Departmental Report for the Law and Order Committee

Transcription

1 Organised Crime and Anti-corruption Legislation Bill Departmental Report for the Law and Order Committee March 2015

2 Organised Crime and Anti-corruption Legislation Bill Departmental Report for Law and Order Committee Contents Introduction and overview of the Bill... 3 Summary of submissions... 3 Summary of key recommendations... 5 Clause-by-clause analysis of the Bill... 6 Part 1 Amendments to the Crimes Act Part 2 Amendments to other enactments Subpart 1 Amendments to Anti-Money Laundering and Countering Financing of Terrorism Act Subpart 2 Amendment to Companies Act Subpart 3 Amendment to Criminal Investigations (Bodily Samples) Act Subpart 4 Amendment to Criminal Proceeds (Recovery) Act Subpart 5 Amendments to Customs and Excise Act Proposed new subpart Amendment to Extradition Act Subpart 6 Amendments to Financial Transactions Reporting Act Subpart 7 Amendments to Income Tax Act Subpart 8 Amendments to Misuse of Drugs Act Subpart 9 Amendments to Mutual Assistance in Criminal Matters Act Subpart 10 Amendment to Policing Act Subpart 11 Amendment to Secret Commissions Act Submissions outside the scope of the Bill Appendix one List of submitters Key to recommendation boxes Recommendation to make technical amendments Explanation of the recommendation Recommendation to make substantive amendments Explanation of the recommendation 2

3 Introduction and overview of the Bill 1. This Report has been prepared by the Ministry of Justice. It informs the Law and Order Committee (the Committee) of issues arising from submissions on the Organised Crime and Anti-corruption Legislation Bill (the Bill) and recommends further amendments required to give effect to the Bill s purpose. 2. This Report covers all aspects of the Bill other than the amendments to the Policing Act and submissions on that part of the Bill. A separate report will be provided to the Committee on that aspect of the Bill. 3. This is an omnibus Bill aimed at strengthening the law to combat organised crime and corruption. To achieve this purpose the Bill: 3.1. implements proposals contained in an All-of-Government Response to Organised Crime (August 2011); aims to improve New Zealand s ability to co-operate with international partners to disrupt organised crime and ensure law enforcement agencies are able to quickly and effectively respond to new challenges; 3.3. will allow New Zealand to ratify the UN Convention against Corruption (UNCAC) and implement the Agreement between the US and NZ on Enhancing Cooperation in Preventing and Combating Crime (the PCC Agreement); 3.4. will enhance New Zealand s compliance with a number of other international conventions including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Anti-Bribery Convention), the UN Convention against Transnational Organised Crime, and the UN Anti-Trafficking Protocol. Summary of submissions 4. The Committee received 20 submissions on the Bill. Twelve were supportive of the Bill s purpose and seven were neutral. One submitter does not support the Bill in its current form. 5. Eleven submitters presented oral submissions to the Committee. The list of submitters, their positions on the Bill, their key concerns and our responses are briefly summarised in the Appendix to this report. 6. The key issues raised by submitters can be broadly summarised as: 6.1. Requests for the removal of the facilitation payments exception to the foreign bribery offence in section 105C(3) of the Crimes Act Concerns that as currently drafted, the amendment to the money laundering offence will not work in practice. 1 In August 2011 the Government released An all-of-government response to Organised Crime intended to combat and reduce organised crime in New Zealand. It identified areas for operational improvement and has already resulted in operational changes. In addition, it found that while New Zealand has a strong legislative framework in place to obstruct organised crime, a number of amendments were required to address gaps in the law, make existing processes more efficient, and improve compliance with international conventions. These amendments are reflected in this omnibus Bill. 3

4 6.3. Clarification that the amended trafficking offence will cover both domestic and international trafficking Requests for the lead in time for commencement of the new prescribed transaction reporting obligations to be extended Requests for certain types of transactions to be exempted from the prescribed transaction reporting requirements 6.6. Uncertainty as to which reporting entities involved in an international wire transfer will be required to make a prescribed transaction report Suggestions to remove the requirement that individual employees be named in a prescribed transaction report Requests to extend the maximum time period for submission of such reports Concerns that the penalty for failing to report a prescribed transaction is too high. 4

