively safe and stable financial sector to launder the proceeds of these activities. This legislation will improve our ability to investigate organised crime and to follow the money trail through financial systems.

The ASSISTANT SPEAKER (Hon Rick Barker): There is a lot of chatter in the Chamber from all sides of the House. The Minister is speaking. I would like some quiet, please. I say to the member who is gesticulating to me that it is traditional for members not to have their backs to the Speaker. There must be respect for the Chair.

Hon SIMON POWER: This bill goes hand in hand with the Criminal Proceeds (Recovery) Act, passed by the Government in April, which will be used to attack those profits.

The passage of the bill into law will help to maintain New Zealand’s international reputation and confidence in our financial trading system. Most of New Zealand’s financial trading partners have already implemented robust anti - money-laundering and countering financing of terrorism regimes. In a global economy, countries and businesses are looking for stable, safe economies with which to do business. The passage of this bill into law will demonstrate New Zealand’s commitment to assisting with what is an international problem. The legislation implements measures established by the Financial Action Task Force, which is an inter-Governmental body that sets international standards for combating money-laundering and terrorist financing.

The bill anticipates a significant amount of cooperation between industry and Government to ensure that the regime is responsive to risk, and effective at detecting and deterring criminal activity. The bill, as far as possible, enables businesses to focus their resources on those customers or products that represent the most risk. However, to achieve the bill’s aims, financial service providers and casinos will need to ensure they have appropriate customer due diligence measures and that they can identify and report suspicious activity. The framework the bill establishes is appropriate to New Zealand’s financial system, and is aligned with the frameworks of our trading partners, particularly those of Australia. The bill establishes the Reserve Bank of New Zealand, the Securities Commission, and the Department of Internal Affairs as supervisors to support and maintain the new regime as it is phased in.

I thank members of the Foreign Affairs, Defence and Trade Committee, in particular the committee’s chair, and industry representatives for their valuable contribution to the development of this legislation. I commend this bill to the House.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I am really disappointed with the comments of the Minister, Simon Power. He does this continually. I now have to acknowledge all my colleagues who said that I was wrong about that Minister, and to say that I was in fact wrong and they were right. There is an increasing level of arrogance about that Minister that has completely surprised me. Not once did he mention the work done by my predecessor in this portfolio, the Hon Clayton Cosgrove, on the cost-benefit analysis that was critical to fixing the disastrous bill that that useless Minister introduced. The second thing he failed to acknowledge was the work by my colleague the Hon Pete Hodgson, who I believe was able to work very collaboratively with members of the Government on the Foreign Affairs, Defence and Trade Committee in order to make the changes that needed to be made to this Anti-Money Laundering and Countering Financing of Terrorism Bill.

This bill is nothing like the bill that was introduced into this House some months ago. The reason it has had to change so substantially is that, to put the kindest expression that one could put on it, a very busy Minister took his eye off the ball and let a bill be introduced into this Parliament in a shape that was completely and utterly unacceptable, unworkable, and totally out of line with the cost compliance that one would expect to see, given there was a process across the Tasman in Australia that we should have been able to work with right from the outset. This bill was introduced in really bad shape. I guess that is the point I want to make, and I want to know why. That Minister has not once addressed in all of his contributions on this bill why he took his eye off the ball, in that regard. The fact that he has not even acknowledged that he did take his eye off the ball just shows how arrogant he has become. I am truly disappointed, because I thought he was one of their better ones and I hate to be proven wrong.

I think the problem actually arose when the Government shifted away from that focus on harmonisation with Australia. Again, that surprises me, because the Minister of Justice who is responsible for this bill is also the Minister of Commerce, with responsibility for the single economic market agenda. So it seems utterly surprising to me that he did not pick up that it was fundamentally flawed legislation, until it was able to be rectified by the select committee.

The Foreign Affairs, Defence and Trade Committee did, I think, a very good thing. It was not the committee that would normally be dealing with technical matters such as these; they would normally be within the purview of the Finance and Expenditure Committee or the Commerce Committee. But I congratulate the chair of the committee, John Hayes, and the members of the committee, who I think worked very collaboratively on the bill, on bringing in outside assistance to enable them to address the complexities of the issues.

I think that if we want to really understand the difference between the bill as introduced and the bill that came out of the select committee, we have to look at two quite different approaches. One is a risk-based approach, and that is the one that has been implemented in Australia. The other is a very prescriptive set of rules—one ticks the boxes, and one has to do things in a particular way in order to proceed. I think the Australian, risk-based approach is the right way to go. It is usually the right way to go in the commercial area, because, of course, pacing the prescriptive requirements can actually mean that businesses are not alert to the real issues they should be alert to when trying to manage the risk of things going seriously wrong.

What are we trying to manage here? I think it is important to remember that this bill is the Anti-Money Laundering and Countering Financing of Terrorism Bill, so it is about identifying the risk of large sums of money being laundered through our banking system, which of course has to have integrity in order to be effective, and it is also about countering the financing of terrorism, another important issue that our country has to be part of in terms of our international obligations under the Financial Action Task Force. I think that it made absolutely no sense to me, whatsoever, that this National Government, of all Governments, which says it is the friend of business, introduced a bill with a whole set of prescriptive rules. In fact, banks could not even enter a casual business relationship with somebody from overseas who might be in the process of migrating to New Zealand and wanting to set up a bank account, without first having done some background checks. That would, of course, have been ridiculous, and would have meant that a lot of people who wanted to migrate to New Zealand would have found it very difficult to comply with the requirements of the legislation as it was first set out.

