Dangers in relying on ‘Perception’ of Low Risk Corruption

Asia Pacific AML – Kerry Grass, Founder, AML360

Updated 5 October 2020

Too much emphasis is based on New Zealand’s rating of having a perception of being low risk to corruption. 

The country ranking is reported in the Corruption Perceptions Index (CPI).  The data however is collated based on “gut feelings” – not known-facts.  Many scholars, including a former researcher for Transparency International, have admitted that the Corruption Perceptions Index needs to be radically revised to be a valid measure for comparative corruption. 1

In May 2016, David Cameron  raised an uncomfortable topic. At an anti-corruption summit in London, the former British prime minister sat alongside Nigeria’s president and other dignitaries and declared that money laundering was “the cancer at the heart of so many problems we need to tackle in our world”. The setting was telling, as the British capital had become the location of choice for oligarchs and corporate crooks to sanitise their ill-gotten gains.

As an anti-corruption advocate of some 20 years, I have lobbied current and former Ministers of New Zealand’s Ministry of Justice to strengthen New Zealand’s weaknesses.  Responses from both National and Labour governments is a reference back to the great ranking of New Zealand’s ‘low perception’ of corruption.

That type of response from a Minister has a focus on trying to protect reputation.  It is of course expected (sadly) but it cannot be objectively supported.  In fact, scratching only shallow at the surface reveals horrifying statistics on how badly New Zealand is managing its exposures to organised crime.

This article highlights New Zealand currently has a High Risk to corruption. The risk is real and is escalating.  

What is corruption?

Corruption can be defined as – the abuse of public power for private gain.  It may involve dishonest or fraudulent conduct by businesses and government, typically involving bribery. 

Links to organised crime

Corruption is a key characteristic of organised crime.  Corruption involves criminals developing and maintaining relationships with politicians and the state sector.  Forming such relationships allows criminal groups to avoid detection in areas such as trafficking drugs, arms or humans, or committing money laundering and terrorism.

Highest risk areas?

New Zealand’s police force is highly exposed to corruption.  Corrupt police officers may turn a blind eye to illicit activities or pass on information to criminal groups relating to planned raids or tampering with evidence. 

Bribery of custom officials and border police officers is also a common feature of trans-national organised crime networks.

New Zealand has no dedicated Anti-Corruption Agency

Transparency International New Zealand (TINZ) has fought for years for New Zealand to improve its capability of fighting corruption. 

TINZ have lobbied that without adequate resourcing, corruption cannot be measured, monitored and reported.  

Where there are no controls, corruption is likely to be rampant. 

In its 2018 annual report, TINZ commented –

“ … progress in many areas has been extremely disappointing. On a number of issues passivity and a lack of urgency continue as the risks to integrity escalate and the ranking of the New Zealand Public Service falls …”

“The fall in ranking may reflect increased publication of information about corruption by the Serious Fraud Office …”

“… it is beyond time for serious and urgent action to protect and extend integrity in New Zealand.”

“… our country is vulnerable to overseas corruption and will continue to miss out on the resources necessary to preserve the trusted society of which we have been proud.

Not Meeting United Nations Treaties

In 2003, New Zealand signed a United Nations treaty known as the ‘United Nations Convention against Corruption’.  This Convention commits New Zealand to implementing a resourced national agency equipped to manage corruption.  17 years later, New Zealand is still waiting for full ratification!

Labour and National Lack Integrity

In response to local and international pressure, Labour and National have both pledged to pass this role to the Serious Fraud Office (the SFO). The problem is that the SFO have a history of being under resourced – 2

Serious Fraud Office NZ - statistics

The above data reveals the Serious Fraud Office has had more than a 100% increase in complaints over four years. 

Annual investigations commenced by the SFO have fallen from 10% to 1%. 

A mere 1% investigation rate against the number of complaints received is far from a competent performance indicator.

In the 2019 annual report, the Director of the Serious Fraud Office advised, –

“Our reputation supports our businesses trading overseas. The threats to this reputation have probably never been greater today than any other time in our history.” 

“Serious financial crime can impact personal, family and community wellbeing. It is insidious, everchanging and disproportionately hurts the most vulnerable groups in our society.”

 

Serious Fraud Office Investigating 1% of Complaints Received

With this poor performance indicator, it is not possible for Labour or National to have integrity in their commitment to combatting corruption by stating they will move responsibility to the SFO.

