U.S. may offer Poland to give patriots to Ukraine, replacing them with Iron Dome. The United States is considering a three-way exchange of air defense systems involving NATO, Poland and Ukraine according to Politico. In this scenario, Poland as a NATO ally would receive American Iron Dome systems and the portion of their Patriot systems would be transferred to Ukraine. This development came about after Israel declined requests from Washington and Kiev to send the Iron Dome a highly effective missile defense system that is also capable of countering mortars and artillery directly to Ukraine. The Iron Dome is a mobile, all-weather air defense system developed by the Israeli company Rafael Advanced Defense Systems. The system is capable of intercepting and destroying tactical unguided rockets and artillery shells launched from distances of four to seventy kilometers with trajectories that pose a threat to populated areas. Since 2015, the system has also been equipped to intercept and destroy mobile unmanned aerial vehicles. Indeed, Poland has been actively acquiring various military equipment to strengthen its national defense capabilities. Among its acquisitions, Poland has ordered Abrams tanks and nearly 500 high-mobility artillery rocket systems from the United States. As reported by the Telegraph back in May, Poland's aim is to build the largest ground army in Europe, driven by concerns about potential threats from Russia in the region. This demonstrates Poland's commitment to enhancing its military capabilities and preparedness in the face of evolving security challenges. It's important to note that Ukraine currently possesses two Patriot air defense systems. One was provided by the United States and the other was delivered jointly by Germany and the Netherlands. President Volodymyr Zelensky has stated that Ukraine would need 50 Patriot batteries for effective defense against Russian attacks. The Patriot air defense system has already demonstrated its effectiveness in Ukraine. On May 4th, over Kiev, the Patriot system successfully intercepted a Russian hypersonic missile, the KH-47 Kinzel, marking a significant achievement in Ukraine's air defense capabilities.


Okay, how's the sound? Is that okay for everybody? Good, all right, wonderful. We'll welcome everybody to tonight's event, which is entitled Corruption in New Zealand. It's my pleasure to welcome you all here along with our distinguished guests from tonight who are, I would say, major figures in the struggle against corruption here in this jurisdiction. We have first Julie Reed, who is the director of the series Fraud's Office and before and a prior incarnation at ASIC, she was responsible for the investigation and litigation against the Australian wheat board that paid bribes to Saddam Hussein under the Oil for Food program, which is, I think, an interesting tidbit. Marty here, Marty Robinson, is a AML lawyer, which is anti-money laundering lawyer, as well as a criminal lawyer, an author of, oh yes, a recently released book from Lexis Nexus entitled The Anti-Money Laundering Regime, a Practical Guide, just, what, a month ago? July? July, okay, so quite recent and quite relevant as Marty will explain, there have been a number of changes recently to New Zealand legislation on this point. My name's Tim Cuner, by the way. I'm an associate professor here, specializing in law, democracy issues, and it's my job to introduce tonight's event with some reflections on why it's important. In terms of arriving at the first reason why it's important, I should tell you something that you probably already know, which is that New Zealand has an excellent reputation when it comes to anti-corruption. In the 2016 Transparency International Index, New Zealand was tied for number one along with Denmark, if I'm not mistaken, but you'll be glad to know in 2017, New Zealand pulled ahead to first place, edging Denmark, am I right? Edging Denmark out by one point, but still beyond that, significantly ahead of other Scandinavian countries and Switzerland too. So Norway, Finland, Switzerland are looking enviously towards New Zealand. Now, this is not obviously this corruption perceptions index from Transparency International is not a perfect measurement by any stretch of the imagination, but the countries that are at the top of this measurement are at the top of most other measurements as well, and the countries that are at the bottom of this tool are also at the bottom of most other indices. So it does give you a ballpark view of what we know about corruption, which again is an imperfect universe. So that brings me to the first reason why I think tonight's event is interesting is we can learn something about what country number one in anti-corruption is doing right. We can explore what New Zealand is doing in its regulatory environment to address corruption, and that is a significant case internationally because of its standing at the top. Now, having said that, New Zealand's score on this index is an 89 out of a possible 100. So to be at the top, you only need to get a B plus. No country is presently receiving even an A minus. Furthermore, just last week, Transparency International put out a press release stating that New Zealand needs to increase its efforts to fight foreign bribery, citing a lack of improvement since 2015 when similar concerns were voiced before. Additionally, a 2017 review of New Zealand pursuant to the United Nations Convention Against Corruption pointed out key weaknesses in terms of bribery being defined too narrowly, facilitation payments being allowed, and insufficient provisions in the laws addressing trading and influence, elicit enrichment and embezzlement. So concern coming from Vienna and the United Nations Office on Drugs and Crime and the countries that were reviewing New Zealand as part of the review mechanism there. So the second reason that I think tonight's event is important is that we might also be poised to learn something about what New Zealand could do better and to not be complacent in sort of resting on your laurels here in this country. The third reason that I think tonight's event is important is the broadest one of all, and it's well conveyed actually by the situation affecting my home country under the presidency of Donald J. Trump's, I can't even say his name, it's sort of, for an anti-corruption person, it's just like chewing on some unsavory morsel that you need to spit out. So what I think Trump's case illustrates among other things is that pretty well-established democracy, arguably an advanced democracy can fail. Pretty easily. Without more robust controls for corruption. Now unfortunately the case of Trump of an illiberal authoritarian populist on the far right isn't an isolated case. Actually there's similar trajectories as you probably know in Poland, in India, in Italy, in Austria, Turkey, Hungary. So we are at a time in history when people's frustration, political scientists tend to be establishing that the election of far right populists flows in part from reasonable frustration with economic and political systems, specifically corruption. Now the irony there is that voters who are frustrated with corruption are tending to elect governments and candidates who bring only worse forms of corruption to bear on the very system that they've voiced frustration with. So in the case of Donald Trump, this promise to drain the swamp really seems like instead he's flooding it and starting to charge admission. So let me just say a little bit about that. As you may have already heard, Trump owns many corporations operating around the globe. He's richer, even when you equalize the money in today's dollars, he's richer than all prior US presidents combined. Despite those things he's failed to release his tax returns or divest himself from his companies and of course he's appointed family members to key posts. Now, shortly after spending $66 million of his own money to get elected, he proclaimed that the president can't have a conflict of interest and that the law is entirely on his side. He then went on to appoint an exclusive group of millionaires and billionaires to cabinet positions. Notably, these cabinet positions are responsible for policies in the areas of trade, environmental protection, commerce, agriculture, education and energy in which all of these cabinet positions, these individuals have personal financial stakes. So they apparently, like the president, are incapable of having a conflict of interest or if