5 Summary of key recommendations 7. The table below summarises the key changes to the Bill recommended by advisers, subject to Parliamentary Counsel Office advice on drafting. Some of the amendments identified below are of a minor, technical or consequential nature to give full effect to the agreed policy but have been included in the table as they respond to submissions. Rec number Clause Recommendation Para 3 6 Make new specified fines available in addition to the existing term of imprisonment for the offence of foreign bribery (section 105C Crimes Act 1961) Amend the money laundering offence to remove the purposive element, while retaining concealment as an element of the offence (section 243 of the Crimes Act) Ensure that where an offence has extraterritorial effect, laundering the proceeds of that offence can form the basis of a money laundering charge (regardless of whether that conduct is criminalised in the jurisdiction in which it took place) (sections 243 and 245 of the Crimes Act). 9 Proposed new clause Amend the AML/CFT Act to provide a regulation-making power to exempt certain reporting entities involved in an international wire transfer from the prescribed transaction reporting requirements. Remove the requirement that individual employees be named in prescribed transaction reports from new section 48B(1)(b)(vi) of the AML/CFT Act Amend new section 48A of the AML/CFT Act to extend the maximum time period for submission of prescribed transaction reports from 10 days to 10 working days Remove clause 25(3), and amend the AML/CFT Act to clarify that prescribed transaction reporting obligations are subject to the civil enforcement regime in the Act Amend the Criminal Proceeds (Recovery) Act 2009 to enable foreign restraining orders to remain in place in New Zealand for two years, and be extended (more than once if necessary) for a further year, in line with the extension of domestic restraining orders Proposed new subpart Amend the Extradition Act 1999 to enable Police to take identifying particulars from persons arrested under warrants issued under the Extradition Act

6 19 Proposed new clause Amend the Secret Commissions Act 1910 to ensure that the prohibition on bribes and the duty to disclose interests in a contract extends to an agent s step-children (as well as their own children as is currently the case) Clause-by-clause analysis of the Bill Clause 1 Title 8. This clause states the title of the Bill. Clause 2 Commencement 9. This clause sets out how the Bill may come into force. Submission 10. The Regulations Review Committee (RRC) wrote to the Chair of the Law and Order Committee on 12 January 2015 to express its concern that most of the Bill may be brought into force on the earlier of a date appointed by Order in Council and 1 January The RRC noted that as a general principle, legislation should incorporate a fixed commencement date and that provisions for the commencement of legislation by Order in Council should be used only in rare and exceptional circumstances. 11. The commencement clause was drafted, in so far as possible, to address the RRC s concern about having a definite commencement date. 12. This clause was drafted well before introduction of the Bill in June 2014 and it is now clear that 1 January 2016 is not an appropriate date to commence all parts of the Bill. 13. However, as this is an omnibus Bill, each individual Act arising from it will have its own self-contained commencement provision once the Bill is split up at the Committee of the Whole House stage. Therefore, clause 2 is essentially a holding provision until definite dates can be set at that time. 14. Officials will take into account the RRC submission in framing appropriate commencement dates in each Act arising from the Bill. However, a different commencement date or mechanism for determining a date will need to be set for amendments to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) to ensure effective implementation of the new prescribed transaction reporting requirements (see discussion at paragraph 161). Further, in any case where supporting regulations are required for any Act arising from this Bill, an appropriate commencement date or mechanism will be provided. 15. No changes are recommended, but the RRC submission will be taken into account in framing final commencement dates. 6

7 Part 1 Amendments to the Crimes Act 1961 Clause 3 Principal Act 16. This clause states that Part 1 of the Bill amends the Crimes Act Clause 4 Section 2 amended (Interpretation) 17. Clause 4 extends the definition of crime involving dishonesty in section 2 of the Crimes Act to include public sector bribery and corruption offences in the Crimes Act and private sector corruption offences under the Secret Commissions Act This amendment will ensure that persons convicted of such offences are prohibited from holding positions of trust in the community (e.g. directorships). Definition of crime involving dishonesty 18. One submission was received from the New Zealand Law Society (NZLS). It noted that the amendment, as drafted, includes sections 298A ( Causing disease or sickness in animals ), and 298B ( Contaminating food, crops, water, or other products ) of the Crimes Act, which are crimes against property rather than crimes involving dishonesty. It suggested that these offences should be excluded from the definition. 19. It is agreed that sections 298A and 298B are not dishonesty crimes and should be excluded from the definition. 20. In addition, it is also recommended that the clause 4 definition of crime involving dishonesty be amended to ensure that it captures: all the corruption and bribery offences after section 105 of the Crimes Act (i.e. sections 105A to 105F); and all the offences in the Secret Commissions Act. 21. These amendments will give effect to the intended policy. Consequential amendment required 22. In addition a small consequential amendment is needed to the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to include a cross reference to the new definition of crime involving dishonesty. This will ensure that a person convicted of any of the offences covered by the definition in the previous 5 years will be disqualified from being a financial service provider (eg those who invest or manage money, securities, or investment portfolios on behalf of other people). 7

