Managing the overlap with inter-agency mutual assistance regimes
Inter-agency mutual assistance regimes
19.6Due to the increasing means by which activity can occur across borders, regulators need tools to enable them to access assistance from their foreign counterparts. This is clearly illustrated by a case in which the SFO was involved:
In September 2009, Natural Dairy (NZ) Holdings Limited (Natural Dairy), a company listed on the Hong Kong Stock Exchange, made an announcement of its plan to purchase the New Zealand farm assets of the Crafar family. The plan involved an intermediary in New Zealand, a group of companies called UBNZ, purchasing the farm assets for $240 million. Natural Dairy undertook to purchase the farm assets from UBNZ for $500 million.
In September 2010, following concerns raised by the Overseas Investment Office and the New Zealand Police, the SFO opened an investigation into these transactions. A parallel investigation was opened in Hong Kong by the Independent Commission Against Corruption (ICAC). After extensive cooperation – between the two agencies, the SFO consulted ICAC regarding the prospect and nature of charges being laid in Hong Kong.
19.7Charges were subsequently laid. Regulators such as the SFO, Inland Revenue, the Financial Markets Authority (FMA), and the Commerce Commission have statute-based mutual assistance regimes. The most recent statute-based regime has been introduced by the Organised Crime and Anti-corruption Legislation Bill. Under this Bill, the New Zealand Police will be able to share personal information with its international counterparts where it is necessary to enable the overseas agency to carry out policing functions in its own jurisdiction. This followed the Agreement on Enhancing Cooperation in Preventing and Combating Crime between New Zealand and the United States of America (PCC Agreement).
19.8The focus of some of the inter-agency mutual assistance regimes is not on criminal investigation and prosecution, but rather it is to facilitate regulatory compliance and enforcement. For example, New Zealand law taxes its tax residents on their worldwide income. Because income can be derived in different countries and New Zealand tax residents do not necessarily live in New Zealand, Inland Revenue needs information-sharing mechanisms with its foreign counterparts to ensure that its residents are complying with this law and, where necessary, mechanisms to enforce compliance. Compliance and enforcement of the laws for which a regulator is responsible can lead to criminal investigations and prosecutions.
Types of assistance under inter-agency regimes
19.9The main type of mutual assistance that can be provided by a regulator tends to be information sharing. The information that is exchanged is usually information that the regulator holds or can access in carrying out its domestic duties. For example, the FMA can provide documents to its foreign counterparts:
- to enable reconstruction of all securities and derivatives transactions, including records of all funds and assets transferred into and out of bank and brokerage accounts relating to these transactions;
- that identify the beneficial owner and controller of an account; and
- for transactions, including the amount purchased or sold, the time of the transaction, the price of the transaction, and the individual and the bank or broker and brokerage house that handled the transaction.
19.10We understand that, in practice, the majority of requests relate to a request for information that is already held by the agency. For Inland Revenue, the information exchanged with other countries generally takes the form of accounting information, information on the ownership of legal entities and arrangements, and financial information. However, a regulator will generally be able to obtain information for foreign agencies using its powers to obtain information for domestic purposes. For example, amendments to various Acts in 2012 empower the Commerce Commission to provide compulsorily acquired information and investigative assistance to recognised overseas regulators. Specifically, the Commerce Commission is able to use its powers to gather information, including by way of search powers, for a recognised overseas regulator or to provide information already gathered to assist the foreign regulator in performing its functions.
19.11Likewise, Inland Revenue can use all of its domestic statutory powers to obtain information for its foreign counterparts. Article 5(2) of the OECD Convention on Mutual Administrative Assistance in Tax Matters, which was given legislative force through the Double Tax Agreements (Mutual Administrative Assistance) Order 2014, provides:
If the information available in the tax files of the requested State is not sufficient to enable it to comply with the request for information, that State shall take all relevant measures to provide the applicant State with the information requested.
The phrase “shall take all relevant measures” is interpreted as giving Inland Revenue the ability to use all of its domestic statutory-given powers to obtain the information requested from a foreign country. This would include, for example, the wide power in section 16 of the Tax Administration Act 1994 enabling the Commissioner of Inland Revenue to access premises to obtain information.
19.12However, some regulators are not permitted to use their full range of domestic powers to fulfil a foreign agency’s request. For example, the FMA’s power to enter and search a place or vehicle cannot be exercised for the purpose of providing information to a foreign agency.
Safeguards under inter-agency mutual assistance regimesTop
19.13Each inter-agency regime is specific to the regulator. Safeguards may include the following:
- Confidentiality: For example, any agreement into which the SFO enters with a foreign counterpart must contain a condition that no person who receives information pursuant to the agreement will disclose the information except for the purpose specified in the agreement or with the consent of all parties to the agreement.
- Protection of the information: For example, the Commerce Commission can specify how the overseas regulator is to use the information and keep the information secure.
- Legality under domestic law: For example, Inland Revenue cannot carry out measures at variance with or supply information that is not obtainable under New Zealand law or Inland Revenue’s own administrative practices.
- Double jeopardy: For example, the FMA must refuse to assist where a criminal proceeding has already been initiated in New Zealand based on the same facts and against the same persons.
19.14The difficulty is that there is no consistency of safeguards across inter-agency regimes. This is particularly apparent in two areas: ministerial oversight and the role of the Privacy Act 1993. Both the Commerce Commission and the SFO have ministerial oversight of their international cooperation arrangements, but the FMA does not. In relation to the application of the Privacy Act, the Commerce Commission must “consult with the Privacy Commissioner on possible privacy issues before entering a cooperation arrangement”. In contrast, personal information shared under the proposed Police overseas information-sharing regime is not subject to the Privacy Act despite the Privacy Commissioner pushing for an oversight role.
19.15We think there needs to be consistency with some fundamental safeguards included in all regimes.
Q81 What fundamental safeguards do you think should be included in all inter-agency mutual-assistance regimes?