they do have a conflict of interest and they're steering US policy towards their own bottom line and their investments and their prior companies that they used to run, even if they do have those conflicts of interest, they aren't actionable under the law. So anyhow, and now we're in the middle of this Paul Manafort thing where it comes out that of course the man who volunteered to head Trump's campaign for free at the time was indebted to the tune of $17 million to pro-Russian oligarchs and quite scaled at laundering money, which is perhaps a damning detail in terms of the special counsel's investigation into Vladimir Putin's successful attempt to influence the results of the 2016 election. So I would say to have an American introduce an event about corruption is perhaps similar to having an Italian introduce an event about Dante's Inferno. And it's not that we invented, Americans invented corruption or that Italians invented epic poetry, it's just that Trump and Dante are leading cases in those respective categories. And I don't bring up Dante's Inferno although the eighth circle of hell is reserved for the fraudulent and the malicious. I don't bring up Dante's Inferno as a suggestion for how punishments for corruption could be upped. That would be a bit cruel and unusual. But I would know, I think it's interesting that the bariters, these corrupt politicians who trafficked in public offices languished in lakes of boiling tar in the eighth circle of hell. I think it's interesting that the counselors of fraud in that same eighth circle burned inside plumes of flame like spirits swathed in confining fire. Similarly, the falsifiers and the counterfeiters lay about thirsty, filthy, dark and screaming afflicted by terrible diseases for they themselves were a disease upon society. Dante conveys these underlying ideas of what corruption is actually a disease upon society. But again, those punishments today are violent prohibitions on cruel and unusual punishment. The reason that I'm really closing with Dante here is that the Inferno is a part of a three-part journey. It's part of a three-part journey towards God. Not just Dante's journey, but an allegory for the soul's journey towards God. Now, why am I saying this? To get to the highest reaches of creation, Dante begins down below. Recognizing, condemning and exposing this, well, the various circles of hell, including those who end up there because of corruption. Now, most of us here today aren't here out of some sort of religious journey to get to God, but there is an analogy here, which is that we are part of a journey towards some lofty goals of our own, which include the integrity of economic and political systems, a journey towards prosperity and self-governance for all people regardless of class, regardless of wealth, regardless of political and economic connections. And also, in today's world of authoritarian populism, this is a journey to save democracy and to save capitalism and to see if they can be reformed and survive the 21st century. So I do think our guests tonight are part of a very broad issue beyond simply what New Zealand is doing right and what New Zealand could do better. I think they're part of a much bigger issue, which is the survival of democracy and capitalism and whether those systems can endure. So I don't think I'm alone tonight in that conviction, and I think that this is why, this context is why we're especially fortunate to have Julie Reed and Marty Robinson, these two prominent figures in anti-corruption law here with us tonight. So Julie and Marty will both have about 25 minutes to speak without interruption, and then there will be time for comments and questions when they're finished. So with that, I give you Julie Reed, the Chief Executive and the Director of the Sirius Fraud's office. Well, thanks very much, Tim, for your introduction and thank you for the invitation to speak here this evening. I can see some people in the audience who are intimidating me on the left here, so some of who will know a lot more about New Zealand law than I do, as you can probably tell from my accent, I'm Australian, and I've been here for the last five years as Director and Chief Executive of the Sirius Fraud office. I've got a few slides that I just want to romp through to tell you a bit about what we do for those who may not know too much about us. I'll start with those and get on to some more substantive stuff. So the scope and role of the SFO, we were formed under the Sirius Fraud Office Act of 1990, and we were modelled on the UK Sirius Fraud Office, which was established about five years before us, I think. We detect, investigate and prosecute Sirius or complex fraud. We do have both functions, which is quite unusual in the common law world, but in prosecuting, we have a panel of counsel, so external counsel who assist us with the prosecution, so we do have that independent prosecutorial perspective on things. We have some criteria for investigation, which I've listed there. They come from Section 8 of the SFO Act. We obviously have, internally, a much more nuanced set of criteria that fall, but they fall under these four headings of scale, public interest, complexity, and the natural consequences. And one of those of particular interest tonight is that we see corruption as particularly important to our jurisdiction, and we did actually prosecute one person for offering a council planning officer $1,000 in a brown paper bag. We lost that prosecution, interestingly, because the judge found that there were cultural reasons why the defendant thought that that was appropriate, and therefore he didn't have the appropriate menswear. This is very quickly our organisational structure. I'm the director and chief executive. Chief executive is a public service title. Director is my title under the legislation. I have the general council, who is speaking at a lecture tomorrow here. Paul O'Neill, who's an alumni of this institution, and he's a very good general council. So if you're interested in some slightly more technical perspectives than I'll give you tonight, I'd encourage you to come tomorrow, if you're able. We have three teams, evaluation and intelligence, business services and investigation, and as you can see, the vast majority of our resources are operational. You'll also see in the bottom part of the screen that we get over 700 complaints a year, and of those, only about 14 or 16 make it to full investigations. That's because we get a whole lot of stuff that's just not serious enough. We refer them to other agencies. They don't constitute fraud at all. So we have a number of vexatious complainants who like to write to us on a regular basis, just in case we're getting lonely. We have a strategic plan, which you can find on our website, and I'm not going to stay to talk about that, although it obviously includes corruption. In terms of New Zealand's corruption context, as Tim has mentioned already, in 2017, New Zealand was number one. Actually, New Zealand has held the number one place, either alone or with others, on the index 13 times, more than any other country. Our nearest competitor in this regard is Denmark, which has been at number one 10 times, followed by Finland with six. So we're actually quite a long way ahead in that respect, just in the sheer number of times that we've been up there. We've performed significantly better than our fellow Five Eyes countries. Does everyone know what I mean by that? Yeah, sorry. It's sort of come into common parlance, but I'm not absolutely sure. So, with Canada is the only other Five Eyes country that has ranked within the top five, and I've done that five times, but the remaining Five Eyes countries of Australia, United States and the UK, have never ranked in the top five. So it's quite, you know, it's quite a long way ahead in terms of the corruption perception index. And of course, the interest in corruption is not new. The index goes back to about 1995, I think, Transparency International was formed in 1993 and first published their index in 1995. Long prior to that though, the US created their Foreign Corrupt Practices Act, that was 1977. It sat there for almost 20 years before anyone did anything with it, which is a really interesting thing, but obviously some time ago, bribes to secure business or to speed up transactions were just seen as a necessary evil of doing business, particularly in emerging markets. Now, there's a commercially star-studded list of defendants who've been