A pledge from Judith Collins to change the name of the SFO to include “Anti-Corruption Agency” and doubling funding, does not address the real issues.  As a previous Minister of Justice and Minister for the SFO, she has to be well aware of this.

New Zealand Needs Integrity – Urgently

Putting double the investment into the SFO might result from a move forward of investigating 2% instead of 1% of complaints, but it does nothing to address the real issues.

A functioning Ministry of Justice is essential to prevent and combat organised crime and corruption.

Knowingly not addressing the issues is material incompetency or is it corruption working well?  

With reference back to the 2018 report from Transparency International New Zealand – ““… it is beyond time for serious and urgent action to protect and extend integrity in New Zealand.”



1 Fredrik Galtung, Measuring the Immeasurable: Boundaries and Functions of (Macro) Corruption Indices, in MEASURING CORRUPTION 101, 124 (Charles Sampford et al. eds., 2006).

2 https://www.sfo.govt.nz/file/952

Government requires ‘Governance’

Branching off from law enforcement into subject areas of anti-money laundering and anti-terrorism, I have continued taking an interest in New Zealand’s governance controls, in total, for over 20 years.

One of New Zealand’s important agencies for ensuring security to its people and to the reputation of New Zealand is the New Zealand Secret Intelligence Service (NZSIS).

Governance controls around intelligence gathering require people (its citizens) to have a means of communicating, which will enable information to be passed on.  That part is fairly simple stuff.

The skills of an intelligence service is to verify information and work out what is of their interest and what is not.

Controls to receive intelligence, especially on matters of a serious nature, such as corruption and terrorism, should not require ‘informants’, or ‘callers’ to pass their name and phone number to the intelligence service before they can get past the telephonist!

The NZSIS procedure of requiring names and contact details before considering value of information does not work – in theory or practice.  That type of control would be an act to stop the free flow of information.  I know for certainty it stops information and I wonder why New Zealand’s SIS agency uses that style. 

Surely a government agency with skills in deciphering relevant information would know that some people (perhaps most) prefer to pass information on to government without having to disclose their identity, or at least have an option not to disclose their identity?  

Given the NZSIS operate with such a policy, I would suggest this is an inadequate control for effectively receiving information.  There have been allegations since the Christchurch Terror Attack that the SIS failed to adhere to the  ‘white supremacist’ warnings that were provided to their office.  

I wonder how many messages of high value have not been taken, simply because the NZSIS policy requires name and contact details? 

My view is material incompetency indicates corruption.

No measurement, no managing and no reporting – no governance.

This is why New Zealand needs an Anti-Corruption Agency – one with embedded competency and most importantly, Integrity.

Vote New Zealand Clean Again.

Political Interference by the Serious Fraud Office?

Asia Pacific AML – Kerry Grass, Founder, AML360

Updated 4 October 2020

On 29 September 2020, the SFO published a press release linked to a prominent political party (see story below).  The press release was an allegation and confirmation that a charge of ‘deception’ had been filed and was released one day before New Zealand’s election process commencing (international registration/voting).

Given the 1,000 complaints the SFO was unable to resource to investigate in 2019, why did the SFO choose to invest six months of their resourcing into a potential misdemeanour, against a prominent political party, then release their media statement one day before New Zealand’s election process beginning? 

The press release confirmed the SFO were ‘filing’ charges.  It is therefore still an allegation but has resulted in unsettling and disadvantaging New Zealand’s democratic voting system.  That is fairly serious stuff – just ask the Deputy Prime Minister what he thinks of the SFO.  In fact, the issues here could be a bias towards the Deputy Prime Minister because he has been so vocal about New Zealand’s need to get clean in managing corruption. 

New Zealand needs with URGENCY an anti-corruption agency.  

 

Land of the Long Sweeping Carpet

New Zealand (Aotearoa) should be known not as the ‘Land of the Long White Cloud’ but ‘Land of the Long Sweeping Carpet’.

New Zealand has a horrid history of its government not governing properly and harming its people.  Start researching New Zealand’s Commission of Inquiries and Royal Commission of Inquiries.

I have only recently learnt, through the Pike River Mine Royal Commission, that Government policy requires information from the Royal Commission of Inquiry to be sealed for 80 years!  Really?  Yes.  Correct. Just ask Bernie Monk.

