(Amends byline to Lynch)
By Charlotte Greenfield and Nathan Lynch
SYDNEY/WELLINGTON, Sept 16 (Reuters) - New Zealand will extend its anti-money laundering laws to cover real estate agents and other professions amid fears the country has become a soft target for illegal fund flows that have also helped inflate the property market.
Soaring property prices have become a hot issue among the New Zealand public and there are concerns that laundered money has fuelled the boom. The opposition Labour Party has also raised concerns about the amount of money coming from Chinese investors.
Political pressure was placed on the government this year to combat money laundering after the release of the Panama Papers in April, which showed how offshore companies often tout New Zealand trusts as a way to create a secretive un-taxed vehicle in the South Pacific nation.
New Zealand’s existing anti-money laundering rules only cover financial institutions and casinos, but the new rules due to be implemented in the mid-2017 will be extended to include lawyers, accountants and property agents.
The government’s consultation period with those professions closed on Friday.
The change will bring New Zealand into line with standards already in force in countries such as Canada and the United Kingdom.
Gary Hughes, a New Zealand barrister with extensive experience in anti-money laundering regulation, said the rules needed to be extended to cover all professions able to set up secretive trusts.
“They were excluded from the (anti-money laundering) regime but could provide very similar services,” Hughes said.
The Financial Action Task Force (FATF), the Paris-based global standard setter, raised concerns in a 2013 assessment of New Zealand, describing the lack of coverage of non-financial professional services as a “serious scope issue” and a “deficiency that is not yet addressed.”
The FATF has raised similar concerns about Australia, which will consult on new anti-money laundering laws later this year.
Existing anti-money laundering rules are overseen by teams in three different New Zealand government agencies.
Creating a dedicated anti-money laundering agency as exists in Australia would avoid, “duplication of effort and fragmentation of knowledge between supervisors,” said money laundering expert Ron Pol who runs compliance firm AML Assurance.
Pol said it was difficult for banks, police and regulators in New Zealand to determine the source of funds in China, meaning they struggled to distinguish between “capital flight” and criminal laundering.
And while laundering techniques can be used to move money out of China to circumvent government-imposed limits on money outflows, this is not an offence under New Zealand laws.
The new laws will not restrict the ability of overseas investors to purchase property with funds obtained legitimately in China.
Last month, the Canadian province of British Columbia, which includes Vancouver, imposed a 15 percent property transfer tax on foreign real estate buyers, cooling some parts of what remains Canada’s most expensive housing market. The move led to speculation that foreign buyers, mostly from mainland China, will shift to other markets. (Reporting by Nathan Lane and Charlotte Greenfield; Editing by Simon Cameron-Moore)