When Labour members were in Government, we were very concerned to see that this legislation had a very detailed cost-benefit analysis with it. That is why my predecessor in this portfolio, the Hon Clayton Cosgrove, made sure a detailed analysis was undertaken so that the costings would be known. We knew that this bill would impose costs on business; we wanted to make sure that it was the most cost-effective way of delivering the kinds of outcomes that we were seeking in the anti - money-laundering space. But the problem was that when the Government changed the nature of the bill itself, provisions against which the original analysis was measured bore no resemblance to the bill as introduced. That, of course, made a total mockery of the regulatory impact statement in the original bill. I do not think that the Government members picked up on that anywhere along the line. If a detailed, cost-benefit analysis is undertaken by an independent financial agency—as was done by the previous Government—and a Government then introduces a bill based on an entirely different set of requirements from those measured in the independent analysis, then the cost of compliance is completely understated. That was the issue that we had with the bill as introduced.

I have some notes from one of the banks that I certainly spoke to about that particular issue. The bank identified that the cost of the anti - money-laundering project in Australia, just for that one bank alone, was $35 million to complete. If the bank had been able to project that cost into the New Zealand environment, simply leveraging off the work that had been done in Australia, then just for that one bank in New Zealand the cost would probably have been another $5 million to $7 million. With the bill as introduced, that cost suddenly skyrocketed to $10 million and even up to $22 million. That is the size of the difference in costs that would have been imposed if the bill had been allowed to proceed in the way that it was introduced by the Government.

I would have thought that the Minister of Justice would think it was necessary to explain to the House how we got into the situation where such a significant change to legislation was able to go through Cabinet. I bet that Cabinet was not actually told the extent of additional costs that would have been imposed on the banking sector by the shift from the risk-based approach to the prescriptive rules that were introduced.

I place on record the Opposition’s gratitude to the advisers who supported the select committee in the work it did. It is not usual to have external advisers, particularly those who might seem to be interested parties, to be providing that degree of support and assistance, but the Government had got the bill so fundamentally wrong that it was important for a different process to be adopted at the select committee. As a result, we now have a good bill that Labour can support, and that can meet New Zealand’s international commitments on the Financial Action Task Force framework. So I am very pleased to support the final reading of the Anti-Money Laundering and Countering Financing of Terrorism Bill.

JOHN HAYES (National—Wairarapa) : It is fascinating to sit on this side of the House and observe the actions of a lawyer, or a legally trained person, and see the way the member manipulates the facts at her disposal to suit a particular case. I say to that member that she has completely manipulated her assault on the Minister of Justice, who opened discussion on this bill, and who I think did a particularly fine job of introducing this legislation to Parliament. The problem that she should have addressed and explained to this House was why it took you 9 years of sitting on the Government benches—

Hon Trevor Mallard: Hey, hey!

JOHN HAYES: Sorry. Why would it take your party 9 years of sitting on the Government benches to do nothing on this legislation? This legislation was around for 9 years—

Hon Lianne Dalziel: No, it wasn’t.

JOHN HAYES: Yes, I am sorry, it was. It was there for 9 years. I was an official in the Ministry of Foreign Affairs and Trade dealing with this legislation at that time—9 years ago. I know that the speech that you have just made, the assertions you have just made, are actually wrong.

Hon Steve Chadwick: I raise a point of order, Mr Speaker. If the member could remember not to draw the Speaker into the debate, it would be helpful.

The ASSISTANT SPEAKER (Hon Rick Barker): I am sure the member has got the point.

JOHN HAYES: I think I had the point and made adjustments as I was speaking. That is just another game on the part of the Labour Government to disrupt—

Jacqui Dean: Labour Opposition.

JOHN HAYES: It is a game on the part of the Labour Opposition to disrupt my speaking pattern.

Hon Trevor Mallard: Talk about living in the past!

JOHN HAYES: Yes, let us look to the past, because for 9 years you sat there—

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I am really just taking a bit of time for the member to reflect on and get ingrained what he has to say.

The ASSISTANT SPEAKER (Hon Rick Barker): I am sure the member will just draw a breath and realise that when he addresses comments directly to people, he should address them by name or by party, and avoid the use of the word “you”. That word is not automatically ruled out on every occasion. It can be used where someone says: “So and so, you did such and such.”, but on this particular occasion I was the subject of the sentence and that is not permissible.

JOHN HAYES: Thank you, Mr Assistant Speaker, for that clarification.

Certainly, I had 9 years to reflect on why the previous Government took no action on this issue. There was significant pressure from the international community, through the OECD and also through the Financial Action Task Force, to take action to process this legislation. That was not done. So I commend Simon Power, the Minister of Justice, for the excellent job he did. Within 9 months of coming into Government, he introduced this legislation to the House. I thank him for his work.