If there is any truth to that then one might say it appears to be perverting the natural course of justice.  The Rights to the Natural Course of Justice is embedded in New Zealand’s Bill of Rights.

The right to the Natural Course of Justice means name and shame after reasonable evidence secures a conviction, not through a press release of an allegation that is yet to be proven.

This reminds me of the SFO actions around the investigations against Allan Hubbard.  On that occasion, some 10 years ago, the Minister of Justice (Simon Power for National) held a press conference and presented a Fact Sheet.   The Fact Sheet was presented to journalists before the SFO investigation had commenced!

The Fact Sheet had arrows of fund flows going the wrong way!  Yes. Hand on Bible – the fact sheet presented by the Minister of Justice had a material error that consequently caused South Canterbury Finance to collapse. 

Of course the mainstream media who have close ties to government did not report the facts – despite the facts being publicly available.

The Minister of Justice did not wish to admit his wrongdoing. After Mr Hubbard wrote to the Minister to correct the Minister’s error, he asked Mr Hubbard to wait until the agency’s investigators had finished their investigation!

The end result was that the investigation proved the Minister’s Fact Sheet was indeed wrong. Investor’s funds in Aorangi were always safe and confirmed at the end of the investigation. However, the problem the government has, at least National government, is that The Minister’s Fact Sheet and press release caused bias opinion against Mr Hubbard which caused South Canterbury Finance to fail.  

On that point, Bernard Hickey, one of New Zealand’s economic reporters trusted by government, confirmed in a news report that the actions against Allan Hubbard were about the Government’s risks of guaranteeing South Canterbury Finance.  He didn’t mention Aorangi but he was right.  Putting Allan Hubbard into statutory management was not really about Aorangi, it was about South Canterbury Finance and in essence a means to sabotage (successfully) the company.  Another act that government has swept under the carpet. The appointment of an Anti-Corruption Agency that has integrity, would have prevented such conduct.  It is called ‘deterrent’ and ‘accountability’.  It works fairly well and is used commonly as a means to prevent crime.

Returning to current affairs and not historic, it would appear, in my opinion, that the SFO’s news release on a political matter 1 day before the election process was to begin, warrants a reasonable explanation.

Relying on ‘media’ to ‘sort things out’ when the matter is an allegation is ignoring the Bill of Rights which states principles of natural justice must be given to all New Zealanders.  Natural justice means ‘name and shame’ following a fair trial in court. The Bill of Rights would not have intended the Natural Course of Justice to be front page NZ Herald when the matter is still an allegation and still unproven.   

Once again – New Zealand, with urgency requires a competent and independent Anti-Corruption Agency.

 

 

 

Updated 2 October 2020

Let’s talk about the Elephant in the room or at least the Elephant squarely planted in New Zealand’s parliamentary election process.

 

Is New Zealand witnessing a transparent political interference by an ‘independent’ government department?

On 17 October 2020, New Zealand has its election day, an event that occurs every 3 years.

For New Zealanders who live abroad, international voting begins on 30 September 2020.

On 29 September 2020, New Zealand’s Serious Fraud Office made a media press release to state they were alleging a criminal offence. The matter is allegedly indirectly linked to one of New Zealand’s electoral parties.

How can the Serious Fraud Office qualify the urgency to distribute a press release, a day before elections starting?  The intention and consequences is to ‘name and shame’.  Doing so at time of elections has interfered with the integrity of New Zealand’s electoral process.  It was a pointless act and clearly only had one consequence.

The SFO has an obligation to be independent in its enforcement actions –

“It is an important constitutional principle in New Zealand that decisions by law enforcement agencies on the investigation and prosecution of individuals should not be subject to political control or direction. The Act provides that, “in any matter relating to any decision to investigate any suspected case of serious or complex fraud, or to take proceedings relating to any such case or any offence against this Act the Director shall not be responsible to the [responsible Minister], but shall act independently”.

When a government agency releases a press release indirectly linked to a political party at a time that is a day before commencement political voting, it is quite clearly serious stuff.

No one can argue a bias has not been created. The bias impacts on the New Zealand voting public.  Why would an ‘independent’ government department do this?  

