New Zealand has edged out Singapore to take top spot for ease of doing business in the World Bank’s latest rankings, but money-laundering experts warned the honor masked the darker side of the Pacific nation’s vulnerability as a channel for illegal funds.
In its annual Doing Business report released on Tuesday, the World Bank cited tax improvements as a key reason for moving New Zealand to top spot from its previous runner-up position.
The nation also topped the World Bank’s indicator on ease of company formation, a particularly worrisome aspect for anti-money laundering efforts and one that has raised some alarm bells given the use of shell companies to launder funds.
Companies registered in New Zealand were among a network of opaque firms that were used to dupe Chinese investors out of millions of US dollars in a pyramid scheme called “EuroFX” earlier this year.
New Zealand also came under fire this year when the Panama Papers showed the nation’s shell companies and trusts were touted as a secretive way to channel funds around the world, including for tax-avoidance purposes.
“You want a jurisdiction that has a clean reputation, but doesn’t ask many questions when you’re setting up a company there,” said Jason Sharman, an Australia-based money laundering expert and coauthor of the book Global Shell Games.
New Zealand Minister for Economic Development Steven Joyce said the government is aware of the risks and is taking steps, such as bringing anti-money laundering regulations in line with international standards.
The New Zealand Ministry of Justice is also “looking into” the feasibility of a registry that shows the beneficial owners behind companies.
“It’s all about the management of risks and we’ve taken a number of steps,” Joyce said in a telephone interview yesterday.
Others said the risks are not being managed well enough.
“Anyone who wants to … hide dirty money, just needs a local director, a physical address and NZ$45, and in a few minutes they’ve got just what they need to do it with,” said Ron Pol, the Wellington-based head of anti-money laundering firm AML Assurance.
The World Bank report tracks regulatory changes in 190 nations for businesses throughout their life cycle — from the ease of business start-up regulations and getting credit to property rights.
It said a record 137 economies undertook reforms to make it easier to start and operate businesses in the past year, with more than 75 percent of the changes occurring in developing nations.
The World Bank says better performance in the Doing Business rankings generally equates to lower levels of income inequality and reduced poverty.
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