The Intrusiveness & Cost of NZ’s Anti Money Laundering Legislation: [Subtitle: Boiling Frogs.]

Nicolas Gomez Davila: ‘Dying societies accumulate laws like dying men accumulate remedies.’

Benjamin Franklin: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.” 

The below describes the life of an American reporter living in the Soviet Union: but it’s not particular to foreigners in the USSR – if you watch a movie set in East Berlin called The Lives of Others, this was typical for every Soviet citizen:

We were constantly watched. A small Lada would follow our car around the city and a man in a dark suit would keep an eye on us as we walked about. Our phones were tapped, our apartment bugged, our mail opened, and we assumed that our government-provided housekeeper filed frequent reports on us. Even our dog was enlisted—when we took him for walks he would run happily to our mortified minder, seeking the treats he was obviously used to getting.

Even as a grade-school child I was aware of the surveillance and the need for caution. I remember the stricken looks on my parents’ faces when I once blurted out the code to their locked briefcase; that was when I realized that the walls had ears.

So anyway, I thought I would simply publish below the second email correspondence I am having with our own Department of Interal Affairs in my effort to prudently avoid compliance with New Zealand’s Anti-Money Laundering and Financing of Terrorism Act:

Hello again

CC Andrew Little (not to get staff of Department of Internal Affairs [DIA] in any sort of trouble, DIA have been great in humouring me thus far; this CC is only to show the minister the frustration in the private sector with our AML legislation, because I am very much not alone and I know anecdotally of practitioners leaving the professions because of this final straw of pointless bureaucracy [in my case, and for many others] – more on that below).

Thank you (DIA) for your reply below to my first email. Please note this email is partly to ‘cover myself’ vis a vis not legally having to comply with AML, but in view of that goal, it also includes a couple of further questions for clarification (and belly laughs I suspect).

Per my original email (below) I have no intention of complying with this costly and waste of time legislation given I’ve had a closed client base for 15 years, I know all my clients for between 15 and 30 years, they are all in the rural community, mainly farmers, they are all (born) NZ residents, and I don’t do any double tax residency clients. But that doesn’t mean I or any of us can afford to flout this legislation given its draconian nature: I need to keep myself, and my clients, safe here, so I am still in the process, as previously mentioned, of devolving those services that would demand my compliance; that is, I am scaling back because already buried under total compliance overload, I philosophically and physically find the AML to be my line in the sand: NO MORE. This will put single practitioners out of business and concentrate long term professional services out of the big urban centres only, with less and less physical presence in the regions (on the ground); that will be a huge shame.

So, noting I have registered on your link as not liable to comply, I have had to make the one following assumption to justify non-compliance, but then also I now find further questions about tax transfers on the printing of DIA’s explanatory note regarding transferring client funds around their tax accounts.

The Assumption:

As stated I have acquiesced – as much as anything out of convenience – over the years to doing a small number of professional trusteeships (less than 5% of my overall activity – actually probably not even that). Since the first webinar I completed, once I understood the intrusive, dreadful scope of this legislation I wrote to all affected clients and stated that I needed to retire my trusteeship and they needed to appoint (probably) their lawyer as professional trustee. This is now progressing but is taking longer than I thought as it involves conveyance and legal work around property titles, mortgages, etc – ironically all made much harder and more convoluted via this idiot AML: indeed, the process has turned into its own nightmare. But in the meantime, and this is my assumption, per your advice below, I have never advertised trustee services, it has become an inconvenience anyway, I am retiring from all such work, and so while it remains such a small and incidental part of what I do, I do not believe this work is in the ‘ordinary course of business’ for my practice, thus compliance with AML is not necessary.