I also thank him for the space that he gave the Foreign Affairs, Defence and Trade Committee to do one or two slightly unusual things. I would particularly like to record the thanks of the committee to the officials from the Department of Internal Affairs, the New Zealand Police, and the Ministry of Justice who assisted the committee in its deliberations. At an early stage of our consideration of this quite complex legislation it became very clear that it had to be harmonised absolutely with the Australian legislation. There was no debate about that. One of the things the committee agreed to do, quite quickly, was to bring in experts from the banking sector to sit down with officials from the ministries that were advising the committee. That process worked extremely well.

Finally, I thank my colleagues on the committee, from all parties, who were involved in the deliberation on the legislation. I particularly thank my Labour colleague Pete Hodgson, who made a really significant contribution to the consideration of the bill, but there were also others. I do not particularly want to draw attention just to one or two; I thank everybody for the great job they did in bringing this legislation into place. I think it will really help not only the banking sector but also business in New Zealand that we have managed so successfully to integrate and harmonise the legislation with the Australian legislation. I think that will be fundamentally important, given that much of the ownership of the New Zealand banking sector is, at this point, in Australian hands. I think too that it is worth reflecting, as we look ahead, on whether we ought to focus on introducing one entity to monitor this legislation, along the lines of the Australian Transactions Reports and Analysis Centre. I think that having three entities in New Zealand doing this monitoring function will inevitably lead to something falling through the cracks at some point in the future.

With those few words, I particularly support this bill and again thank all of those colleagues who were involved in progressing the passage of the bill through the House.

Hon TREVOR MALLARD (Labour—Hutt South) : I want to talk to the Anti-Money Laundering and Countering Financing of Terrorism Bill as well, and to say—

Jacqui Dean: That would be a change!

Hon TREVOR MALLARD: Sorry?

Jacqui Dean: That will make a change.

Hon TREVOR MALLARD: There is a member over there whose name I have forgotten, and I do not really understand what she was saying. The point that I will start off by making is that this bill, as it is printed at the moment, is substantially bigger than the one that was introduced to the House, as a result of the many changes that had to be made because the bill was inadequate when it was introduced. Today we have had, I think for the first time, an explanation for the inadequacy of the advice stream that led to the very poor bill that was introduced. It was that the previous speaker, John Hayes, was in charge of the advice stream. He was in charge of the advice stream for a number of years, which meant that the bill was unsatisfactory and that the compliance costs put on the banks would have been far too high.

The bill was held back by my colleague Clayton Cosgrove, because he was not satisfied that it was of sufficient quality to introduce to the House. It was introduced in the House by Simon Power, who was described yesterday as a country solicitor by Don Brash, I understand, because of his lack of understanding of some matters. I think Don Brash was making a plea for Chris Finlayson to deal in future with the matters that Mr Power is currently dealing with. As a result of the poor quality of the bill, the Foreign Affairs, Defence and Trade Committee had a lot of work to do on it, and I am not absolutely certain whether it did its work in the right direction. My colleagues on the committee all advise me that they did the right thing, but I think it is fair enough at this stage to say the process they have gone through has still left me with a bit of doubt about the work that has been done around this bill.

That is especially so around the definition of a “politically exposed person”, because the effect of the change that was made by the select committee was to take Ministers of the Crown out of the category of politically exposed persons. One question I have is whether that move went in the right direction or in the wrong direction. Clearly members of the executive—and, in particular, one very politically exposed person opposite—are currently under investigation by the Auditor-General, and financial questions are involved. Any consideration of the use of those funds appears to have been excluded by the changes that have been made to the bill, unless a person travels overseas and there are reciprocal arrangements.

John Hayes: That’s not how it works.

Hon TREVOR MALLARD: I am sorry, but the explanation that we received, I think, is that other countries are putting in place similar legislation to this bill, and that politically exposed persons who travel overseas will be caught at that stage. We were told that just as Ministers who come from overseas to New Zealand will be caught by this legislation, other countries are putting in place legislation like this. When Mr English travels to those countries, he could well be caught under their equivalent legislation, if the common approach to legislation that is being encouraged by the United Nations is picked up on.

But my question is not only about whether the definition should be stopped in that particular way but is also about whether the bill should have gone further. I ask whether members of Parliament generally, who have enough influence on legislation and on matters like this, should be caught. There are a couple of examples around at the moment. I think that there has been quite a lot of speculation about Melissa Lee: about where the extra $100,000 is currently sitting, and whether it would be caught if it went offshore. A lot of us were expecting that the police report on Mr Bakshi would be available this week, and there is a question of money being held offshore in that case. I would like my colleagues to give me some more explanation, as they are dealing with this matter, of whether this legislation would apply to someone who has an enormous influence over Ministers as a member of Parliament and a representative of a particular community. I ask why those funds, just because they are held in rupees in India, should not be caught under this legislation. I think that is a very real question. Therefore, given the change that was made to tighten the definition, I wonder whether some of our reputation might well have been placed at risk as a result of that.