The SFO has acted against the Deputy Prime Minister (Winston Peters) at a time when New Zealand is being governed by a Coalition (shared leadership).  The need for a clean, untampered election process is therefore even greater.

If there is insufficient or inadequate reasons to justify the urgency, then the Serious Fraud Office have either unknowingly or intentionally interfered with New Zealand’s democratic electoral voting system for nominating government leaders.

The Serious Fraud Office has been approached for comment, along with Transparency International New Zealand. 

The Chair of Transparency International New Zealand (TINZ) Suzanne Snively, was approached for comment.  Ms Snively advised,- 

‘All we would say is that given the timing of the election, it would have been good process for the Serious Fraud Office to have reached conclusions about the various actions in front of it, around political parties.”

Ms Snively’s comment is likely reference to the Serious Fraud Office still having an investigation open involving another political party of which no conclusion has yet been reached. This is despite an extensive timeline.  Mr Peter’s claims the timing of a news release from the SFO with an allegation against a matter indirectly linked to his Party for the purpose to ‘name and shame‘  is clearly a bias and the timing of the news release would tend to support his claim.

New Zealand's Deputy Prime Minister Challenges Integrity of the Serious Fraud Office

New Zealand’s Cabinet have previously been informed of the harm that corruption creates and the impact if an adequate resource is not provided. Papers to Cabinet advised, “Complacency impacts on our willingness and capacity to proactively detect and prevent corruption” and “Corruption erodes public trust in government, institutions and the rule of law, and takes a significant toll on the global economy”.

 

For New Zealand to have any integrity behind its reputation as a ‘low risk’ country to corruption, it first needs, as a matter of urgency, to put in place a competent Agency to identify, measure, manage and report corruption.  Until that happens corruption and the harm of corruption will continue within New Zealand, harming its people, its institutions and undermining countries who have made efforts to fight financial crime.

 

Without such an agency, New Zealand remains the weak link in a global chain, undermining the proactive steps of other countries who have made genuine efforts to combat organised crime and acts of corruption.

 

The leader of the New Zealand First party, Winston Peters, has claimed the Serious Fraud Office has created a bias by releasing the press release of an allegation of wrong doing within days of New Zealand entering the electoral process.

 

As an advocate in anti-corruption with some 20 years experience, I agree with Mr Peters.

 

The Serious Fraud Office have clearly used misjudgement in releasing the press release to ‘name and shame’ when the matter has now created doubt amongst electors.  Making a press release of an allegation serves no purpose.  

 

When the news release serves no benefit to the protection and guarding of New Zealand’s political process, the consequences are at worst – an intentional act by a New Zealand Government entity to politically interfere and disrupt New Zealand’s democratic electoral process.

 

This is another reason to confirm why New Zealand urgently needs the establishment of a resourced Anti-Corruption Agency.

 

In not having an Anti-Corruption Agency New Zealand is not ratifying its obligations as a State of the United Nations.

 

Is there potentially more to SFO’s motivation of targeting Mr Peters?  History shows he was the first Member of Parliament to raise serious concerns about corruption in New Zealand which resulted in Peters providing information known as the ‘Winebox Inquiry‘ and removal of an SFO Director.  Any animosity by the SFO towards Mr Peters?

 

Peters was the first Minister of Parliament to call for New Zealand to have an Anti-Corruption Agency.   Though he advocated strongly for it, other politicians claimed the Serious Fraud Office were on top of things.

 

However in a statement given by an Acting CEO of the SFO (Simon McArley) he advised approximately 90% of  complaints to the SFO are not investigated and are instead filed. 

 

Winston Peters is correct that New Zealand needs an anti-corruption agency.  Even the SFO agree (allegedly) – see below.

 

At a Police Financial Intelligence conference held in New Zealand in October 2018, an SFO advocate was questioned about the lack of New Zealand’s implementation of an Anti-Corruption Agency. The response from the SFO delegate was Winston Peters intends to bring in an Anti-Corruption Agency.  I hope that didn’t make Mr Peters a foe at the SFO?  After all, the SFO has fought hard to say New Zealand does not need an Anti-Corruption Agency.  Just an interesting observation.

 

Now that Winston Peters has received first hand the results of lacking such an agency, leaving an under resourced SFO Office to handle such matters (SFO file 90% of complaints without any investigation), I hope Mr Peters wins his fight to make New Zealand Clean Again.