caught in the net of investigations, particularly by the UK and the US. And interestingly, interest was first sparked in America in corruption and particularly foreign corruption when they started to appreciate the economic interests of US businesses were being damaged by corruption in these developing economies because their companies were being beaten to contracts by people who were prepared to pay bribes. And so they realised that there was an economic imperative for the US to start enforcing their Foreign Corrupt Practices Act. So as I said, approximately 20 years after its enactment, the FCPA started to be used. And at about the same time, the OECD Convention came into existence, the foreign bribery convention for short, and the UNCAC Convention came into operation in 2000. One of the things that's obvious about the Perceptions Index and as Tim has already mentioned, is that it's just perceptions. There's approximately 16 indices. So it's actually just an index of indices. So they don't do original research themselves. They take, they can aggregate a whole lot of indices and come up with their index. There are about 16 separate indices that are used, but not every country is ranked by all of those indices. New Zealand is ranked in approximately eight and the maximum that any country is ranked under is 10. Interestingly also, the indices that New Zealand is ranked in are the indices ranked where the top countries are ranked. So if you're in that index, you've got a better chance of getting up to the top is the basic story.  We've traded on our reputation as a high integrity market for at least since the first TI index was released in 1995 when we were ranked one. And even if we wanted to back away now from that, and I don't think we do, the anti-corruption movement has gained so much momentum that enormous political support that it would be possible as especially unilaterally to walk away from the TI index or indeed the two conventions. We've now ratified the two conventions and that's why New Zealand has only just been assessed under UNCAC because we only ratified that legislation recently. New Zealand has a policy of not ratifying conventions although they're signed at the start. They don't ratify until we consider our law as compliant. So there's a whole lot of other countries who ratify immediately and then become compliant. And so while New Zealand was criticized for quite some time for not having ratified UNCAC, United Nations Convention Against Corruption, that was because we felt that we couldn't comply. So I don't think that that's actually inappropriate but or a matter for criticism. But obviously nonetheless, we've signed, we believe we comply, but the standards keep getting ratcheted up. So every time they have a round of reviews, they'll look at different things and come up with some different standards that everyone's looking for. There's no doubt that we are at risk of corruption. We are trading in different parts of the world than we used to, whereas we were focused on the Commonwealth countries, Australia and the UK in particular. We trade far more widely in China and other countries which are subject to much greater risk of corruption. And the pressure of these assessments and so on has also led to the decision to implement the second tranche of AML, which Marty's going to tell you about because I know nothing. And that will, I think, have a significant effect on local business. So I'll be interested to hear about that. So our corruption risks, we think one of the biggest risks to New Zealand is at the complacency in addressing corruption. I've no doubt that we do experience less corruption here than in many countries of the world. However, despite some recent strengthening of our laws in relation to corruption, the reality is that we rely on willing compliance. So we have a cultural compliance with anti-corruption laws. But those societal norms are going to be very much diluted by the enormous diversity in immigration that we're getting and we're having many people come in like the man who paid $1,000 in a paper bag to a planning officer, who don't understand that that's not acceptable here and that will mean that those norms will be diluted and we can't just rely on people to willingly comply. We really need to do something more to maintain our position. It's obviously that it's really hard to understand the scale and extent of corruption in New Zealand. It's something that's kept hidden. It's the same as fraud in that respect and we can only truly know about the cases that have been uncovered. And one of the things that we know is that the cases uncovered represent a fraction of what exists, but there's really very little agreement about what exists, about how that fraction should be expressed as a, do we see a third of the cases? Do we see a 10th? In the five eyes countries, it's generally accepted for example that about 5% of the government's budget is lost to fraud. And I'll talk a little bit about the overlap between fraud and corruption, but that's, you know, for New Zealand, that's maybe $2 billion a year of the budget. It's an extraordinary amount of money. And if we can do something to stem the tide, that would be fantastic because it would mean that money would get to where it ought to go. We've got insufficient linkages and consistency of action across anti-corruption and integrity efforts. And as I said before, economic growth in high-risk industries and countries, international trading partners. So just very briefly, the difference between fraud and corruption, not much is my answer to that, but a common law, and I'll talk a little bit about our specific legislation later. The seat is not required, so you don't need to deceive someone in order to defraud them. So in Scott and the Metropolitan Transport Trust, which is quite a seminal case in relation to fraud, the employees of cinema owners agreed with the defendants to temporarily abstract without permission of the cinema owners a whole range of films. So you can imagine in those days, this is when, this is 1974, films are in those big canisters and the employees receive payment for doing that and the people who received them without the knowledge or consent of the owners copied them for their own purposes. So the owners didn't actually know that the films had been taken, but they had suffered loss because presumably people who may have been their customers saw the films that had been pirated in effect by the defendants. So the court did tend to be at pains to say that loss had been caused to the cinema owners. So we've got obtain again and cause a loss, but it's also potentially a case of economic impairment, which have been very much at the heart of two cases that we've run recently. Emily Holdings, which I've forgotten the name Ross and Waipahana were defendants and they've just been sentenced last week to four years each. And also a case, Gang Wang, who was also called Hung Quang, and a number of defendants, both of those, all of those defendants obtained mortgage monies from banks by misrepresenting the nature of the risk that the banks were taking on in providing the mortgages. So nothing was lost by the banks in either of those cases, but there were very significant sums of economic impairment. So and deflecting a public officer from their duty is the fourth category of fraud which was recognized in Scott. Corruption on the other hand is abuse of entrusted power for private gain and in both the private and public sectors and that's recognized in New Zealand. That's the Transparency International definition and it's the one I prefer because I think it covers all situations. There are a lot more technical definitions used by the various development banks and so on but I think this one's actually the most appropriate. There's an enormous overlap between those two things. So if you have, for example, Joanne Harrison, who was at the Ministry of Transport and managed to take approximately $700,000 as a tier two public servant, she used her position to manipulate the records of the Ministry of Transport in order to benefit herself that falls clearly within abuse of entrusted power for private gain but we prosecuted her for fraud. Some of the fraud offenses here can be quite difficult to fit things into so we have both avenues and I think that that's appropriate. So I've managed to shuffle my slides here. New Zealand's corruption experience, I mentioned Joanne Harrison at the bottom there. Auckland Transport