I want to make it clear that as a former New Zealand Minister, an Associate Minister of Finance, I went on occasions to the World Bank, to the IMF, and to the Asian Development Bank. The probity of New Zealand Ministers, over a long period of time—and I can remember well back to Harry Lake, Rob Muldoon, and many Ministers since them—was never an issue, and there has never been a question of personal corruption as far as a Minister is concerned. There has never been a doubt in the past, and that is partly because of the integrity of the individuals. However much we disliked Ministers on occasion in the past and however much we disagreed with their policies, there was no indication of money going into their pockets. As a result of that, New Zealand’s international reputation has been good. We have been well regarded, and because of that I am sure that the rates charged to the New Zealand Government on its international borrowing are lower than they would otherwise be. There is no corruption risk factor sitting in New Zealand. That is partly a result of our legislation, but also partly because our Ministers not only have integrity but are seen to have financial integrity. They are seen to have it throughout their parliamentary careers. I think we value that highly in New Zealand and there is a degree of anxiety around that.

So I invite Chris Carter, or whoever follows me from the Government benches, to talk about that. I think the member for Rotorua has had personal experience of being the international representative of a country that has had some dodgy financial arrangements. I would welcome his expertise and the advice that he is able to give to Bill English, based on his personal experience, as to how a country can improve and regain its reputation over a period of time, after it has had problems in the past. I am not sure whether the member for Rotorua was part of the problem or part of the solution, but I know that he knows quite a lot about the issue. We will be interested to hear from him about the details of the international matters in which he has some experience. I am sure that he will not have caused the problems in quite the same way that we are now seeing.

The other area that I will focus on is the requirement for suspicious transaction reports. I make it clear that from my perspective we need to get a lot more transparency in this area, including in the New Zealand Parliament. It is my view that the use of trusts by members of Parliament almost automatically creates distrust and suspicion, because people ask why members are hiding things. I accept that there are a number of reasons for using trusts. As someone who is not infrequently the subject of litigation, I can understand why people would put their assets, if they have substantial assets, in trusts. But we should at least let those trusts be transparent. The trusts should be—

David Garrett: Is yours transparent?

Hon TREVOR MALLARD: Yes, absolutely. I do not have a trust; I have chosen not to have one. The point I am making is that members of Parliament and Ministers must be transparent if we are to regain some of the international integrity that we have had. We have always been seen as the least or second-least corrupt country in the world. Not only do we have to pass this legislation but also we have to have a Minister of Finance who is perceived to be clean.

KEITH LOCKE (Green) : The Green Party supports the Anti-Money Laundering and Countering Financing of Terrorism Bill. We were part of a very thorough select committee process that dramatically transformed the content of the bill to use a risk-based approach. We worked closely across all parties and with the banking sector, and the final result is a risk-based system that is fairly close to that applied by Australian banks. In the final analysis that means that instead of banks having to run around getting multiple sources of identification from low-paid workers, beneficiary customers, and people who are more transient, and wasting all their time on people who would not even have the resources to be money-launderers, they are now able to concentrate on the people who really are a problem.

This legislation will reduce money-laundering. In the Foreign Affairs, Defence and Trade Committee we were presented with examples of the ways in which people shift money around from country to country, from the Pacific Islands to Australia and New Zealand. Those people get a big tax advantage and other advantages by shifting the money around through dummy accounts. This bill will improve that situation and increase tax receipts for the New Zealand Government, the Australian Government, and Governments of the Pacific Islands in our region. The implementation of such procedures as a result of the Financial Action Task Force proposals has reduced money-laundering, corruption, and funny-money sorts of dealings in some of the smaller Island States, including in the Pacific.

The bill probably has not gone far enough to really deal with one of the problems that is at the core of the current financial crisis, which is the huge amount of money in tax-haven countries, attracting not much tax at all, and in fact denying the home countries of the particular investors the deserved tax take. New Internationalist magazine estimates that $11.5 trillion, or $11,500 billion, are in tax havens, which equates to a huge amount of tax that could be of benefit to those home countries, particularly poorer countries. But it is disappearing into the private pockets of multimillionaires or billionaires. I am not sure that the Financial Action Task Force, referred to in this bill, will fully deal with that situation, partly because the Financial Action Task Force itself is an organisation of rich counties. It is specifically not a UN organisation; it is an OECD, or rich-country, organisation. There is probably some way to go before we really deal with that problem that is hitting the world in terms of the financial crisis. It is true that the work of the Financial Action Task Force is reducing corruption internationally, and, I suppose, one of the aims from a rich investor’s point of view is to make countries safer for investment, to reduce the overheads in terms of corruption in particular countries. It is a good thing that corruption is being reduced.

The other element to the bill, which is in the title of the bill, is countering financing of terrorism. Exactly how that will work is a bit unclear. We do not have a large number of terrorists in New Zealand at the present time, and one of the problems when I asked—

Hon Trevor Mallard: Depends if you ask the Chinese or not.

KEITH LOCKE: Ha, ha! Yes. I asked the officials which terrorist lists are used to filter the banking transactions, and they said that, basically, the American lists are used. The American list is pretty big; there are hundreds of thousands of people on the list. We had a case a few years ago of a chap up in Auckland, Mohammad Abbas, who was sending money to his sick relatives in India from Auckland through Western Union. Somehow, it all got checked in America on the way through, and he had a hell of a job getting the money to his relatives, because there was somebody else on the list called Mohammad Abbas. It is a fairly common name in the Muslim world. That is an illustration of some of the problems that one can come up against.

