New Zealand updates anti-corruption laws

April 2016:  First published in the International Bar Association, Anti-corruption journal. Gary Hughes, Barrister, IBA Anti-Corruption Division, NZ Country Officer. New Zealand is often held up internationally as a beacon of low corruption, with generally high standards of governance, public institutions, and strong rule of law. For many years, New Zealand has sat comfortably high in international estimations, usually listed amongst the top 3 nations on the annual Transparency International index (and other like surveys) as a relatively low corruption jurisdiction. However, no country is immune from bribery and corruption, especially in an era of increased international travel, trade, and changing migration demographics. As such, one threat New Zealand has had to its fortunate position is complacency, along with weak, out-dated legal measures against corruption. Recognising this risk, a welcome and overdue update to our anti-corruption laws was passed by Parliament towards the end of 2015, in the form of the Organised Crime & Anti-Corruption Legislation Bill. The changes are more in the nature of a “modernising makeover”, rather than a radical reform. Indeed, some commentators would have liked the new legislation to go further, and replicate stronger, more detailed compliance and enforcement measures such as those found in the UK Bribery Act 2010. All the same, it does pull New Zealand closer to international legal best practice. In large part, the law reforms arose in response to international rebuke by the OECD, in publishing its Phase 3 Report (2013) on New Zealand’s levels of compliance with the OECD Convention on Combating Bribery of Foreign Public Officials. The Bill included making a number of technical amendments to criminal laws as recommended in earlier OECD reports, finally ratifying into domestic law the United Nations Convention Against Corruption 2003 and other related international criminal instruments, and updating provisions to deal with modern scourges such as human trafficking, and passport fraud or cross-border identity related offences. Some specific anti-corruption legal fixes and gap-filling The Bill amended 12 other statutes, in particular the Crimes Act and Anti-Money Laundering & Countering Financing of Terrorism Act. To highlight some of the technical, but still important, updating aspects: •  The definition of “crime involving dishonesty” was updated in the Crimes Act 1961 to ensure that all bribery and secret commission offences were covered, with the result that people convicted of corruption offences can be prevented from holding certain positions of trust in the community, and be subject to penalties including up to 7 years’ imprisonment. •  The foreign bribery offence in the Crimes Act now no longer contains a dual criminality requirement. This ensures that New Zealand can effectively prosecute foreign bribery under local statute, regardless of whether it was an offence in the country in which the conduct actually took place. •  The definitions of “business”, “employee”, and “routine government action” were also updated to ensure the foreign bribery offence applies to bribery in relation to the provision of international aid and more clearly to corporate activities, and for trading businesses abroad to try to limit the scope for the facilitation payments exception to become open to abuse. •  New offences were created to address gaps in the pre-existing anti-corruption framework, so that it is now explicitly a criminal offence to accept, obtain, offer or attempt to arrange a bribe involving a foreign public official in New Zealand or a body corporate domiciled here. Further, it is now a specific offence to accept a bribe in return for trading in influence over an official. •  The obligations of companies who might be drawn into foreign bribery were clarified, in particular by changing Companies Act rules to ensure record-keeping of any small facilitation payments (routine minor payments intended to speed up an action or process to which the payer is already entitled) in a consistent manner. Additionally, the Income Tax Act 2007 is amended to ensure that no bribes can be made tax deductible. •  Additional measures are created so that New Zealand can provide seamless cross-border assistance in corruption investigations and prosecutions by using existing Mutual Assistance in Criminal Matters Act processes. Apart from foreign and public official bribery provisions, New Zealand’s main law concerning corruption in the private sector and civil actions remains the somewhat archaic Secret Commissions Act 1910. While its previous small, almost trivial, penalty regime has been overhauled to bring sanctions into line with public sector bribery and fraud offences (maximum of 7 years’ jail), the rest of this creaking statutory regime survives largely in current form. Many useful amendments to the Anti-Money Laundering laws were also made, including provisions allowing and requiring in future full reporting to the Police Financial Intelligence Unit of all cash transactions and wire transfer transactions made through regulated entities (over prescribed dollar thresholds). Facilitation or Routine Payments in foreign trade One particularly contentious issue that New Zealand policy-makers had to grapple with during passage of the new legislation concerned facilitation payments. Our law historically had a facilitation payments exception, which has been open to misinterpretation and possibly abuse. Parliament has taken an approach to significantly cut back the scope of this defence/exception, and clarify some of its definitions. In the eyes of many commentators and practitioners during consultation on the proposals, it would have been preferable to abolish this confusing and questionable defence altogether. A Supplementary Order Paper brought by an individual Opposition Member of Parliament to amend the Bill criticised the continued existence of such a defence, saying it serves merely: “…to legalise facilitation or “grease” payments made to foreign public officials to facilitate such activities as the granting of permits or licenses, the provision of utility services, and the loading or unloading of cargo. These “grease” payments are bribes, no matter their size, and help maintain a culture in some overseas jurisdictions where low-level corruption is permitted and accepted as normal practice when working in some overseas jurisdictions. Internationally, New Zealand is seen as a leader in public sector ethics and transparency. The outlawing of the controversial and unethical practice of facilitation payments will help uphold this international perception.” Unfortunately, in the Parliamentary political process, such sentiments eventually went unheeded. Legitimate concerns were raised about potentially putting export business at a disadvantage when many other competing trading nations permit some form of routine payments. So a facilitation payments exception remains available under the new law, albeit with additional restricted definitions. This could be seen as a missed opportunity for New Zealand to become a legislative leader on such areas, rather than sticking largely with the tried and traditional. Overall, however, the changes are at least a solid step forward in retaining legal tools to protect the country’s mantle as one of the least corrupt jurisdictions.