1
In Confidence
Office of the Minister of Justice and Minister responsible for the Serious Fraud Office  ACT 1982
Chair, Cabinet Social Policy Committee
Corruption in New Zealand: Risks and opportunities to respond
Proposal
1
This paper provides an overview of New Zealand’s corruption risks and current work to
address  that  risk.  The  paper  also  seeks  Cabinet’s  agreement  to  direct  the  Officials
Committee  for  Domestic  and  External  Security  Coordination  (ODESC)1  to  report  to  the
Cabinet Social Policy Committee (SOC) by the end of 2017 on the anti-corruption work
programme being developed by the Serious Fraud Office (the SFO).
2
The aim of the work programme is to provide a cohesive framework for agencies’ anti-
corruption  efforts  relating  to  education,  prevention,  detection,  enforcement,  and
INFORMATION
engagement.  The  ODESC  report  back  to  SOC  will  focus  on  agreeing  key  actions,
including any necessary legislative changes.
Executive Summary
3
New  Zealand  has  made  valuable  progress  combating  bribery  and  corruption  in  recent
years.  This progress, along  with  a strong culture of integrity, means that New Zealand
enjoys a reputation for being one of the least corrupt countries in the world.
4
However,  there  is  a  growing  consensus  that  the  risk  of  corruption  in  New  Zealand  is
increasing  and  that  it  may  be  more  pervasive  than  is  generally  acknowledged.  While
numbers  remain  minimal  overall,  the  number  of  bribery  and  corruption-related
complaints and investigations has increased.
5
Work is already underway to help respond to the key risks of corruption. But it will also
need  to  ensure  there  is  coordination,  oversight  and  that  there  is  the  ability  to  detect
emerging trends and issues whilst also addressing al  of New Zealand’s risk areas.
6
To  help  address  these  matters,  Chief  Executives  directed  the  SFO  to  develop  a  work
programme  to  respond  to  the  risk  of  corruption.  The  aim  of  developing  the  work
programme  is  to  provide  a  cohesive  framework  for  agencies’  anti-corruption  efforts  so
that the conditions which allow corruption to occur do not take root in New Zealand.
7
We propose that Cabinet ask ODESC to report back to Cabinet on the work programme
developed by the SFO before the end of 2017, with a view to agreeing on key practical
actions,  as  well  as  any  necessary  legislative  changes  to  enable  those  actions  to  be
implemented.
1 ODESC is a committee of Chief Executives which manages national security in New Zealand in both its governance and
response mode. ODESC is chaired by the Chief Executive of the Department of the Prime Minister and Cabinet, and other
organisations represented at the meeting included the Ministry of Justice, Serious Fraud Office, State Services
Commission, Office of the Controller and Auditor-General, New Zealand Police, Ministry of Business, Innovation and
Employment, and Auckland City Council.
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Background
8
New Zealand has made valuable progress in our contribution to global efforts to combat
bribery and corruption.
9
In  November  2015  we  passed  the  Organised  Crime  and  Anti-corruption  Legislation  Bill
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which, among other things, increased penalties for bribery and corruption offences in the
private  sector,  improved  our  ability  to  share  information  with  international  law
enforcement counterparts, and clarified that no bribes are tax deductible.
10
The amendments mean New Zealand is now compliant with all mandatory provisions of
the  United  Nations  Convention  Against  Corruption  (UNCAC).  Consequently,  we  ratified
UNCAC  on  1  December  2015.  The  first  review  of  New  Zealand’s  compliance  with
Chapters III and IV (criminalisation and law enforcement, and international cooperation)
of UNCAC is almost complete and the assessment is expected to be largely positive.
11
The  Anti-Money  Laundering  and  Countering  Financing  of  Terrorism  (AML/CFT)
Amendment  Bill  (the  Bill)  passed  its  third  reading  on  3  August  2017.  The  Bill  puts  in
place “Phase 2” of New Zealand’s AML/CFT laws.
12
New  Zealand  also  made  a  number  of  commitments  at  the  London  Anti-Corruption
Summit  (the  London  Summit)  in  May  2016.  Many  of  these  commitments  have  already
INFORMATION
been met. For example, New Zealand has nominated representatives to the Governance
Board  of  the  International  Anti-Corruption  Coordination  Centre  (the  Centre),  which  was
officially launched on 5 July 2017. The SFO has received funding to provide resource to
the Centre, which has resulted in the appointment of an investigator who commenced at
the Centre in June 2017.