was a division of the Auckland City Council who within that, sorry, wasn't Auckland Transport as a whole, a division of Auckland Transport received enormous benefits from a supplier. That included mobile phones, iPhones for all of the staff. They were taken out to lunches. They were given overseas trips. They weren't paid cash, not extensively. One of the person at the head of that section did get paid as a contractor on a regular basis but there weren't bags, brown bags of cash. Again, we charged them with fraud but they were using their positions to give this contract of money, sorry, contracts for Auckland Transport. Wallace Teahuru was also an employee of the Waitangi Trust and he used his position to defraud the trust of, I can't remember, a significant sum of money. He's recently pleaded guilty. Procurement fraud, which is a bit of the Auckland Transport thing, misappropriation of assets, undisclosed conflicts of interest and inappropriate gifts and favours so that the inappropriate gifts and favours of Auckland Transport, one lunch that they went to cost $15,000 and finished at nine o'clock at night. It's a little bit hard to imagine how that was appropriate. So a lot of these things, in fact, most of these things were prosecuted as fraud. We do prosecute corruption offenses but there's an enormous overlap. So our legislative responses, we've had the organised crime and anti-corruption bill in 2015 which was in part the legislation introduced to allow us to ratify UNCAC. It narrowed the circumstances where facilitation payments were appropriate and increased the penalties for private sector corruption in the Secret Commissions Act which were increased from two years, to seven years imprisonment maximums. So I have shuffled these a little bit so the public corruption is in the Crimes Act basically so we have a raft of offenses there that include judicial corruption but the fundamental one of providing a public officer and in the Secret Commissions Act we have the equivalent of private sector corruption. Some of the other responses that I've noted up there, the vicarious liability for foreign bribery, there I'm referring to corporations. So interestingly, we have a real divergence in corporate liability for bribery in this country. We sort of parachuted in a set of provisions relating to foreign bribery, so bribery of a foreign official which included vicarious liability for companies. So a corporation can be convicted of foreign bribery if an employee acts within the scope of their responsibilities and pays a bribe so it's not technically, it's not named as vicarious liability but that's the effect of it. Whereas in domestic law, in order for a corporation to be responsible for bribe, we still have the directing mind and will theory of corporate liability. So it's a real dichotomy between the two and one of the things we think is that that should be addressed. The narrowing of the facilitation payments is something that's got us into quite a lot of hot water overseas. The OECD in particular don't like it. So what we did was to create an exception where an act committed for the sole or primary purpose of ensuring or expediting performance by a government official or of routine government action is still exempt. Very little is actually going to fit in with that. You can't pay millions of dollars to someone to do something within the time they're supposed to do it. It's unlike, and if you do pay that, it's not going to be a facilitation payment. I'm not, I understand that the OECD would like a very purest approach to this but I'm not sure that our position is really inconsistent. Future consideration, a definition of corruption would be good. At the present time, our act defines a bribe as money, valuable consideration, office or employment, or any, oh sorry, office of employment I think, or any benefit. It's made an offence to pay the bribe by requiring that the bribe be corruptly given or offered and there's no definition of corruptly. So I think it would make the legislation a lot clearer if we had a definition. Deferred prosecution agreements is something that we're also very interested in. The United States has had deferred prosecution agreements probably 25 years or more and they also have non-prosecution agreements and those agreements are reached between the prosecutor and the, or an installation investigator in the UK's case to settle with a corporation in return for their cooperation which enables the prosecution of individuals. So that's something that we would like to look at but of course there's no incentive for a corporation to cooperate I would think if you have the directing mind and will basis of liability because it's gonna be very hard to incriminate the corporation anyway. But in the UK that's despite them having the directing mind and will theory of liability they've had quite a bit of success in getting cooperation under their deferred prosecution regime and modernizing the offence regime in the Crimes Act. My personal preference would be to modernize it so that it represented the four varieties of fraud. But at the moment we have a whole menu of different things which don't really effectively cover the field. So the SFI use section 220 which is something that I'm now going to forget theft by person in a special relationship for a lot of the financial companies that were in trouble after the GFC. So we had to shoehorn a whole lot of offenses into that and I think ideally we need to move some way towards ensuring that the offenses are more modern and will cover the financial transactions that exist today. Let's see what we've got next. So system responses. The SFO has recently received cabinet approval for the commencement of a work program an anti-corruption work program. So this is not investigation and prosecution this is what can we do to ensure that we strengthen our regime and stay ahead. It includes developing a shared understanding of corruption and the specific vulnerabilities in New Zealand. Local government procurement which we know from our own experience is a difficult area. International threats and risks, public funding allocation. So there's a lot of work being done elsewhere looking at public funding and in the UK for example it's each government department has to declare and report actually how much fraud has occurred on their department and if you don't declare anything you're considered not to be doing your job. Whereas here interestingly when Joe and Harrison's case came to light what we did was to vilify the chief executive who reported it which I think is a really counterproductive thing to do. What chief executive would want to report fraud having seen that experience, Martin Matthews experience in the UK that's celebrated if you find it because that's good we can stop it, we can learn from it and we can change practices. But I think it's fair to say that most of the chief executive said to me at that time there but for the grace of God go I because you know Joe and Harrison for example there were, you might have seen in the news there were reports about Joe and Harrison but she was a highly trusted employee. She was considered to be the best performer in the senior leadership team as the Ministry of Transport. There are all sorts of reasons why she would be trusted and that's what we all do every day. We know that you're a person who would pick up $20 if I dropped it and give it back to me so why wouldn't I trust you with something else or you're good at your job so why don't I trust you to do everything in your job well. I think it's a very human reaction and it's quite unfortunate that we took that approach and it's something I've talked a little bit about in government as well. Probably not directly about corruption but still. We want to measure the value of prevention efforts. We think that that's really important too because there's that $2 billion there and if we can talk about how much of that we've saved that would be fantastic and some private sector outreach and again modernisation of the relevant legislation. So that's the end from me. Thank you very much for listening. To the extent that I haven't talked about corruption please feel free to ask questions later and I'll just hand over to Tim. That's probably the only time the microphone's over. It'll be called many things. Tim's not the worst. Coming through the mic. Perfect, thank you. Good. That's very interesting. I really like their public works programme. I wasn't aware of most of