One of the other aspects that we were talking about in the select committee was the way financial transactions are done internationally. They all pass through what is known as the SWIFT system, which is a system that has two very big data-processing centres, one in Europe and one in the United States, that mirror each other for 124 days before the information is stored in a back-up facility. The European Governments had a problem with SWIFT—and they have partly solved it now. There was a big battle between the US and the EU over what happened at some of the data centres sitting in the United States. The US Treasury asked for information from SWIFT on this, that, and the other thing, and they were doing what was described by the Europeans as carpet sweeping. They were getting a whole array of information on transactions without particular targeting of people who they could prove were a terrorist danger. Some of the information they were seeking was not related to US transactions—that is, transactions originating or finishing in the US—sometimes it was related to internal transactions within European Union countries. The European Union countries were a bit upset that some of their internal transactions were being demanded by the United States Government through the SWIFT system.

Most of New Zealand’s banking transactions and reconciliations go through the SWIFT system, with all the details—the name, the amount, etc.—attached to them. There are still possibly a few problems to be worked out there in terms of privacy and in terms of which terrorist definition one applies when one filters the financial transaction information, etc. The Green Party, despite concerns about that dimension of it, does support this bill as a good way of combating the scourge of money-laundering and the criminal activities that go with it.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, Mr Assistant Speaker. Kia ora tātou katoa. The Māori Party is pleased to support the Anti-Money Laundering and Countering Financing of Terrorism Bill at its final reading. We welcome the move of the House to do so in time for World Poverty Day, which is 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, which is a goal that we in the Māori Party keep very close to the heart. In the relationship agreement we signed with the National Government just over 11 months ago was a commitment to achieve significant outcomes in whānau ora through eliminating poverty. The question that we come to this bill with is how the law that we pass today will make a difference to 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 have 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 other 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 $8 billion and $2 trillion annually. We are talking about huge amounts of funding resulting from the practice of bribery and corruption. That estimate is from a decade ago, so we can only imagine the extent of the damage that happens now. When we 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 is, money from crime—into clean money. Clean money has nothing to do with the crispness of the notes, of course. It is all about whakapapa. You see, clean money to all outsiders’ eyes looks like it comes from a legitimate source, which thereby makes it almost impossible to trace the criminal origin of the money. By using this form of changing money, this process of transformation, criminals are able to benefit from their crimes, and it becomes extremely difficult to develop a case for prosecution. It becomes even more complex when we find the menu of ways in which money-laundering can take place. I found this to be quite a matter of interest.

The helpful Ministry of Justice website against money-laundering shows almost a beginner’s guide to money-laundering. There is something called smurfing, which is the process of depositing cash across a range of institutions in amounts that do not need to be reported to the Government, and then eventually transferring it all into a central account. Then there is currency smuggling, which is when funds are moved across borders by mail, courier, or body packing as a form of disguise. There is exchanging transactions, where foreign currency is bought that can be transferred to offshore banks. Alternatively, prospective money-launderers could purchase assets with bulk cash, which is building up an inventory of assets such as cars, boats, and real estate, and then selling them to deposit the funds. If all else fails, there are the casinos, where a pile of gambling chips can be purchased and then redeemed for a big, huge, fat cheque.

The more we read about it, the more complex and the more sophisticated the whole industry of money-laundering becomes. Initially that seems a pretty good reason for passing legislation to make it easier to detect and investigate money-laundering activities.

One the issues that interested us when this bill came before the Foreign Affairs, Defence and Trade Committee was an observation made by the National Council of Women. It suggested that the claim that the bill will contribute to public confidence in the financial system seems contrived. Its view was that in the absence of hard evidence that our banking system is threatened by money-laundering or terrorism, it is difficult to know whether the public will feel more confident if this bill is passed. Instead, the National Council of Women of New Zealand saw the reason for this bill being indirectly in the public interest, in terms of complying with international obligations.

Basically, the Government is obliged to pass this legislation to maintain the viability of our economy in global eyes. It is about keeping faith with the Financial Action Task Force on Money Laundering, which is a body to generate the political will to combat money-laundering and terrorist financing. That last part is the real reason why so much momentum is focused around this particular bill. It is driven by American legislation such as the Patriot Act, which amended 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. Here ends the lesson of whakapapa.

Having established the source and the context of why we are rushing this legislation through today in this third reading, I will return to the specific impact of this legislation for us. The briefing paper from the Reserve Bank puts this bill into the context of being an essential component of the Government’s programme to tackle organised crime. That paper estimates 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.

I raise a note of caution that emerged from the paper written by Dr Jackie Harvey and published in the Money Laundering Bulletin, a publication from the Newcastle Business School. It stated: “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 predicate 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 that 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, which is the fraudulent use of funds, rather than on promulgating fear. As we return to the Māori Party focus on the most effective ways to eradicate poverty, I cannot leave this debate without noting that our adoption of the recommendations will increase business costs to customers, which will be passed on to ordinary bank customers. This is at a time when, as the Finance and Expenditure Committee report makes clear, banks have already been shown to be overcharging their customers. We are concerned that this legislation will place additional costs on businesses and customers when they are under the most strain. There is little clarity in the bill about the extent of these costs, but it will cost, and there is no doubt about that.