13
Despite  these  initiatives,  there  have  been  recent  examples  of  corrupt  practices,  which
have the potential to undermine confidence in public institutions and take a toll on  New
Zealand’s economy.
14
In response to concerns about the risk of corruption, officials developed a corruption risk
profile for New Zealand. ODESC met in late 2016 and early 2017 to consider how best
to  respond  to  that  risk.  ODESC  commissioned  a  Police-led  strategic  risk  assessment,
which supported a growing consensus that the occurrence of corruption is increasing in
New Zealand and that may be more pervasive than generally acknowledged.2
15
In  response,  ODESC  has  agreed  in  principle  that  the  SFO  would  take  the  lead  in
developing an anti-corruption work programme, to be completed by November 2017.
The risk of corruption in New Zealand
16
Corruption3 erodes public trust in government, institutions and the rule of law, and takes
a significant toll on the global economy. Estimates of the total cost of corruption vary, but
studies  have  placed  the  global  cost  of  bribery  alone  at  US$1.5  trillion  (approximately
NZ$2.2 trillion) per year.4
2 NZ Police (2017), Strategic Assessment: Corruption in New Zealand Perception vs Reality.
3 There is no legally binding definition of corruption in New Zealand. The definition used by the Asia Development Bank is:
"Behaviour on the part of officials in the public or private sector in which they improperly and unlawfully enrich themselves
or those close to them, or induce others to do so, by misusing the position in which they are placed."
4 Kaufmann, Daniel, Myths and Realities of Governance and Corruption (November 2005).
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17
However,  as  the  OECD  has  noted,  the  true  costs  of  corruption  are  likely  to  go  much
further  than  bribery  alone,  including  misallocation  of  resources  and  market  distortion.5
Indeed, some estimates of the total cost of corruption suggest the figure is in excess of 5
percent of global GDP (approximately US$2.6 trillion).6
New Zealand remains relatively free of corruption but our risk is increasing
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18
New  Zealand  has  a  strong  culture  of  integrity  and  our  institutions  remain  largely  free
from  systemic  corruption.7  New  Zealand  therefore  rightly  enjoys  an  international
reputation for being one of the least corrupt countries in the world.
19
As  noted  above,  Police’s  risk  assessment  notes  that  there  is,  however,  a  growing
consensus that the occurrence of corruption is increasing in New Zealand and that it is
likely more pervasive than generally acknowledged.
20
In  recent  years  there  has  been  an  increase  in  the  number  of  corruption  related
prosecutions  and  allegations  in  New  Zealand.  Instances  of  domestic  corruption  are
becoming  more  common  and  allegations  with  an  international  element  are  also
increasing. The SFO currently has 13 open investigations involving bribery or corruption
allegations.  Although  the  numbers  remain  minimal  overall,  the  number  of  bribery  and
corruption-related complaints have increased over the last decade and more corruption
related investigations are now being undertaken.   INFORMATION
21
Research indicates that the most common types of domestic corruption are undisclosed
conflicts  of  interest,  inappropriate  gifts  and  personal  favours.8  There  have  also  been
significant  cases  recently  involving  bribes  paid  to  officials  and  corrupt  payments  made
within the private sector.9
22
New  Zealand  also  has  increasing  social  and  business  links  to  jurisdictions  with  a  high
risk of corruption.10 The risk of corruption is also known to be amplified in the context of
increased spending on public infrastructure and Government procurement.11
Complacency and a lack of proactive detection and prevention are the biggest risks
23
As  a  country  with  generally  solid  anti-corruption  foundations  and  a  reputation  for
relatively low  levels of corruption, arguably the most significant risk New Zealand faces
is  complacency.12  Complacency  impacts  on  our  willingness  and  capacity  to  proactively
detect and prevent corruption.  It can also  lead to inconsistent approaches in managing
integrity risks including, for example, in relation to gifts and conflicts of interest policies.
24
For  example,  the  Deloitte  Bribery  and  Corruption  Survey  2017  reported  that
approximately  20  percent  of  organisations  surveyed  have  experienced  one  or  more
known  instance  of  corruption  in  the  last  five  years,  both  domestically  and  abroad.13
However,  only  55  percent  of  organisations  expect  to  implement  or  upgrade  their  anti-
5 G20/OECD (2013), Issues Paper on Corruption and Economic Growth.
6 OECD (2014). Background Brief: The rationale for fighting corruption
7 Transparency International NZ, (2013). Integrity Plus 2013 New Zealand National Integrity System Assessment.
8 Deloitte Bribery and Corruption Survey 2017.
9 See, for example, R v Borlase and Noone [2017] NZHC 236; Harrison v Serious Fraud Office [2016] NZHC 2127.
10 Deloitte Bribery and Corruption Survey 2015.
11 See, for example, OECD, ‘Preventing Corruption in Public Procurement’ (2016).
12 Transparency International NZ, (2013). Integrity Plus 2013 New Zealand National Integrity System Assessment.
13Including board members, executives, managers, and operations staff from public and private sector organisations, and
not-for-profits. Deloitte Bribery and Corruption Survey 2017.