8 Recommendation 1 Amend clause 4 to ensure the definition of crime involving dishonesty - (a) excludes the offence in sections 298A and 298B of the Crimes Act; and (b) includes the offences in sections 105A to 105F of the Crimes Act; and (c) includes all offences under the Secret Commissions Act Recommendation 2 Amend the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to include a cross reference to the new definition of crime involving dishonesty. Clause 5 Section 98D replaced (Trafficking in people by means of coercion or deception) 23. Clause 5 replaces section 98D, which relates to trafficking in people by means of coercion or deception. New section 98D establishes an offence for arranging the movement of a person for the purposes of exploitation, or knowing that the movement involves one or more acts of coercion or deception. The movement covers entry to and exit from New Zealand, and the reception, recruitment, transport, transfer, concealment or harbouring of a person. It augments the existing offence by ensuring it covers trafficking within NZ as well into NZ (the current law). 24. Six submitters commented on the new trafficking provision, all of whom were generally supportive of its intent. The various issues raised by submitters are addressed below. Extension to domestic trafficking 25. Stop Demand and the New Zealand Police Association (NZPA) support the removal of the transnational/crossing border requirement from the offence. Stop Demand also supports the inclusion of exit from New Zealand, which will clearly cover trafficking originating in New Zealand. 26. The Salvation Army New Zealand Fiji and Tonga Territory (the Salvation Army), Justice Acts and Stand Against Slavery (Justice Acts) and the Human Rights Commission (HRC) requested an assurance that the new offence covers both domestic trafficking as well as international trafficking. 27. One of the main reasons for amending the trafficking offence is to remove the requirement to cross borders from the offence. It is intended that the trafficking offence cover domestic trafficking and this is clearly stated in section 98D(1)(b): the reception, recruitment, transport, transfer, concealment, or harbouring of a person in New Zealand or any other State. 8

9 Exploitation, coercion or deception 28. As well as the movement of a person, the trafficking offence requires that movement to involve an act of exploitation, coercion or deception. Justice Acts and the HRC submit that this should be expanded to include fraud, abduction, the abuse of power and the giving or receiving of payments or benefits. 29. The trafficking offence already includes some of these concepts. Section 98B includes definitions of terms used in sections 98C to 98F. These definitions include an act of coercion against the person and an act of deception. In turn, these definitions cover abduction and fraudulent actions. 30. The only two concepts that are not specifically included are abuse of power and the giving or receiving of payments or benefits. However, we note that the definitions are not exhaustive, and these behaviours are covered by the concepts of coercion and deception. Mens rea 31. Justice Acts submits that criminal negligence and recklessness should be included in the mens rea (mental element) for the offence. 32. Intentional behaviour is the appropriate mens rea for the offence. This is what is anticipated in the trafficking in person protocol which this provision is intended to implement. It requires a State party to criminalise conduct when committed intentionally. 33. Elements of the offence include concepts like exploitation, coercion and deception. It is appropriate that these behaviours are done intentionally, not that they are done without thought, and the consequence was coercive or deceptive conduct. 34. In addition, this is a serious offence attracting a high penalty of imprisonment for a maximum of 20 years. Having a mental element of intention reflects the serious consequences of undertaking this behaviour. Penalty for trafficking offence 35. Section 98(2) provides that the maximum penalty for trafficking is 20 years imprisonment and/or a fine of $500, Three submitters made comments about the penalty level included in the Bill (Jason, the Salvation Army and Justice Acts). Jason submits that the penalty is unrealistic and offers no preventative compulsion. Conversely, the Salvation Army hopes that this penalty acts as a deterrent to those contemplating or engaging in these behaviours. 37. Justice Acts supports the penalty, but considers that the provision has not sufficiently considered the Sentencing Act 2002 in relation to mitigating factors specific to the human trafficking offence. 9

10 38. The penalty included in the Bill is the same as the existing penalty for trafficking in the Crimes Act. This penalty has remained unchanged since enactment in It was set because it is consistent with comparable international jurisdictions and the high fine recognises the substantial material gain typically derived from this kind of illegal activity. We have reviewed the penalty and consider it is still appropriate. 39. Further, we note that the sentencing judge in a particular case will take into account both the aggravating factors in section 98E, as well as the aggravating and mitigating factors in the Sentencing Act. All of these factors will be considered in a particular case, in determining the appropriate sentence. Sections 98D(3) and (4) 40. Section 98D(3) confirms that proceedings can be brought even if part of the trafficking took place without exploitation, deception or coercion, or if a person was not in fact transported. 41. Section 98D(4) contains a definition of exploit. Exploitation means to cause or to have caused a person, by an act of deception or coercion, to be involved in prostitution, slavery, servitude, forced labour or services or the removal of organs. 42. The Salvation Army supports these sub-sections. Stop Demand fully supports the widening of the purpose of human trafficking to include the element of exploitation in these subsections (and linked to (98D(1)). Justice Acts supports subsection 3 and the intent of subsection Justice Acts and the HRC submit that a legislative definition should be provided for slavery, servitude and forced labour. This should be done as part of a full consideration of the offences of slavery, forced labour, servitude as well as human trafficking. 44. They also submit that serious forms of labour exploitation, forced marriage, and forced surrogacy should be added to the list of exploitative actions. 45. As noted by Justice Acts, the provision allows for flexibility. As well as being elements in the trafficking offence, slavery, forced labour and servitude are also separate offences. Therefore, as noted in the submissions, consideration would need to be given to these other offences, and how these would be affected by including a definition in the trafficking offence. This Bill is not the appropriate vehicle for that consideration. 46. No changes are recommended to this clause. Trafficking issues outside scope of Bill 47. Submitters also made comments related to trafficking that are outside the scope of the coverage in the Bill. We deal with these matters below. New Zealand approach to trafficking 48. Justice Acts supports the move towards a comprehensive trafficking offence. Such an approach means that the serious penalties attaching to trafficking are available, victims 10

