The so-called Panama Papers leak that may have linked many world leaders and other public figures to huge amounts of treasure held in secret offshore accounts not only throws a spotlight onto New Zealand’s foreign tax-free trusts, but also raises questions about our ‘ratification’ of the United Nations Convention Against Corruption (UNCAC).
It’s widely accepted that the passage through Parliament last year of the Organised Crime and Anti-Corruption Legislation Bill enabled New Zealand to ratify the UNCAC, by introducing changes to a dozen Acts of Parliament, in particular to those relating to bribery and corruption.
These moves were certainly welcome, especially as it had been a full 12 years since New Zealand had signed the UNCAC after its adoption by the General Assembly in 2003. Although New Zealand has long enjoyed an international reputation as a corruption-free country, this tardiness suggests at least a degree of complacency on the part of our law-makers. Whatever the case, by the time these measures were enacted last year, New Zealand sat alongside only Barbados, Bhutan, Japan and Syria in having signed but not ratified the UNCAC.
It’s also the case that ‘ratification’ of the UNCAC is something of a moveable feast. The Panama Papers revelations are timely in drawing attention to the question of what are commonly referred to as a “Politically Exposed Person” – an individual, and their family and close associates, who could use their public offices for illicit personal gain.
While Article 52 of the UNCAC does not specifically use this term, it makes clear that ratification of the convention depends, in part, on a state’s willingness to implement “enhanced scrutiny” of the financial transactions of PEPs, and makes no distinction between foreign PEPs– officials working for their government overseas—and domestic PEPs, officials working within their own country.
It must be acknowledged that many countries have officially ratified the UNCAC without having satisfied all formal requirements of the convention, including those relating to domestic PEPs. This is one reason why some consider the UNCAC to be only a weakly symbolic instrument to fight corruption.
New Zealand’s ratification appears to be less than convincing. While the statutory changes that have now been adopted provide enhanced financial scrutiny of foreign PEPs, Parliament does not see fit to include domestic PEPs – New Zealand’s own public officials—in this regime.
Parliament took the same stance a few years ago when considering the proposed legislation that was enacted as the Anti-Money Laundering and Counter-Financing of Terrorism Act 2009. Although the Foreign Affairs select committee had earlier recommended that judges, the prime minister and cabinet ministers, departmental heads and the governor of the Reserve Bank should be subject to enhanced financial scrutiny, this provision was later dropped from the enacted legislation.
The reasoning? Apparently New Zealand already had sufficient safeguards within its banking and financial institutions to cover any corrupt practices that domestic PEPs might engage in.
In Transparency International’s Corruption Perceptions Index, New Zealand has overall been rated as the least corrupt country since the index was instituted 21 years ago, though its score and ranking dropped significantly in 2015 from the previous year.
Interestingly, among those countries that have over the years enjoyed good reputations, as far as levels of corruption are concerned, Iceland experienced a dramatic drop in its ranking from sixth to 13th place between 2006 and 2011, as a result of the banking and financial scandals that virtually bankrupted the country during the global financial crisis.
Now Iceland’s prime minister has resigned, and not because the apparent conflict of interest involving his wife’s financial dealings were subject to enhanced scrutiny, as a domestic PEP—they were not—but because they were exposed by other means.
We need to ask, can New Zealanders be sure there is no good reason to subject our own domestic PEPs to enhanced financial scrutiny, in accordance with Article 52 of the UNCAC, or do we need to rely on events like the Panama Papers? Are we confident that our existing safeguards against the misuse of public office for private gain are fully fit for purpose?
Emeritus Professor Bob Gregory specialises in public policy at Victoria University of Wellington’s School of Government.