The Māori Party will continue to speak out about the absolute need to address the matter of poverty. 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 that this bill goes anywhere near an effective response to the problems of income distribution, but it does make an honest attempt to ensure that we are aligned with cleaning up the international financial system. As global citizens, we are pleased to support this third reading of the Anti-Money Laundering and Countering Financing of Terrorism Bill.

JACQUI DEAN (National—Waitaki) : The purpose of the Anti-Money Laundering and Countering Financing of Terrorism Bill is very clear. It is to bring New Zealand into line with the international standards for the framework of anti - money-laundering and countering financing of terrorism. These standards are set out by the Financial Action Task Force on Money Laundering, of which New Zealand is a member. The purpose of the Financial Action Task Force on Money Laundering is to develop and promote national and international policy around prevention of money-laundering and the financing of terrorism. This bill is designed to enhance New Zealand’s anti - money-laundering and countering financing of terrorism legislation and is to be in line with recommendations from the Financial Action Task Force on Money Laundering.

The bill is forward-looking. It recognises that the financial sector is one of rapid technological change. It is, as far as is practicable, harmonised with Australian legislation. It is risk-based rather than being overly prescriptive, and that is to minimise compliance costs for banks and financial institutions but also importantly to maintain smooth business relationships between, say, a bank and its customers.

A risk-based approach will enable financial institutions to focus resources on areas of higher risk with varying levels of customer due diligence, or checking if you like. It will depend on whether there is an existing relationship with the customer, whether there has been a material change in the nature or purpose of the business relationship, whether the customer is a trust or another vehicle for holding personal assets, or whether it is an overseas customer. In terms of risk, there is a world of difference between the financial transactions undertaken by my lovely, elderly mother-in-law and a non-resident customer from a country that has minimal anti - money-laundering measures in place. Customer due diligence provisions recognise these varying levels of risk of money-laundering on behalf of their customers.

Reporting entities, banks, and financial institutions will be required to develop anti - money-laundering programmes and to report to one or more of four supervisors. Those supervisors are, at the moment, the Reserve Bank, the Securities Commission, the Police, and the Department of Internal Affairs in the case of casinos. Those supervising entities will be required to develop a regime for the supervision of the monitoring and enforcement of its anti - money-laundering and countering financing of terrorism obligations under this legislation. Given the strength of New Zealand’s existing financial monitoring systems we recommended against requiring the application of the Financial Action Task Force on Money Laundering definition of politically exposed persons to New Zealand nationals living within New Zealand. However, enhanced scrutiny will be applied to foreign politically exposed persons conducting transactions within the New Zealand financial sector.

The main object of this bill is to detect and to deter money-laundering and the financing of terrorism. Measures in the bill are designed to facilitate cooperation between reporting entities, anti - money-laundering and countering financing of terrorism supervisors, law enforcement, and regulatory agencies. This bill achieves those objectives, and with thanks to committee members, banking representatives, and officials, I recommend this bill to the House.

Hon CHRIS CARTER (Labour—Te Atatū) : As the previous speaker, Jacqui Dean, said, the purpose of the Anti-Money Laundering and Countering Financing of Terrorism Bill is to enhance New Zealand’s anti-money laundering and countering financing of terrorism network worldwide, and assure the world that New Zealand’s financial system is robust, transparent, and honest. I know that the question of politically exposed persons has been a subject of some debate in this House. I was listening with a degree of amusement to my colleague Trevor Mallard’s exploration of that particular phenomenon, particularly in reference to Mr English’s embarrassing situation over the rent for his house. I guess that is an issue that focuses us on how a financial system picks up where corruption has been occurring in a financial system.

In the course of the Foreign Affairs, Defence and Trade Committee looking at this legislation, we heard that it had a confidential report from the New Zealand Police. The report was about whether money-laundering had been going on through our financial system, whether there had been a transference of funds between different South Pacific locations, and whether there were genuine reasons why we should be concerned that politically exposed persons—I am not necessarily saying New Zealand ones, but ones in our region—were using our financial system to launder money. The report we received back was indeed that cases of that were proven. There were also concerns that international terrorist groups—and, sadly, this is a phenomenon of our age—were using global financial networks to move funds around to finance their terrorist activities. There was concern that our financial system could provide that cover to wash money through to make it look legitimate and to use it to finance terrorist activities.

New Zealand is a member of the Financial Action Task Force, which my colleague Keith Locke talked about a few minutes ago. It is an international organisation established to combat the very issue of money-laundering and terrorist financing. This is an issue that the previous Labour Government was working on. My colleague the Hon Clayton Cosgrove, as the Associate Minister of Justice in the previous Government, had officials working on this issue. It is something that New Zealand has an international obligation to work on, to assure our global partners and the international financial system that our systems are robust and effective in stopping money-laundering, particularly with its focus these days on international terrorism.

One of the things the Foreign Affairs, Defence and Trade Committee was really concerned about was that the structures we put in place within our financial systems were in sync with those in Australia. As most people are aware, much of our banking system is Australian-based. It is the banking system in particular—and the wider financial system, of course—that is the framework where this new legislation must be effective. So we wanted to ensure that whatever legislation this Parliament passed would be in sync with the Australian legislation and would be acceptable to the banking sector, because we are relying on it to make sure that it works.