11 are recognised as victims of trafficking, and better information is able to be collected about trafficking in New Zealand. 49. Stop Demand is concerned about New Zealand s piecemeal approach to trafficking, and the official position stated by agencies. It considers that more resources and a proactive response are required. 50. The amendments in the Bill respond to criticisms of a piecemeal approach to trafficking. New Zealand s position is that our legislative framework does capture and criminalise domestic trafficking (not involving the cross-border movement of an individual). 51. As an alternative to trafficking, there are a range of offences that can be pursued and prosecuted under the Crimes Act 1961, the Prostitution Reform Act 2003, the Human Tissue Act 2008 and the Immigration Act Examples of Crimes Act offences include slavery; participating in an organised criminal group; migrant smuggling; sexual offences including rape, attempted rape, and sexual exploitation of children; organising child sex tours; abduction; kidnapping; engaging underage prostitutes; coercing prostitutes; and exploiting persons not legally entitled to work. 52. Nevertheless the Government has agreed to remove the requirement to cross borders from the trafficking offence in section 98D of the Crimes Act. This replaces a large part of the previous piecemeal approach with a single section on trafficking in persons. 53. The NZ Police and the Ministry of Business, Innovation, and Employment (MBIE) are both involved in actively investigating various offences that currently make up the framework of New Zealand s trafficking offences. 54. With regard to investigations, authorities (including labour inspectors and immigration officers) use their judgment when they become aware of allegations of trafficking. It is expected that implementation of the new Bill will involve awareness raising and training. Civil society advisory group 55. The Salvation Army submits that the Government should establish an advisory group which would include non-governmental organisations with expert skill and knowledge in trafficking and labour exploitation issues. The purpose of this group is to provide valuable input and insight into trafficking and labour exploitation in New Zealand. This concept was first presented to MBIE in MBIE has developed a draft Terms of Reference for a NGO Advisory Panel. The Panel will strengthen and foster a greater and more cohesive government and non-government partnership in efforts to effectively prevent and address people trafficking in New Zealand. Work on establishing the Panel is ongoing. Victims 57. The Salvation Army is concerned that the needs and care of victims are not adequately addressed in this legislation. In particular, they identify the need for stable residence in the State a person has been trafficked to, and the principles of do not harm and the best interests of the child being fundamental to the development of any remedies. 11

12 58. The Bill does not include provisions relating to assistance to victims, and is not the appropriate vehicle for this. However, set out below is some of the key assistance available to victims. 59. Once victims have received certification from the NZ Police that they are believed to be victims of trafficking, they will be granted a 12-month temporary entry class visa. While on this visa victims will have access to publicly funded health and disability services, financial assistance, and be able to work (or if a child, study). 60. Following receipt of the temporary visa, adult applicants will be able to apply for residency. Child victims will be able to apply for residency immediately, and be granted a 12-month student or visitor visa while their residence visa is being processed. Prostitution 61. Stop Demand has concerns about the sex industry. The first is that the decriminalisation of prostitution risks masking trafficking cases. Other concerns are about the approach to offending in brothels and the existence of illegal underage prostitution. Stop Demand submits that the approach to enforcement in prostitution related offending is inadequate, and is concerned that this perceived lack of enforcement will also occur in the trafficking area. 62. The submission fails to note that those trafficked into the sex industry will also have recourse for the trafficking itself. We note that trafficking can occur in any industry, with investigations in New Zealand occurring in the horticulture, viticulture and hospitality sectors. The legality of the sector does not prevent trafficking from occurring. 63. Both the NZ Police and MBIE are involved in actively investigating various offences that currently make up the framework of New Zealand s trafficking offences. Reduced labour inspector numbers 64. Stop Demand is concerned that a reduction in the number of labour inspectors will lead to a reactive, rather than a proactive approach to investigations, which will include potential human trafficking cases. 65. MBIE advises that there are no plans to reduce the number of labour inspectors in New Zealand. The Government chose to increase the number of inspectors in 2014 to ensure that the Labour Inspectorate was resourced to respond to the risks of exploitation in the Canterbury rebuild. Training for officials 66. Stop Demand is concerned about the training that is provided to officials. In particular, there was a concern that officials lacked empathy/understanding of the dynamics of trafficking, and there was a risk of treating victims as criminals. 12