that. My name's Marty. I come from SFO London for about six or seven years doing the sort of work that Julie's done but obviously the lower level investigating lawyer bill. I've spent some time at the DIA which is the main regulator in the anti-money laundering space and so we may get to that. I've always been a little bit sort of prosecutorial in my thinking. When I was about four I told my mum what do you want to be Marty? Please stop. I didn't recognise that that wasn't a concept but you could do. So I think it's always been in there and I've spent probably more years prosecuting and defending but I like the court litigation work so that's my background. Fell into the AML consultancy that I do now as a lawyer having worked at the AML with the AML team at the DIA and prior to that I was more into the fraud prosecution with the councillor in Christchurch, the SFO in London but I've really enjoyed the AML stuff so I'll give you a bit more about that. I'm going to set my timer for 18 minutes. That's what I give my kids, six minutes each stories otherwise bedtime. And if I haven't by then got onto the AML act I will. So look the biggest problem for humanity what would you say it was? A lot of people would say it's just simply global warming Marty. That's pretty obvious. There's various other solutions to that question but I'm going to suggest we flip the script for a moment and consider what's preventing humanity from transforming societies from nepotistical autocracies such as Tim's home country into flourishing democracies where citizens feel heard respected and empowered to contribute to a fair egalitarian society such as perhaps New Zealand judging by the stats we've seen. Given the sort of international community that may be promoted if all the countries had that similar sort of approach the Scandinavian model, the New Zealand model wouldn't we come together better to solve things like global warming? Wouldn't we start to listen and actually tackle the things that need to be tackled rather than sweeping under the carpet and letting money. Sorry that's the next paragraph. Just to re-learn. The New Zealanders are very lucky in our country's governance is comparatively excellent as you've seen on the Transparency International Index. We do very well and there's a number of other indexes that I will hopefully get to if our children's time allows me. But could we go backwards like America right now? That does concern me. And how can we grant countries move forward towards liberal democracy? Or some other thing with flourishing and fair society doesn't necessarily have to be good credit. But an egalitarian society or whatever should it be from the tax side. Corruption, I would say to you is one of the biggest barriers to that and it's extremely difficult to overcome and build the same momentum. Money is the best process for the US. Big funders of the Republicans, oppression politicians, towards outcomes favourable to rich business owners or gold plunders or reality TV starers or real estate magnates or prison expanders. Some of them fit within the same big diagram. Integrity, including financial integrity is the powerful, potentially powerful cure to corruption. But leaders need to make commitments to reform and help us sign up to measures that don't mean get domesticated and don't mean enforced. There's a pro-integrity movement typified by work being done by the OECD that you perhaps have some input of. It seems to be gaining momentum, relies on things that can be transparent and honest to leaders. And I think it's to be afforded. Trying to tackle corruption and promote integrity in the world is going to seem in the hand of mental institutions. But integrity, of course, is like health. It's much easier and cheaper to maintain that it's taught and integrated with the outside. And if it's included in the design of your laws, your policies, your institutions, then it's much more likely to take root in the rain. Much harder, like health, to cure corruption. That's going to be much more expensive. It seems an impossible task to transport to make it move more and really everything else we do. The honest and transparent government, as I say, and requires leaders like I would say, I quite like this person, and I think she does have a lot of intensity in the heart and the right place and wants to move in the right direction and I agree with her. I do know how to relate to both, so I would say that will work. But governance, I think, is a really important concept. And let me just talk to you a little bit about what governance means in a national level. It's really how authority is exercised in a country. What institutions and traditions exist in a particular country to achieve the exercise of authority in a constructive and state-of-the-art? Think about the processes by which governments are selected, how they monitor, pre-press, political checks and balances, oversight bodies, et cetera. How are the governments replaced? Is it smooth? Is there a coup? Are the policies... Are the rules and institutions around it? Are they mature and developed? Or are they done? Are they messy? What's the capacity of the government to formulate and implement sound policies effectively? Think about the institutions that govern economic and social interactions and make citizens and groups in society. And are those institutions respected by the citizens? And you've caught the question for Tim. Are these institutions respected by those in power? I'm certainly not in the US at the moment. Stephen Colbert... Hands up, who doesn't know Stephen Colbert? Pretty good show. Stephen Colbert recently quit that Trump had real difficulties with the Department of Justice. That's a tough one. But in New Zealand, we value justice. We value everybody. Fairness, equality, transparency. We'll go, of course, not 89 out of 100. We haven't always managed a perfect record, but we certainly sit at the top of most of these. After the dirty politics scandal, perhaps the worst we've seen in the recent few years, then we're in a far better place than most of the world in Trump's America at the moment. At least until the November midterms, hopefully, act as a belated step on unrestrained abuse of liberal democratic norms. Various industries highlight just how far we are above other countries in terms of their governments. We've dealt with the transparency of international corruption perceptions in this, but I just noticed based on perceptions, and that's possibly important, but we can't really measure these things very clearly. Corruption in money, I'm wondering, is they high? So economists can try to value all of the assets and liabilities in countries and around the world and try and balance those. They don't balance, it's a black hole, and they say, well, there's our corruption at full, our money laundering, but it's always a bit of a guess, a bit of this, and some commentators have said the results are really around the ear, and we're not really sure. But the New Zealand police, the financial intelligence unit, deals with the money laundering risk. They receive all the suspicious activity reports. They calculate about 1.35 billion a year, and it's less than 2 million. It's just the small amount before you then consider what's actually superlating through businesses. It becomes exponentially bigger because money goes around and goes around and goes around and it's higher. But they say 1.35 billion is what keeps taking out the pot and to start with. I won't deal with transparency international, but I will deal with the world governance indicators. And if you want to look these up, they're quite interactive. There's a little table of graphs and I find them quite fun. I'm a little bit of a geek, but you might also, if you're on the eq scale, find them interesting. They are on info.worldbank.org, should you wish to have a look. And they score countries on a percentile rank, so 0 to 100, so unlike the TI, you don't get 89, you should get 100 and they sound a bit different. But they have measures of voice and accountability, political stability, absence of violence and terrorism, government effectiveness, regulatory quality, rule of law and control of corruption, which is perhaps the most important for tonight. But let me give you, just to stroke our own egos of country, let me give you a flavour. Voice and accountability measures the perceptions of how far a country's citizens can participate in selecting government, freedom of expression, freedom of association, and