The Questions:

Regarding the DIA’s ‘Explanatory Note: Involvement in tax transfers, payments and refunds’, this has put a further dent in my plans. The swearing and profane language that was coming out of my office by the time I got to the end of the department’s explanatory note even earned a rebuke from my wife …

[Breathe in, breathe out … calm] … I can’t believe ringing IRD to say dithering old Client X has paid their 2019 provisional tax instalment via internet banking into the wrong year – which many do -so can you please, IRD officer, transfer from 2018 income tax to 2019 income tax, brings me, again, into the AML. So, a new idiot policy I plan to institute in order to comply with this idiot legislation, can you please tell me if this suffices, but also a question:

The Idiot Policy. At huge inconvenience to myself and my clients, again, all rural customers, mainly farmers, all NZ residents I’ve known between 15 and 30 years – I’ve probably been to their kids weddings – I can guarantee not a single Jihadist, my policy is now to be I will only enter a client’s MyIR to view information I need to complete their financial statements: ie, to reconcile GST and income as between their IRD accounts/payments and their balance sheets; if a transfer or refund of overpaid tax is required, then instead of simply taking the five minutes to transfer it online, in every case I shall ring the client concerned, chat about the weather for half an hour, waste both our times, then ask them to waste more of their time by ringing IRD, to waste their time, and ask them to make the transfer: ie, I will be issuing no instructions to third parties concerning that inter-year transfer, nor completing it myself even with my client’s expressly given authority (which I hold in every case). I am assuming that keeps me out of the AML? Can you confirm please?

The Idiot Question. But, just out of bloody-minded curiosity, if I was to remain compliant with AML and do that harmless little transfer, what is the (farcical) paper trail you would expect please? To repeat, if Client X pays provisional tax of $970 mistakenly into 2018 year not their 2019 year, and I simply ring myself and ask the officer concerned to transfer the payment between years, or I do that online, noting all the above about how well I know Client X – and that I can’t see why any sane person would try and launder money via IRD – what is the paper trail that you would expect a compliant office to keep on that particular transaction? How do I have to identify Client X (other than with my eyes after 15 to 20 years of drinks at the pub), and what form would that evidence be for every such transaction?

Um, one more question: I’m pretty sure people laundering funds are not in the tax system, so how likely do you or the government think it that criminal geniuses are laundering their cash through IRD income tax accounts?

Again, nothing personal to DIA staff, I know you’re all just doing your job, but as my attempts to foment revolution among the professional classes has failed (they’re all too worn down trying to comply to bother) I am determined to stay out of this nonsense (given my circumstances) and I will either keep devolving services, or frankly, retire – even if I can’t really quite afford that yet – if I can’t figure this out. So I await your reply with … well, with annoyance and a bottle of wine.

Faithfully Mark Hubbard

PS: next time you use professional services, for example your lawyer to sell your house, make sure you get a mortgage to cover the increase in fees that we are all saddled with given this legislation is as costly as it is pointless (re Ron Paul’s study). And given, thanks to AML, which makes every business and private transaction like walking through treacle, it took me four hours just to open a term deposit three weeks ago, you’ll need to take a couple of days off your paid work.

PPS: Coincidentally the retirement paperwork for one of the remaining mentioned trusteeships has arrived on email. This is what I’ve just sent back to the lawyer:

I was afraid of this: it’s going to be at least a week before I can get the retirement paperwork back to you. A big part of the reason I’ve asked all my affected clients to let me retire from my professional trusteeships is we live remotely now in the Marlborough Sounds, so getting a JP, etc, to witness our signatures pretty much means we lose a day having to travel to find one: I’ve found a JP reasonably close, but he’s an old guy, and last time I used him for a simple Trust house sale he talked for about two hours and I couldn’t politely get away, so I don’t want to use him again, which means travelling to either Havelock (and last time we used the one there he was having a domestic with his partner), or Blenheim. The reason we were out yesterday was doing our supply 10-day trip to Blenheim, so I have to get some work done before next trip.

The AML legislation has frankly made my life a nightmare.

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2 thoughts on “The Intrusiveness & Cost of NZ’s Anti Money Laundering Legislation: [Subtitle: Boiling Frogs.]

  1. It is another ‘traffic calming device’. Every time these idiots set out to prevent a form of illegal activity they do it in such a way that normal law-abiding citizens suffer enormous inconvenience, and the whole exercise becomes more expensive than if they had organised proper policing to detect and punish the wrongdoers in the first place.

    Liked by 1 person

  2. Yes. And the launderers know the rules so get around them anyway. What is chiefly ludicrous here is the notion that crims in the cash economy have gone out and got IRD numbers and are laundering cash through IRD income tax accounts. Pure Monty Python.

    Like

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