13 s 67. Various agencies including the NZ Police, Labour Inspectorate, Immigration New Zealand and Customs all undertake specific trafficking training. This includes indicators of trafficking, and how to identify victims. It is expected that implementation of the new offence in the Bill will involve awareness raising and training. Section 351 Immigration Act Section 351 of the Immigration Act 2009 prohibits exploitation of persons not legally entitled to work. 69. Justice Acts and the HRC submit that human trafficking should be included in the list of exploitative actions. 70. The Immigration Act includes a number of offences related to employing, exploiting or assisting unlawful migrants. These offences are designed to complement, not replace or duplicate, the people smuggling and trafficking offences in the Crimes Act We also note that section 351 does not provide a list of exploitative actions. It sets out consequences of actions which, if done, will mean that an employer will be possibly committing an offence. An employer cannot undertake an action that intends to prevent or hinder the employee from: leaving the employer s service; leaving New Zealand; ascertaining or seeking entitlements under New Zealand law, or disclosing the circumstances of his/her work. 72. It would be duplicative to provide that by trafficking persons not legally entitled to work, an offender is also guilty of exploiting those persons under section 351 of the Immigration Act. Clause 6 Section 105C amended (Bribery of foreign public official) 73. Section 105C of the Crimes Act 1961 contains the offence of bribery of a foreign public official. Under the offence, a New Zealander is liable for bribing officials of foreign governments or international organisations in the context of international business transactions. Like most other offences, it applies to both natural and legal persons (i.e. corporate entities). 74. Clause 6 makes several amendments to section 105C to bring the offence into line with recommendations of the OECD Working Group on Bribery and enable ratification of UNCAC. To achieve this, the amendments: clarify the circumstances in which a corporate person (e.g. a company) is liable for foreign bribery; extend the definition of routine government action to ensure that the facilitation payments exception in section 105C(3) of the Crimes Act is not open to abuse; and extend the definition of business to ensure that the offence applies to bribery in relation to the provision of international aid. 13

14 75. We address submissions and our comment on each issue in turn below. Corporate liability for foreign bribery 76. The NZ Police Association expressed its support for the amendment clarifying the circumstances in which a corporation will be liable for foreign bribery. The NZLS proposed clarifying that the new definition of employee in section 105C(1) includes a director of a company. It noted that while the current definition would capture a director, that in many statutory contexts, a distinction is drawn between directors, officers, employees, and agents of a company. For the avoidance of doubt, it suggested adding director into the new definition of employee. 77. We agree that clause 6 should be amended to make it explicit that a director is an employee in relation to a body corporate or corporation sole. This will maintain consistency with existing legislation, and clarify the circumstances in which a company can be liable for foreign bribery. Submissions calling for removal of facilitation payments exception. 78. New Zealand s foreign bribery offence contains a narrow exception for small payments made to a foreign public official for the sole or primary purpose of ensuring or expediting the performance of a routine government action. These are known as facilitation payments (see section 105C(3) of the Crimes Act). 79. For such a payment to be lawful, it must be small, for an action within the scope of the official s ordinary duties, and not involve a decision about awarding new business or continuing existing business. Examples of facilitation payments include small payments relating to the grant of a permit or licence, the provision of utility services, or loading or unloading cargo. 80. Clause 6(3) of the Bill further clarifies the facilitation payments exception to ensure it will not cover instances where the payment provides either (i) an undue material benefit to the person making the payment, or (ii) an undue material disadvantage to any other purpose. 81. Michael Macaulay, the HRC and Transparency International New Zealand (TINZ) provided very similar submissions, calling for the facilitation payments exception to be removed altogether. In summary, their submissions highlighted that: Such payments are bribes regardless of their size; UNCAC does not distinguish between facilitation payments and bribes and this exception could prevent ratification of this Convention (which is a key purpose of the Bill); The OECD and the Asia Pacific Economic Cooperation also encourage businesses to eliminate the use of such payments; Such payments are already illegal in almost all of the countries where they are paid; 14

15 81.5. Removing the exception would align New Zealand with other jurisdictions (the UK prohibits such payments and Canada has recently passed legislation to remove its exception); Anti-bribery training produced by the Serious Fraud Office (SFO) (in partnership with TINZ and BusinessNZ) provides that, as good practice, facilitation payments should not be paid; and Prohibiting such payments will affirm New Zealand s commitment to preventing corruption and send a clear message to the international community that honest transactions are expected when working with New Zealand businesses. 82. In addition, Michael Macaulay noted that the inclusion of any action in the definition of routine government action could contradict the facilitation payments exception in section 105C(3)(a) of the Crimes Act. 83. Article 16 of UNCAC provides that State Parties shall criminalise the promise, offering or giving to a foreign public official of an undue advantage Thus while UNCAC does not distinguish between facilitation payments and bribes, any payments given/offered etc. must provide the recipient with an undue advantage. 84. The exception in section 105C(3) of the Crimes Act is already very narrow, and as outlined above, the Bill amends the definition of routine government action to ensure that the exception will not apply to the granting of an undue material benefit. As such, payments that fall within New Zealand s exception are unlikely to fall foul of UNCAC and prevent ratification of this Convention. Further, the OECD Anti-bribery Convention does not explicitly require parties to criminalise facilitation payments In addition to New Zealand, small facilitation payments are legal in both the United States and Australia. While such payments are illegal in the UK, in 2012, the Director of the SFO and the Director of Public Prosecutions issued joint guidance on the Bribery Act 2010, suggesting that they are unlikely to prosecute in cases of small facilitation payments. It is arguable that the approach adopted in New Zealand is, in practical terms, no different to that of the UK. 86. New Zealand is by no means complacent when it comes to facilitation payments and is vigilant in ensuring that the exception is not abused. In addition to clarifying the definition of routine government action, the Bill also contains measures to ensure companies record facilitation payments in a consistent manner in their books (see clause 37). 87. Further (and as already highlighted by submitters), in 2014, TINZ, the SFO and BusinessNZ launched a free online anti-corruption training module, and held anti-bribery workshops for New Zealand businesses that covered the identification and treatment of facilitation payments. 88. Finally, it is unclear what is meant by Michael Macaulay s comment about the inclusion of any action in the definition of routine government action. 2 See paragraph 9 of the aries on the Anti-Bribery Convention. 15