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bribery and corruption  compliance framework within the next five years, and more than
half of respondents had not conducted a foreign bribery and corruption risk assessment.
25
Complacency  can  also  lead  to  a  lack  of  planning  or  overarching  strategy  among  the
agencies which have responsibility for New Zealand’s anti-corruption framework. A table
listing  relevant  agencies  and  their  anti-corruption  responsibilities  is  attached  as
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Appendix A.
26
Given  the  number  of  agencies  working  on  anti-corruption,  there  is  a  risk  that  without
clear strategy and allocation of responsibility, New Zealand’s approach to anti-corruption
becomes uncoordinated and inefficient.
27
Moreover,  while  a  number  of  public  sector  organisations  have  some  powers  or
responsibility  to  launch  investigations  into  corrupt  behaviour14  and  the mismanagement
of public funds15, in practice these are generally conducted reactively once the offending
has already occurred.
28
There  may  be  a  particular  risk  in  devolved  public  entities  such  as  local  government,
where  elected  officials  and  staff  are  not  regularly  involved  in  anti-corruption  policy
development and where there is arguably more of a focus on voluntary compliance (e.g.
making  public  declarations  of  pecuniary  interests).  This  has  been  highlighted  by  a
number  of  local  government  corruption-related  complaints  to  the  SFO  which  have
INFORMATION
resulted in investigations.
Current work to respond to the risk of corruption
29
As noted above, work is already underway to help respond to the key risks of corruption.
30
At  a  general  level,  the  Ministry  of  Justice  plays  a  key  role  in  New  Zealand’s  efforts  to
combat  bribery  and  corruption,  usually  through  leading  on  legislative  reform  and
engagement  with  international  organisations,  including  the  OECD  and  the  United
Nations Office on Drugs and Crime. Engagement with the international community is an
integral part of maintaining and enhancing New Zealand’s reputation, and also provides
valuable opportunities to learn about international best practice.
31
Responsibility  for  investigating  and  prosecuting  complex  or  serious  fraud,  including
bribery and corruption, lies with the SFO. The SFO coordinates with New Zealand Police
on these investigations through a MOU. The Crown Law Office handles requests to and
from other countries for mutual legal assistance in criminal matters.
32
More  specifically,  the  State  Services  Commission  (SSC)  is  developing  new  integrity
guidance, including on conflicts of interest, gifts, and benefits for the State services.
33
The  SSC  is  also  currently  working  with  Australia  on  a  joint  research  project,  ‘Whistling
While They Work 2’, which aims to inform governments, regulators, and organisations of
the  effective  management  of  internal  reports  of  suspected  wrongdoing.  The  project  is
due out in late 2018. The next phase of the work will, among other things, aim to identify
best practice in this area.
34
The State Services Commissioner recently noted that he is considering a review of the
Protected Disclosures Act 2000 in the context of the release of the Beatie report into the
14 See, for example, the Serious Fraud Office Act 1990, Part 2.
15 Public Audit Act 2001, section 18 and Part 4.
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treatment  of  whistleblowers  at  the  Ministry  of  Transport.16  The  Commissioner  has  also
issued  model  standards  outlining  minimum  expectations  for  organisations  to  support
staff on speaking up in relation to wrongdoing, and will monitor compliance with these.
35
Following  a  commitment  made  by  New  Zealand  at  the  London  Summit,  the  Ministry  of
Business,  Innovation  and  Employment  (MBIE)  is  also  exploring  the  establishment  of  a
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public  central  register  of  company  beneficial  ownership  information,  and  intends  to
consult on this issue in early 2018.
36
The OAG has also proposed procurement and contract management as the theme for its
2018 - 19 work plan.
37
MBIE has also established a Procurement Capability Index, which is a tool designed to
assist  government  agencies  to  self-assess  procurement  performance  against  a  wide
range  of  measures,  including  governance,  accountability  and  good  procurement
practice.