pre-quest. Norway, Sweden, 100. New Zealand, Netherlands, 99. Second, but close. Political stability and absence of violence and terrorism. Monaco, Greenland, 100. New Zealand, Singapore, 99. So we're still really up there. Scandinavians for some reason fall a little behind over some weeks. Just to give you some other numbers to be context, Libya, 3, Iraq, 2, Lebanon, 9, 13. New Zealand's only 80. So we've beaten Dutchies quite well on this one. Namibia, 69. Russia, 21. Moving on to government effectiveness, which we would think we'd do pretty well on. This deals with the perception of the quality of public services. We're very proud of our civil service here. And the degree of independence compared to the precious, and Jane may have to review them, and I'll just discuss, the quality of policy formulation and implementation and the credibility of the government's commitment to such policies. And here, Switzerland and Singapore. Norway, 99. Finland, 98. Sweden, 94. US, 93. Doing quite well. Interesting career. South Korea, 82. North Korea, 4. Perceptions, though, in the US I have to suggest that the people living on the east have dropped out of school in 1993 in the 17th most recent moment and perhaps quite well up. The next measure is regulatory quality, which deals with the perception about the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. Here, we come through high as well with the Dutchies, 99. Hong Kong schools, Canada, Switzerland, Germany and Italy, in the late 90s. Penultimate is the rule of law index, which is measuring the perceptions of the extent to which agents have confident in and abide by the rules of society, agents meaning US businesses. And in particular, the quality of contract enforcement, property rights, the police, the courts. As well as the likelihood of violence and crime, as expected. And here we do well as again, behind Norway and Finland on the third page. Russia is going to be down 22, China 45 on the improved India 53 and North Korea and Iraq on four each. And finally, the control of corruption index, which is the most pertinent to tonight. This measures the perception of the extent to which public power has exercised for the private game, including both Peter and Graham for the direction, as well as the capture of the state by elites and private interests, and I'll mention Donald J, something like that. So here we have 100, we do really well. And Norway, 100 as well. We've been 100 since 2009. So in terms of that control of corruption on this index, we treat very well. Again, the Scandinavians are high. Switzerland, Canada do well. UK and Germany, all in the 90s. The US is at 89, or at least it wasn't 2017, or 2016 data, but again, I suggest it's probably taken a bit of a better over the recent times. As fast as the world's international institutions try and solve the problems around corruption. It's the commonly received wisdom at least, and I think it's probably been long, that criminals will simply continue to invent new ways of subverting the systems put in place and will certainly see that in money laundering. The typologies or methods of money laundering constantly shift, and the police have put out documentation. They do a quarterly deal with new typologies and new issues that have to be dealt with. And businesses under the new anti-money laundering regime have constantly agreed their stuff. They have to have an anti-money laundering compliance officer who has to be alive for all the issues. Update the risk assessment that measures the risks of the business. The risks that have been exploited by money launders or terrorist finances. And update the documents and the compliance program that the government is going to do in this business to make sure they're taking all these changes that keep happening. Also, of course, you've got new technologies dropping into the labs, with new abilities to solve all problems, but also circumvent regulation and circumvent law enforcement screening. New technologies like crypto-characteries and especially privacy coins are in particular constantly blamed, perhaps widely, perhaps unfair, for making money laundering much easier to get away with in the case of corruption. But the privacy coins, as you probably all know, they're much more resistant to being traced to the others' identities than is the case with most crypto-characteries such as Bitcoin or Ethereum, which are effectively chipped into stone in the blockchain or other distributed ledger technology and law enforcement quite likes that, because often, once they can prove their loans to a particular bit of currency or tokens, they can trace it in time and they can watch as things happen going forward. Whereas, with the privacy coins there's a lot of technology called mixers. You may be aware of these like a tumbling around mixer thing that puts money in from certain people. We've lost the ability to not be earmarking on it. The privacy coins, you can't at the moment trace those and not fail with the pure technology, but I understand they're getting a lot of criticism for the reason that law enforcement won't be able to deal with them in the same way. It's the scrambling of the audit trail with those mixers and the privacy coins. They are a very unskittered new bit of technology for enabling payments and tokens of value. And if you asked money orders 15 years ago or even some of them five years ago, they would have had no idea that such strange new inventions would have existed to help them with their trade. And in the dark net, as you'll be aware, a lot of this stuff happens and these new technologies provide really rich opportunities for criminals to come together, learn, join forces, access each other's illicit products and services. You know, there'd be drug sales, illicit child sex abuse material, which I was a prosecutor for a few years at the DIA and it's a pretty grizzly enterprise. There's extortion services, hacking, fishing. I understand even paid assassination services, if you want them, whatever you need. If you're telling anybody this, I don't actually have to be prosecuted for aiding and vetting their future crimes, but one of you knows. You're aware of these sorts of things. And criminal activities in the dark net yield the proceeds of numerous of these crime types and these will need to be, these proceeds need to be noted so they can be used safely by their owners. Happily, both fraud-enabling services and money laundering services are available in the dark web to help you. The technology is often associated with using the dark web, including these anonymity-enabling devices, the ban on law enforcement. So what's money laundering and what is New Zealand doing about it? Oh, good. So, money laundering and terrorist financing definitions, I'll start with those. Money laundering describes a variety of techniques that are used by criminals to defeat law enforcers, effectively by converting the proceeds of the criminal and dealers into usable assets or cash or electronic funds of other value, cryptocurrencies and so forth, that have been cleaned of any trace of the original crime, which is to say they've had the order trail effectively stretched to the point of breaking, obfuscated to death. Money laundering is described as having three overlapping phases, which are placement, layering and integration, which concepts that you really don't need to know because it's pretty simple when you hear how they work. Placement really just means placing proceeds into a legitimate, financial place style of story. For example, taking cash from illegal drugs sales and co-mandling it with legitimate business takings is the first point of call feeding into the legitimate financial system. Another example might be receiving fraudulent tax refunds and splitting it up into several bank accounts when you get it back from the real world. Criminals often use professionals as whipping condos to help place criminal proceeds as to the legitimate economy, so lawyers and councillors and real estate agents are being cashed in a phased response by the Government through the DIA as the supervisor started in July to scorn boards Monday this week as accountants and then 1st of January real estate agents come in as well as well as high battery dealers and the racing board or the new interdicts drug number. It's done a lot with financial institutions and casinos and financial institutions as a group for all in terms of sure banks, insurance, money providers, people that do factoring which is buying old pairs and trying to make some money on the internet and all sorts of various weird things that you would expect from under the definition of financial institution. But it covered around 2,000 businesses which is quite a lot to me so there's only a few banks. 