16 89. New Zealand s current approach to facilitation payments, as reflected in the Bill, strikes an appropriate balance and no changes are recommended Definition of Business 90. No comments were received on the amended definition of business and no changes are recommended. Further amendment to penalty for foreign bribery recommended 91. Since the Bill was drafted, the Ministry of Justice has done further policy work on the penalties available for the foreign bribery offence. It is recommended that the offence be amended to enable the court to impose a new specified fine in addition to the existing level of imprisonment. Currently imprisonment or a fine is available under section 105C of the Crimes Act 92. The current penalty specified in section 105C is a term of imprisonment not exceeding seven years. While no fine is specified, the Court has the power under section 39(1) of the Sentencing Act 2002 to impose a fine as an alternative to imprisonment. However, as section 105C is currently drafted, it is not possible to impose both imprisonment and a fine for foreign bribery. 93. Because a corporate entity cannot be imprisoned, the courts would have to rely on section 39(1) to impose a criminal sanction (i.e. a fine) on legal persons convicted of foreign bribery. 94. There is no statutory limit on the amount of the fine that may be imposed under section 39(1). This is left to the discretion of the court, applying the general principles of sentencing set out in the Sentencing Act 2002 and case law. An OECD Working Group has recommended changes to the section 105C penalties 95. In 2013 New Zealand was evaluated by the OECD Working Group on Bribery ( Working Group ) for compliance with the OECD Anti-Bribery Convention. In its report, the Working Group recommended that New Zealand make both imprisonment and fines available as sanctions for foreign bribery on the basis that monetary sanctions are a fundamental deterrent for economic offences. 96. The Working Group s report also expressed concern about the discretionary nature and uncertainty of sanctions available for legal persons for foreign bribery, and recommended that New Zealand ensure that legal persons are subject to effective, proportionate, and dissuasive sanctions. 97. In October 2015 New Zealand is required to report back to the OECD on implementation of the Working Group s recommendation. If no action is taken to respond to the recommendation, it is likely that New Zealand will again be criticised by the Working Group. Proposed amendments to respond to the Working Group s recommendations 98. To respond to the Working Group s recommendations, it is recommended that the foreign bribery offence be amended to enable a fine and/or imprisonment to be imposed by the court. 16

17 99. In New Zealand, the use of the fine and/or imprisonment formulation is becoming more common across the statute book. The Crimes Act generally only specifies maximum terms of imprisonment for offences, including all domestic bribery offences in sections 101 to 105 of the Crimes Act. However, there is precedent in the Act for providing for the imposition of both fines and imprisonment when giving effect to international agreements. For example, this is provided for in the people smuggling/trafficking offences in sections 98C and 98D of the Crimes Act. Many other OECD member countries already allow for this combination of penalties for foreign bribery, including Australia, the United Kingdom, Canada and the United States To address the OECD s concerns about the discretionary nature of fines, we also recommend specifying a fine for the foreign bribery offence. Specifying a fine for foreign bribery will provide greater certainty, and give the courts a clearer indication of the seriousness Parliament attaches to this offence We recommend amending the penalties in section 105C of the Crimes Act so that anyone convicted of foreign bribery would be liable to a term of imprisonment not exceeding seven years and/or a fine not exceeding the greater of: a. $5 million; or b. if it can be readily ascertained and if the court is satisfied that the offence occurred in the course of producing a commercial gain, three times the value of any commercial gain resulting from the contravention The proposed amendment would mean that the same maximum fine would apply to natural and legal persons (as legal persons cannot be imprisoned). A $5 million maximum fine would be the largest specified for a natural person for any offence under New Zealand law. However, the high level of the proposed fine reflects the commercial nature of the foreign bribery offence, which applies only to bribes given to obtain or retain business or obtain an improper advantage in the conduct of business. Including a commercial gain formula in addition to a specified penalty links the penalty with the offending, and makes it less likely that individuals and corporations will make a commercial decision to pay bribes or treat any potential fine as a "cost of doing business" While New Zealand has yet to prosecute a case of foreign bribery, successful prosecutions in other jurisdictions have resulted in substantial fines for legal persons. Since 2003 at least 23 US companies have received monetary sanctions in excess of USD10 million. In one case, monetary sanctions totalling USD800 million were ordered against a single company. In the United Kingdom a plea agreement set the financial penalty (fine and ex gratia payment) in a corporate foreign bribery case at GBP30 million The increasingly heavy sanctions in other countries reflect the substantial gains that can be made by offenders through foreign bribery and have lifted the profile of the foreign bribery offence internationally, particularly given the broad jurisdictional reach of the UK and US provisions. During its Phase 3 review for compliance with the OECD Anti-Bribery Convention, the US Government provided that, in its view, heavy penalties are the main reason why many companies operating abroad have taken steps to improve their antibribery measures, internal controls, books and records, and compliance systems. 17