38
These efforts, and a number of related pieces of work, are summarised in  Appendix B
attached and could form part of the work programme being developed by the SFO.
There are several areas of our risk that are not currently being actively considered
INFORMATION
39
There are a number of specific risks which, to our knowledge, are not being addressed
by current pieces of  work. For example, we consider there are potential risks around a
lack of auditing of decision-making which does not involve the spending of public money
but  nonetheless  has  considerable  financial  impact  for  the  parties  involved,  including
regulatory  and  quasi-regulatory  decisions.  Improper  influence  over  such  decisions,
including  through  personal  favours  or  gifts  poses  the  same  risk  of  undermining  the
legitimacy of decision-making as it does where it involves public expenditure.
40
We  are  also  unaware  of  any  work  concerning  issues  such  as  broader  based  asset
disclosure  rules  for  elected  and  public  officials,17  strengthening  requirements  or
incentives  for  companies  to  adopt  robust  anti-corruption  compliance  policies18,  or
enhancing  incentives  for  companies  to  self-report  where  they  detect  compliance
breaches.
41
The consistent theme of the issues that are yet to be carefully considered is the lack of
mechanisms  to  proactively  detect  and  prevent  corruption.  It  is  necessary  that  we
proactively  review  our  laws  and  policies  to  identify  ways  to  reduce  the  risk  of,  and
enhance our capacity to uncover corruption.
42
In  this  vein,  Chief  Executives  directed  the  Ministry  of  Justice  to  undertake  a  review  of
international  legislation  related  to  preventing  corruption,  including  procurement  and
auditing standards, and compliance regimes. The preliminary conclusions of that review
are  that  New  Zealand  appears  to  rely  more  heavily  on  willing  compliance  and  culture
than on dedicated anti-corruption legislation and compliance frameworks. There appears
16 http://www.ssc.govt.nz/media-statement-report-investigation-whistle-blower-treatment-within-ministry-transport
17 Asset disclosure systems are mechanism by which a public official must periodically submit information about their
income, assets, liabilities, and/or interests; see Ivana M. Rossi, Laura Pop & Tamar Berger, ‘Getting the Full Picture on
Public Officials: A How-To Guide For Effective Financial Disclosure’ (Stolen Asset Recovery Initiative; The World Bank &
UNODC) (2017).
18 Including in relation to recruitment and employment termination, and procurement.
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to  be  relatively  little  tailoring  of  legislative  solutions  to  specific  risks  of  bribery  or
corruption. A summary of the draft review is attached as Appendix C.
43
The  intention  is  that  this  work  will  help  to  inform  possible  areas  of  legislative  reform  to
explore  as part of the work  programme being developed  by the SFO. We propose that
the  Ministry  provides  advice  on  possible  improvements  to  our  legislative  framework  as
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part of the ODESC report back discussed below.
The SFO is developing a work programme to improve our response to corruption
44
While  the  ongoing  pieces  of  work  described  above  are  all  positive  moves  individually,
they  do  not  overcome  the  issue  of  a  lack  of  coordination,  oversight  and  our  ability  to
detect emerging trends and issues. Nor do they address al  of New Zealand’s risk areas.
45
The issue of coordination was discussed by Chief Executives at their meeting of 3 May
2017.  As  a  result  of  that  discussion,  Chief  Executives  agreed  in  principle  to  the  SFO
developing  a  work  programme  to  respond  to  the  risk  of  corruption.  The  most  recent
version of the terms of reference to give SFO a mandate to lead the development of the
work programme are attached as Appendix D,19
46
The  SFO  is  well  placed  to  lead  this  work  given  its  expertise  in  anti-corruption  work,
policy  development  experience  and  a  wide  range  of  established  domestic  and
INFORMATION
international government and private sector contacts.
47
The  aim  of  developing  the  work  programme  is  to  provide  a  cohesive  framework  for
agencies’ anti-corruption efforts so that the conditions which allow corruption to occur do
not  take  root  in  New  Zealand.  It  is  anticipated  that  the  initial  product  will  be  a  plan  of
prioritised  actions  under  three  different  streams  of  the  proposed  programme.  The  four
work streams are:
47.1  prevent  –  address  the  conditions  that  allow  corruption  to  occur,  including
exploring  whether  a  specific  agency  should  have  structural  oversight  of  public
and private entities’ internal prevention systems
47.2  detect  and  enforce  –  improve  practical  mechanisms  to  proactively  identify  and
act on individual cases
47.3  engage  and  educate  –  enhance  domestic  and  international  engagement  and
raise awareness of integrity standards and corruption, and
47.4  understand and inform – develop a shared understanding of corruption and how
this  relates  to  New  Zealand’s  capability  to  inform  and  diagnose  the  common
areas of risk.