In that process the select committee engaged extensively with the New Zealand banking sector. We had the help of four representatives from that sector. One of them was previously an adviser to the Hon Michael Cullen. She worked in his office as one of his major financial advisers and is a very experienced young woman. These representatives were extraordinarily helpful in helping us work through this legislation to make sure that the system, first, was in sync with Australia; and, second, was acceptable and practical for the banking system without creating enormous compliance costs, which is something we were very keen to avoid.

I have to say that it is unusual to work on legislation in this Parliament that everybody agrees is important and where there is very much an attitude of taking a bipartisan approach to it. Mr Hayes, who is the chairperson of the Foreign Affairs, Defence and Trade Committee, was extraordinarily helpful in taking on board advice from Opposition MPs. The Hon Pete Hodgson, who led the Labour team on this legislation, was amazing. He has an incredible ability to get straight down to the nitty-gritty. He also has an amazing ability to digest a vast amount of technical data. I guess it is his scientific training. He very much took the lead role at the select committee in working through how we can make this legislation effective, compliant with our international obligations, and acceptable to the banking sector. I take this opportunity to thank Mr Hayes for the work that he did in chairing the process. In particular I thank and praise my Labour colleague Pete Hodgson for making this bill better legislation as it comes before this House. I have great pleasure in saying that the Labour Opposition fully supports this legislation.

Hon PETE HODGSON (Labour—Dunedin North) : I am a little surprised that National members have stopped—

Hon Gerry Brownlee: Do your tie up.

Hon PETE HODGSON: I thank the Leader of the House very much. He should tuck in his shirt.

Hon Gerry Brownlee: Why? It’s fashionable.

Hon PETE HODGSON: The member cannot? OK. I was surprised that National members did not seek the call, but I was very happy to do so.

I want to make a point at the outset. Because we are going into urgency I am not going to give a 30-second speech, even though the case for my giving a 30-second speech is very strong. The Anti-Money Laundering and Countering Financing of Terrorism Bill is now in its last phase. It has been done and dusted through this House, through the various phases that legislation must go through, and it has been spoken about at length by people who know about the legislation, and also by one or two folks who do not. In the case of those who do, the listener would have had no difficulty working out what the legislation is about; what its origins were; how the Foreign Affairs, Defence and Trade Committee worked; what a great person the chair was; what a great group of folk the New Zealand Bankers’ Association was; how good the officials were after we had had a little disagreement earlier; and the role this legislation plays in our country and in our relationship with other nations. That does not need to be repeated. It is well understood now. Folk have generously talked about this legislation and its role for hours and hours, so a 30-second speech would be a really, really good idea. But, you see, we have to teach the Government to manage the House better. We do not particularly mind staying around on a Thursday night; half of us are here anyway. It does not much matter.

Hon Paula Bennett: It’s that arrogance that meant the public actually said no to Labour.

Hon PETE HODGSON: We have just been advised by the intellectual giant opposite that because Labour lost the last election, after spending 9 years in Government—the longest time a Labour Government has been in power since the Second World War, I say parenthetically—somehow or another I should be giving a 30-second speech, not a 10-minute one. That leap of logic—that cascading paroxysm of intelligence that just emanated from the vaguely humanoid piece of protoplasm over there—does not stand up to scrutiny. So I will stand here and make a point of wasting Parliament’s time. I will make a point of wasting Parliament’s time because the Hon Gerry Brownlee is in the House—it is good to see him—and we want to ask him to try to manage things a little better so that we do not find ourselves, as we did a few weeks ago, adjourning the House early one day and then whipping back in under urgency the following day. It is not necessary. There are certainly times when the House needs to go into urgency—

Jo Goodhew: Lazy Opposition!

Hon PETE HODGSON: Government members are really getting annoyed about it, and that is great, because that is the whole point of my speech. If Government members go silent, I have nothing to bounce off. The way to shut down someone who is trying to waste Parliament’s time is to go quiet. If members heckle then I immediately have something to feed off. They give me oxygen. So I ask National members to please keep the noise running; I love it. It is what makes it work for me. I have no difficulty getting through 10 minutes. In fact, I could get through 10 hours.

Jo Goodhew: We have to listen to 10 minutes even though he has nothing to say.

Hon PETE HODGSON: There is another heckler. The member is from Timaru. I spent last weekend in Timaru and I have one or two things to say about that member that I learnt on Saturday and Sunday from her constituents in Timaru.

Hon Trevor Mallard: I was there on Monday.

Hon PETE HODGSON: Trevor Mallard was there on Monday, so he has an update. I dare to suggest that if we tried to introduce that material into the debate Mr Deputy Speaker would say that it is getting a bit broad. I will not do so, because I might be ruled out of order. I just say to the member from Timaru that she would be well advised not to heckle, because, you see, another 30 seconds have gone by. Or was it 60 seconds? I am happy to stand here. I have studied Fidel Castro. It is not difficult to speak for 6 hours. I have watched a man do it. He is an amazing gentleman.

Hon Trevor Mallard: I’ve seen Venn Young do 75 minutes here.

Hon PETE HODGSON: That is amazing. It is astonishing.

I say to members opposite that we could have had this legislation through the House a long time ago and be well down the Order Paper but for the fact that the Government has decided again that it does not know how to run the House properly, and will put the House into urgency again.