2,000 businesses until recently has gone up to about 8,000, 9,000. So it's a lot of businesses now coming under pretty heavy clients' costs and control by the Government helping us all all the reporting entities under the idea to be the arising units and to report things that they need suspicious and to help the Government try to clean up the sector and make sure money doesn't explore businesses to be extended and perhaps used to. Now sorry back to the second phase. So we placed it by just taking cash points on there or getting out of the revenue or whatever it might be. Second phase is layering which simply means doing that over and over and over and over. This is the washing machine where they're made more during as an energy country. So making further transactions, conversions movements of the illicit funds to confuse any forensic accountable laser trials, peace of trial, we have to get it. An example of this might be moving funds through multiple accounts breaking it up and structuring into little bits when you send it around it's quite a nice term for this you send it around the whole of the dues going through airports and different banks and trying to break it up and bring it back together at the end where the ultimate beneficial owner i.e. criminal can then use it and get a house in the canals and that's called smurfing. I think because these little guys they come back and publish smurfing as they had in the canals. There's also something called cookie smurfing but I won't bore you with that but there's a pretty high hand weird one in terms in this area which is god damn useful because it's pretty boring at times which is why I think in my money laundering I don't really agree with some criminal litigation just to give a little the glory of the eyes of you that you like to be supplied with drugs coming back away from that an example of layering will be moving money through multiple accounts as I said for three companies through trust which is particularly effective because they're a piece and understand what's going on in a lot of cases companies nested where the ultimate beneficial owner might be five or six layers up so we have to find and so the reporting entity is over they now have to try and clear the fog, understand who will be others are and describe who the ultimate beneficial owners are and perhaps due diligence is triggered i.e. some risk factor that's higher than new i.e. risk of being an official owner or in some cases several of them what's your source of wealth what's your source of funds to serve i need evidence of this i need third party documentation i need enough to make me on a risk based approach comfortable that I know who are not on some sort of sanctions list or a politically exposed person which might be somebody with political exposure at a high level in the last five months in the foreign jurisdiction and he tries to do a deal through my law firm and I find he pops up on a check as a politically exposed person I'm now prompted to say alright, I know who you are we need to have a little bit of a check before I do business with you sir so professionals are often used and this is something that the financial action task force has tried to press as a new phase of the reforms financial institutions have been covered around the world for many years and the realest stuff came up and when the Twin Towers government in 2001 is when terrorist financing got rules on as well so it's been around for a while but lawyers accountants and real estate agents are the primary three new business groups that have been co-opted into the regime now in New Zealand and we're now little pigging with the best regimes in the world for this area most countries don't have those because the gaps keep in proficient that you can keep the gaps for the legitimate financial institution that allow you to create a company then create a trust then nest it, you're putting it around and then throw your money in throw it around the washing machine for a while, pops out in some real estate or some business or whatever and obviously lawyers will go and form a company who will trust for you accountants will do the same trust and company service providers will do the same they're all medium to high risk and they're going to resist there is limited risk what the interviewees that are now moving around the regime so these ones are medium high there's not many that are high many of them matters for sure are high most are medium to low so the new entities that are coming under the regime are actually the more risky ones according to the financial institutions and the administrative regulars high-diversity, the third phase the way of it around, and that integration really just means it is now integrated to the point where I feel comfortable as a criminal, flaunting by ill-gotten gains in a way that no forensic accountant is going to be a step in the structure to find out that it was actually taken from my methamphetamine sales to the triads. That's effectively what we're trying to do, get to the place where you integrated it, and you now use it in a way that nobody uses it wisely. You might reinvest it into illicit business, you might wire a shop on the high street and you're cleaned from now, because you've got a few million you don't need to worry about giving any more money if you've got any deals. You're good. Criminal don't think about that, of course, because if you agree, you agree that you stay good. But a lot of it does get useful in the businesses, because that's the way of, say, you come into New Zealand, you buy some nice real estate in a stabled, democratic environment, where nobody from the state is going to try and drive you on those assets, because some of the countries that we haven't, here, no way.  So it's really up to us and the businesses that come into the regime to try and find the stuff and report it to the police before they get to the point of integration. So the AMO laws have been implemented. I had the previous four chair of the Nexus to say, you want to write a book on it, which is remarkable, really. They chose me to do that. Now, that was a pleasure to do. And it deals with, it's really a practitioner's guide on practically how you can provide a business. It could be your own rule for it. Generally, if somebody comes to you, I've got a factory in business. I need a risk assessment. I need to assess the risks of money laundering and affecting my business. And I went to then design a compliance programme that sets the place, how I do my customer due diligence. I know your customer check at KYC is probably the term you know. CDD is what we call the New Zealand. Once you get them through the door, you've got to check that you understand where they come from. You get a name, date of birth, address, information. You verify that against the government sources. I've been the DIA's citizenship registrar with birth, death, marriages. But they're from offshore and you're going to use some of the ways of checking who they are. They would have certain high respect as if they're at trust, for example. If they have a relatively expensive person, if they try and do wire transfers offshore over $1,000, these are the sorts of things that trigger you to go, okay, we're dealing with something serious here. We need to now apply enhanced due diligence on you. So they call it CDD. There's acronyms coming out and there is this new regime. The worst is, there's a non-financial business with proficient D and FPP, but there's a lot of 70 tenders. So I guess it's a lot of new regimes. But the New Zealand domestic situation is full design from a centralized best practice in the financial action task force, a pan-government body introduced by the G7 in 1996. They introduced best practice and they had a main and a challenge of routine whereby you'll be blacklisted if you're not following what needs to happen. And to the extent New Zealand's been on a watch list, not a blacklist, we've had to up our game. So just to highlight for you how that's occurred, I'd like to see if I can even give you that... Yes, 2003, at the success of New Zealand's anti-money laundering systems to the extent we had them at that time and found significant gaps across