18 105. The proposed amendments align with the approach taken by New Zealand s international counterparts and will address the OECD s recommendations. Recommendation 3 Amend the penalty for foreign bribery in section 105C of the Crimes Act 1961 to a term of imprisonment not exceeding seven years and/or a fine not exceeding the greater of: a. $5 million; or b. if it can be readily ascertained and if the court is satisfied that the offence occurred in the course of producing a commercial gain, three times the value of any commercial gain resulting from the contravention. Recommendation 4 Amend the definition of employee to include a director. Proposed new clause Section 105D amended (Bribery outside New Zealand of foreign public official) 106. This section provides that it is an offence if a New Zealand citizen, resident or company bribes a foreign public official whilst overseas Section 105D(4) should be repealed as it provides a cross reference to section 105E (exception for acts lawful in country of foreign public official) which is also repealed by the Bill. Recommendation 5 Repeal section 105D(4) of the Crimes Act. Clause 7 Section 105E replaced (Exception for acts lawful in country of foreign public official) 108. To increase compliance with the OECD Anti-Bribery Convention, clause 7 removes the dual criminality requirement from the foreign bribery offence (whereby bribery must be an offence in the country in which it takes place in order to be an offence in New Zealand) In addition, clause 7 inserts two new offences to address gaps in New Zealand s anticorruption framework. The Crimes Act is amended to criminalise the acceptance of a bribe by a foreign public official and the acceptance of a bribe in return for using one s influence over an official. These amendments are required to enable ratification of UNCAC No submissions were received on this clause and no changes are recommended. Clause 8 Section 106 amended (Restrictions on prosecution) 111. Clause 8 amends section 106, which concerns restrictions on prosecution. The amendment adds the offences in new sections 105E and 105F to the list of offences that cannot be prosecuted without the leave of the Attorney-General No submissions were received on this clause and no changes are recommended. 18

19 Clause 9 Section 228 amended (Dishonestly taking or using document) 113. Section 228 deals with dishonestly taking or using a document. The amendment provides an offence for selling, transferring, or otherwise making available a document with the necessary intent No submissions were received on this clause and no change is recommended. Clause 10 New sections 228A to 228C inserted 115. This clause inserts new offences of designing, manufacturing or adapting goods with intent to facilitate the commission of crimes involving dishonesty and possessing, selling or disposing of such goods No submissions were received on this clause and no change is recommended. Clause 11 Section 240 amended (Obtaining by deception or causing loss by deception) 117. This clause amends section 240 by adding a new offence of selling, transferring, or otherwise making available a document to derive pecuniary advantage with the necessary intent No submissions were received on this clause and no change is recommended. Clause 12 Section 243 amended (Money laundering) 119. Section 243 of the Crimes Act criminalises money-laundering. Money laundering is the process of disguising the true origin and ownership of the proceeds of criminal activities by converting it into apparently legitimate income or property. Laundering not only assists offenders to avoid detection; it also enables the proceeds of crime to be preserved and reinvested in further criminal activity The essential elements of the offence are set out in the table below. Elements Description Physical element dealing with (dispose of, transfer, etc) property; or assisting another person to deal with the property Intent knowing or believing that property is the proceeds of a crime; or being reckless as to whether it is the proceeds of a crime Purposive element to conceal (disguise nature/source or convert from one form to another) the property; or to enable another person to conceal the property Predicate offending The property is proceeds of a serious offence (ie, punishable by for a term of 5 years or more imprisonment) 121. Two changes to the money-laundering offence are made in the Bill. Firstly, the requirement that the proceeds of the money-laundering are generated from serious offending (punishable by 5 years or more imprisonment) is removed. 19