48
A  lead  agency  will  be  assigned  to  each  of  the  actions,  which  will  be  targeted  at
addressing the gaps and risks identified in this paper as well as other risks or gaps that
are identified during the process.
49
Several  elements  stand  out  as  being  important  to  all  the  work  streams;  improved  data
collection,  strong  connections  with  public  entities20  and  the  private  sector,  and  the
19 This version is subject to amendment and it is anticipated it will be approved by the Chair of ODESC in the near
future.
20 Including local government agencies, the health and education sector, State-owned enterprises, and Crown entities.
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development  of  proactive  and  practical  solutions  to  help  deter  and  detect  unethical
behaviour.
50
Improved  data  collection,  sharing  and  monitoring  of  corruption  indicators  would  allow
more  precise  identification  of  our  corruption  risk,  gaps  in  the  system, and  opportunities
for targeted investment in anti-corruption efforts.
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51
Close  partnerships  with  local  government,  the  private  sector  and  non-government
organisations are also essential. These sectors all contribute to New Zealand’s economy
and  have  a  key  role  to  play  in  maintaining  our  reputation  as  one  of  the  least  corrupt
countries in the world.
52
Most  importantly,  in  our  view,  it  is  vital  that  any  proposed  solutions  are  proactive  and
pragmatic.  If  our  systems  are  not  effective  in  looking  for  fraud  and  corruption  then,
whether through complacency or impunity, our risks will never be reduced.
53
Both  public  and  private  entities  need  to  have  effective  mechanisms  and  prevention
systems in place. Prevention systems can help to ensure probity in decision making, and
to  detect  and  deter  corrupt  behaviours.    Increased  oversight  of  prevention  systems  will
also  enable  us  to  identify  risk  areas.  Because  most  agencies  with  anti-corruption
responsibilities have primarily reactive functions, including the SFO, initial work will need
to specifically assess which agencies should lead aspects of the work programme with a
INFORMATION
more proactive focus.
54
The  SFO  intends  to  develop  the  work  programme  by  November  2017.  We  therefore
propose  that  Cabinet  ask  ODESC  to  report  back  to  Cabinet  on  the  work  programme
developed by the SFO before the end of 2017, with a view to agreeing on key practical
actions,  as  well  as  any  necessary  legislative  changes  to  enable  those  actions  to  be
implemented.
Consultation
55
The  Department  of  Prime  Minister  and  Cabinet,  State  Services  Commission,  Serious
Fraud  Office,  New  Zealand  Police,  Ministry  for  Business,  Innovation  and  Employment,
Department of Internal Affairs, and the Office of the Controller and Auditor-General have
been consulted on the paper. The Treasury has been informed of the paper.
Financial Implications
56
There are no financial implications arising directly from the proposals in this paper.
57
As noted above, however, any policy changes to respond to the risk of corruption could,
for  example,  cement  and  improve  New  Zealand’s  reputation  as  country  with  relatively
low  levels  of  corruption.    Conversely,  enhancing  our  efforts  to  combat  corruption  could
lead to increased compliance costs for central and local government, as well as for New
Zealand businesses.
58
Officials  will  provide  more  detailed  information  on  the  financial  implications  of  any
proposals once the work programme above has reported back.
Human Rights
59
There are no human rights implications arising directly from the proposals in this paper.
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Legislative Implications
60
There  are  no  legislative  implications  arising  directly  from  the  proposals  in  this  paper.
There may, however, be a need for legislative change depending on the conclusions of
the work programme above.
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Regulatory Impact Analysis
61
The  Regulatory  Impact  Analysis  requirements  do  not  apply  to  this  paper  and  therefore
no Regulatory Impact Statement has yet been prepared.
Gender Implications
62
There are no gender implications arising directly from the proposals in this paper.
Disability Perspective
63
There are no disability implications arising directly from the proposals in this paper.
Publicity
64
We  do  not  propose  to  undertake  any  publicity  until  after  the  work  programme  outlined
INFORMATION
above has reported back with possible next steps.