three pivotal areas in how we radiate this stuff. Conducting customer due diligence, not good. Reckle giving, not good. Implementing compliance programs, not good. I mean, these are almost non-listed, frankly. And the government's quality of supervision over the financial sector, not good. These are heavy-hitting, need-to-do things. So New Zealand was placed in a regular follow-up process to monitor our efforts, which is the name of the insurance bank. They're fairly excellent at this, and they've got most of the world's countries. Towards 200 territories or countries are now at least in some way complying or implementing domestic legislation. They're only living on the AML deficient list. And these are the North Koreans and the Iranians and the Iraqis. Venezuela, I think, is there. Sri Lanka, strangely. Sri Lanka actually ranks pretty high other than being on this as there's so no non-gratid list. But there's only 11 in the world who really are struggling to do this stuff. It shows you how well the government has done to get everyone on Corral and to say, look, you don't play well here. Foreign investments are going to dry up. Your reputation is going to dry up. People won't trust you. There's a country to have the integrity of your financial working, so it's really worked very well. And there's been an unusually aggressive approach in the way that these things are done internationally, but very quickly. So after our game, and further, if they call these things mutual evaluations, people come from different regimes who work in the area of antimalinal drilling in their own country, experts from, say, the DIA and Equivalent, and they'll look into what the country's doing and give it a rating and find the problems. So there was a mutual evaluation in 2009. There'll be another one in 2020, by the way, so we're starting to look pretty good for that. 2009, the fact is found even after the improvements, New Zealand still failed to comply in a meaningful way, or at all, with 24 out of 49 recommendations. So we're about half even after we've tried to get this stuff sorted. We were read as compliant, eight out of 49 recommendations, largely compliant with another CDT, but with the other 24, we were either not compliant or partially compliant with trans-privileged. So in 2009, the government responded to the fact of criticisms in the form of the antimalinal drilling and countering financing of terrorism bill, which was a title we could serve, but was rejected. It's probably a mouthful. And the initial briefing to the foreign affairs defence and trade select committee had the Ministry of Justice saying this. Money laundering and terrorist financing undermine the economy and create instability in the financial sector. Uncheap money laundering promotes crime and terrorism and would highlight New Zealand as a weak link internationally, making our economy more attractive to money launders and terrorist audiences. This would in turn make our economy less attractive to legitimate investors. Continued non-compliance could also result in increased costs of overseas borrowing for the government and private sectors, but overseas lenders placed a greater risk premium on non-compliant countries over time. As a small independent country, but one with a wide range of international interests, New Zealand relies on diplomacy as its main vehicle for ensuring an external environment that is stable and rural-based, and for opening up opportunities to pursue our trading and other objectives. Compliance with FATF, the Financial Task Force, would also support New Zealand's reputation as a country of counter-terrorism, particularly in the eyes of key planted players such as the United States. And accordingly, our interventions on counter-terrorism matters in regional and international fora would be enhanced. So, as I say, I'll cut to the end because I think we're probably there. The most important obligation is now placed on businesses and, as I say, there's able-line housing by the time we get to current living conditions. They are customer due diligence, both at the outset, when you're onboarding, the horrible term, gathering your client. It's a merit in all of this, that's a merit. Now, you're onboarding your client, you've got a customer due diligence, check them, and during the business relationship, you need to keep monitoring and bring increased risks, and that could come in in various forms. But generally, it might be that starting accessing another service you have such as forming a trust or forming nested companies where you think, well, we're probably exposed here to a risk of money laundering. You don't have to see it. You can't be seen. All of this stuff is largely invisible. But if it takes certain boxes in your compliance program to say, look, if this happens, people start spending over $500,000 on particular things, if they have five members of nested companies, if they have politically exposed persons, there's been official owners somewhere in the background coming aboard, then you've got to do more checking, then you might have to get rid of them, which is really difficult for lawyers because surfing your client, first of all, you've got certain duties about the retainer.  So if you think they're doing something highly dubious, you can't actually turf them. Well, you can, but you've got to be very careful how you do it, and you've got to make sure that you're not giving many implications if you think their activities or services or transactions are suspicious and they're sneaky words of the cops. This is the lawyers in the room, which will be best of you. This is obviously really tricky in terms of what we're used to is they tell me stuff like all that stuff. I don't tell no one about this stuff, and I tell them anything I learn about the case that they need to know, regardless, as long as it's relevant to me, I will tell them. All of a sudden you put in a position now of, God, I've got this really difficult meeting with this guy on this round, and I can't tell him I'm considering a suspicious activity report. He's checking how I'm going to run this relationship. It's a really tricky situation. Also, privilege is a nuisance when you want to report something suspicious. If you're happy as a lawyer, you'll be reporting all the stuff that you normally never would. Then you've got to act with privilege stuff. Privilege is carved out to the back. It doesn't include anything compared to the trust account. It all gets very complex, and it's very unusual for lawyers and accountants in particular. So, an interesting new revenue. Along with customer due diligence, reporting of suspicious transactions, these are the main things that your community needs to do in the regime, and as I say, asking for a source of wealth and source of funds, and independently verifying the information. These are the main things that businesses are now able to do. That's pretty much a good coverage, I think. You know, I'm probably over time, so I'll stop there and, if you don't see any questions that you want us to ask in the day. Personal schedules. Please take this opportunity to be down as a compromise so you can help. Otherwise, stick around for comments and questions. Questions or questions? I'll get names and let the experts respond. He's the core of it. Good to know that social anxiety was a reaction to vilify me as being here. I don't know if I can touch on things, but I do refer to a reaction that's really interesting, because social norm is directed against the offender rather than the discoverer. And I think what I would say is that the social norm is a form that someone who finds out corruption. And the difficulty for that particular chief executive was that he was considered an offender founded early enough. And if you look through all the documents that Ministry of Transport published all the documents about this on their website, and if you go through them all, I think we're going to record this. Oh, we're not? If you don't want to, that's fine. If you go through all of those documents, it's quite interesting. First of all, she was a psychopath. She had two prior convictions before. There was a warrant for her arrest in Australia for a forward, and she'd come to New Zealand to escape that.


Are you ready for exercise number three? Take a short break if you need to. Move your shoulders, your shoulders must be tired now. My wrist, move them around, move your elbows, move your hips, move your knees, move your ankles, loosen it up.