I just say that urgency is a legitimate thing for a Government to do. We had a lot of urgency when we were in Government, and the previous National Government had it a lot, but we did it out of necessity or because there was some degree of urgency over this, that, or the other legislation. Here the Government is showing its inability to manage the House in ordinary times, not in extraordinary times. The Bolger-Shipley Government did not do that until the 8th year, but here National is doing so in the 10th or 11th month. I remember that in the 8th year of the Bolger-Shipley Government—and I will come back to my money-laundering point—Jenny Shipley said she was going to run the House with machine-like efficiency, but it stalled when Max Bradford tried to get the electricity system wrecked. The mismanagement is now reaching—

Hon Trevor Mallard: Tell us about the Plimsoll line!

Hon PETE HODGSON: No, that is outside the scope of the bill. The Deputy Speaker is very, very accommodating, and I do not think we should abuse his accommodation.

Hon Trevor Mallard: Yes, but the ship might be carrying laundered money.

Hon PETE HODGSON: Ah, that is a point. I am sure that some money-laundering occurs on the sea—I have no doubt. Some occurs by air and some occurs by wire, but certainly some occurs by sea.

Hon Trevor Mallard: It’s normally folding stuff.

Hon PETE HODGSON: That is right, and that is why the Plimsoll line is important. If it is folding stuff, the Plimsoll line is visible; if it is solid gold, the Plimsoll line disappears. That is one reason why a money-laundering cop would want to look at the Plimsoll line. If the ship is laden with gold, then the Plimsoll line will be out of sight; if it is folding money, as my colleague the Hon Trevor Mallard said, we will see the Plimsoll line high and mighty.

Hon Trevor Mallard: Paper can be pretty heavy.

Hon PETE HODGSON: Yes, but paper is not as heavy as gold. That is the point. The Hon Trevor Mallard makes a good point, but it is not good enough. Actually, when one thinks about it, a dollar’s worth of gold is heavier than a dollar. The Hon Trevor Mallard is probably correct when regarding a gold coin versus pure metal gold. I ask whether my time is finished.

Hon Trevor Mallard: 2 more minutes!

Hon PETE HODGSON: We are just reflecting on whether a gold coin being laundered on the sea will be more likely to make the Plimsoll line disappear. On reflection, given that the price of gold these days is a little over $1,000 per ounce—

Hon Gerry Brownlee: US!

Hon PETE HODGSON: —US$1,000 per ounce, the Hon Trevor Mallard is probably right and I am probably wrong. Gold in the form of pure metal is likely to be lighter, dollar for dollar, than a gold coin. On the other hand, if we move to folding money, I am correct. The devil is often in the detail.

Hon Trevor Mallard: Well, it depends on the denomination of the note.

Hon PETE HODGSON: OK, we could play that. We start at $5 and go up to around $100. Is there a $200 note? Can anyone tell me? I do not think there is. But at $5 or $100 I still think I am correct. On the other hand, if we are talking about $1 and $2 coins then my colleague—my learned colleague—

Hon Trevor Mallard: No, I’m not learned!

Hon PETE HODGSON: My non-learned colleague, the Hon Trevor Mallard—

Hon Trevor Mallard: Don’t go that far!

Hon PETE HODGSON: Ha, ha! If we are talking about $1 and $2 coins, he is probably correct.

I think we can conclude that when trying to detect money-laundering on the sea, the Plimsoll line is probably not as much use as we would have hoped. One does not know whether one is dealing with pure gold metal or with folding money. If it is folding, what is its denomination? Or is it $1 or $2 coins? The Plimsoll line will bounce up or down depending on all of those factors, and I imagine that the Plimsoll line would sit highest out of the water if the ship is carrying $100 notes.

Hon Gerry Brownlee: That’s the point.

Hon PETE HODGSON: I say to that member that I hope my point is now made.

TODD McCLAY (National—Rotorua) : It gives me pleasure to rise and speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. I think it is important that we move quickly to the vote on this important legislation. The previous speaker, Pete Hodgson, attempted to suck all the intelligence out of the debate in the Chamber, and I think he was largely successful. I recognise those who have worked hard to make this legislation the great bill we have before us: the submitters; the banks; our officials; Government members; our chair on the Foreign Affairs, Defence and Trade Committee, John Hayes; and, of course, our Minister of Justice, Simon Power. I make particular reference to Keith Locke. Without that member’s good work in the committee, we would not be here with this good legislation. When I look at my list, I see that that is it. No others need recognition, and I look forward to voting on this very soon.

DAVID GARRETT (ACT) : I rise on behalf of the ACT Party to support the Anti-Money Laundering and Countering Financing of Terrorism Bill. Having lived up in the Islands for some time, I realise and recognise what a problem there can be in various parts of the Pacific. We will be supporting this excellent bill.

JO GOODHEW (National—Rangitata) : As the last speaker in this debate on the Anti-Money Laundering and Countering Financing of Terrorism Bill, I think it is a really good idea that we end the debate by remembering what the key objectives of this bill actually are. They are to improve the detection and deterrence of money laundering and the financing of terrorism, to enhance New Zealand’s international reputation, to contribute to public confidence in the financial system, and to realise these objectives with minimum cost. Finally, we can remember what this bill is all about. I commend the bill to the House.

• Bill read a third time.