20 122. This requirement can put Police in a position of having to establish that the proceeds of crime are generated from criminal activity for which a higher penalty applies. This is difficult as often the proceeds are intermingled and arise from a range of criminal activity. The current requirement is an unnecessary hurdle to successful prosecution The second change makes it clear that the prosecution does not need to prove that the defendant had intent to conceal property, although this may result from the moneylaundering transaction The intended effect of this amendment is to ensure that the prosecution burden is returned to the position of early case law after enactment of the money-laundering offence in the late 1990 s. Early case law held that intent to conceal was not an element of the offence to be proved, although the defendant may have that objective. More recent decisions have required the prosecution to prove that element The Financial Action Task Force (FATF), an intergovernmental organisation that sets international best practice for combating money-laundering and of which New Zealand is a member, has raised a concern about this requirement Issues raised by submitters in relation to this clause and our comments are included below. Removal of purposive element from money laundering offence 127. The Legislation Advisory Committee (LAC) and the NZ Police Association submitted that the purposive element must be removed from section 243 to ensure that the provision is workable At the time the Bill was drafted, officials considered that the clear statutory statement in new subsection (4A), providing that the prosecution is not required to prove that the defendant had an intent to (a) conceal any property; or (b) enable any other person to conceal any property would be sufficient to ensure that the courts would not require the prosecution to establish such intent However, in view of further consideration and submissions on point, it is agreed that the drafting could be clarified by removing the purposive element from existing subsection (4). This will avoid confusion with the existing intent elements in the offence. However, any such amendment will retain concealment or conversion of the proceeds of crime as a feature of the money-laundering offence. Penalty level for money laundering offence 130. The NZLS recommends that consideration be given to a graduated penalty scheme depending on the value of the proceeds laundered The approach suggested by the NZLS is not recommended. Unlike theft, obtaining by deception, and receiving stolen property, the money laundering offence involves dealing in the proceeds of the crime knowing or being reckless as to its origin and is intended to give effect to international best practice in criminalising and deterring such practice. 20

21 132. It is also important to note that currently there is no direct correlation between the seriousness of the offence from which the proceeds are derived and the dollar value of the proceeds realised. It is possible under existing law that the proceeds derived from a very serious offence used in a money laundering transaction are of a low value. In that case the person would still be liable to the maximum penalty of 7 years imprisonment In money-laundering transactions the exact value of the funds involved or realised by the activity may be difficult to establish, especially with intermingled funds and different property types involved in or derived from the activity. Requiring Police to prove the exact monetary value of the proceeds of crime involved could pose an extra unnecessary burden to successful prosecution Further, the deterrent effect of the provision could be undermined if penalty levels were set at a level that could encourage multiple low level money laundering transactions such that organised criminal groups are prepared to run the risk of the penalty being merely a potential cost of business New Zealand may draw adverse comment from the FATF (and other international bodies) if the penalty level for certain money-laundering activity is lowered and is no longer seen to be effective or dissuasive The inherently insidious nature of money-laundering warrants penalties sufficient to deter such conduct, irrespective of the value of proceeds involved. Further consequential amendments required 137. As a result of amendments in clause 12, the definition of serious offence in section 243 of the Crimes Act is replaced with offence. The current definition of serious offence is cross referenced in other legislation. Section 79 of the Limited Partnerships Act 2008 gives the Registrar of Companies increased powers to disclose information obtained under that Act to government agencies for law enforcement purposes. Law enforcement purpose in that context includes any serious offence as defined under s 243(1) of the Crimes Act It would not be appropriate to give the Registrar authority to disclose information about any offending. It is therefore recommended that the status quo be retained in this regard. It is recommended that the wording of the definition of serious offence in section 243(1) be carried across into the Limited Partnerships Act and any other legislation (such as the Companies Act 1993) that use that definition as a threshold for information disclosure for law enforcement purposes That will mean information disclosure will only occur in relation to offences punishable by imprisonment for a term of imprisonment for 5 years or more. 21

22 Recommendation 6 Amend the money laundering offence in section 243 of the Crimes Act to remove the purposive element, while retaining concealment as an element of the offence. Recommendation 7 Amend the Limited Partnerships Act 2008, the Companies Act 1993, and any other legislation that uses the current definition of serious offence in section 243 of the Crimes Act as a threshold for information disclosure for law enforcement purposes, to maintain the status quo of an offence punishable by 5 years or more imprisonment. Clause 13 - Section 243A replaced (Charges for money-laundering) 140. This clause makes a consequential amendment to remove the reference to the moneylaundering offence in the Misuse of Drugs Act (repealed by the Bill) and to replace the references to serious offence (replaced in section 243) No submissions were received on this clause and no change is recommended. Clause 14 Section 244 amended (Defence of enforcement of enactment) 142. This clause makes a consequential amendment upon the removal of serious offence from section No submissions were received on this clause and no change is recommended. Clause 15 Section 245 amended (Section 243 not to apply to certain acts committed outside New Zealand) 144. As amended in the Bill, the only changes to section 245 are consequential upon the removal of serious offence from section 243 and correct a section cross reference error No submissions were received on this clause. However, amendments are recommended to ensure New Zealand complies with international best practice in ensuring that offences in respect of which New Zealand has extraterritorial jurisdiction are predicate offences for money-laundering. Further amendment required regarding predicate offences for money laundering 146. Money laundering involves dealing with the proceeds of crime in order to conceal their criminal origins. It involves two offences: the crime that generated the proceeds in the first place (the predicate offence ) and the subsequent crime of laundering the proceeds The money laundering offence in section 243 of the Crimes Act has extraterritorial effect. That means that a New Zealander that launders the proceeds of crime overseas commits an offence under New Zealand law Consistent with the approach in other jurisdictions, New Zealand s money laundering offence contains a dual criminality element. In order for conduct committed outside New Zealand to count as a predicate offence for money laundering purposes, the conduct must be a crime in the jurisdiction in which it is committed. The policy underpinning this element is that, if the funds in question are not the proceeds of crime 22