Recommendations
65
The  Minister  of  Justice  and  the  Minister  responsible  for  the  Serious  Fraud  Office
recommend that the Committee:
1
note that New Zealand remains relatively free of corruption but that the risk is increasing
2
note  that  officials  have  begun  a  programme  of  work  aimed  at  better  identifying  and
responding to the risk of corruption in New Zealand
3
direct the Officials Committee for Domestic and External Security Coordination to report
to  the  Cabinet  Social  Policy  Committee  on  the  anti-corruption  work  programme  by  the
end of 2017
4
direct  the  Ministry  of  Justice  to  provide  advice  on  possible  improvements  to  our
legislative  framework,  in  consultation  with  relevant  agencies  including  Serious  Fraud
Office and New Zealand Police, as part of the ODESC report back by the end of 2017.
Authorised for lodgement
Authorised for lodgement
Hon Amy Adams
Hon Paula Bennett
Minister of Justice
Minister responsible for the Serious Fraud Office
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A
Appendix A: Agency responsibilities
Agency
Responsibility
SFO is responsible for complex or serious fraud investigations and
prosecutions. Priority cases for the SFO include bribery and corruption,
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The Serious
and any case that could significantly damage New Zealand’s reputation
Fraud Of ice
for fair and free financial markets minus corruption.  The SFO has
(SFO)
received funding to provide resource to the Centre, which has resulted
in the appointment of an investigator who commenced at the Centre in
June 2017.
MOJ has general anti-corruption policy responsibility and administers
The Ministry of  some of the key anti-corruption legislation. MoJ works with other
Justice (MoJ)
agencies and organisations –  both domestically and globally –  to
maintain New Zealand’s reputation, support international anti-corruption
efforts and strengthen our anti-bribery laws.
The OAG is an Of icer of Parliament with a central  role  ensuring the
accountability of the public sector. Part of its role is to look closely at the
The Office of
way the public sector uses its money and to report any corrupt use to
INFORMATION
Controller and  Parliament. Audit service providers appointed by the Auditor-General
Auditor-General  carry out annual audits of public entities on the Auditor-General’s behalf
(OAG)
to give taxpayers and ratepayers assurance that public entities are
appropriately reporting on how they spend public money and on the
services they have provided.
The Office of
The Of ice of the Ombudsman investigates complaints raised  against
the
New Zealand central, regional and local government. The Ombudsmen
Ombudsman
can look into complaints about corrupt behaviour.
Sport New
Sport New Zealand works with agencies and organisations –
Zealand
domestically and internationally – to promote integrity in sport.
The Ministry of  MBIE is responsible for anti-corruption work related to companies and
Business,
limited partnerships, and for procurement policy. This also includes
Innovation and  labour exploitation risks.
Employment
(MBIE)
The State Services Commissioner holds the integrity mandate for the
State services and is responsible for setting standards of integrity and
The State
conduct. Under his statutory mandate, the Commissioner is the
Services
employer of public service chief  executives.  He can exercise
Commission
independent powers of investigation and enquiry, including in relation to
(SSC)
any concerns about bribery and corruption in the State services. The
State Services Commission administers the Protected Disclosures Act
2000 (PDA), and is an “appropriate authority” under the PDA.
The Crown Law  The CLO handles, alongside relevant agencies,  requests  to and  from
Office (CLO)
other countries for mutual legal assistance in criminal matters.
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Agency
Responsibility
IRD uses technology, information from other government agencies, and
Inland Revenue  data analysis to detect and monitor suspicious activity, ranging from tax
Department
evasion and basic scams, to complex and organised criminal activities.
(IRD)
IRD is responsible for matters including tax deductibility, training for tax
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examiners, and bilateral tax treaties.
Can cooperate with SFO in the investigation of bribery and corruption.
The Financial Intelligence Unit within Police also receive suspicious
New Zealand
transaction reports from banks and financial institutions to assist
Police
detection of money-laundering (which may follow bribery or corruption).
Police has an important role in asset recovery, including proceeds of
domestic and international corruption.
Department of Internal Affairs (DIA) is responsible for working with other
agencies, local government sector organisations and local authorities
Department of  directly to resolve serious problems that may arise within local
Internal Af airs  government. This may occasionally result in a Crown intervention to a
local authority, including any entity that the local authority may control or
have an interest in (Local Government Act, Part 10).
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B
Appendix B: Current anti-corruption work being undertaken by agencies
Agency
Work
Key risk area
Completion date
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MoJ
Review of international
Lack of mechanisms to prevent July 2017
legislation on preventing
corruption
corruption.
MoJ
UN Convention Against
Awareness
Late 2017
Corruption – first cycle review
of New Zealand’s
implementation of chapters III
(criminalisation and law
enforcement) and IV
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(international cooperation) of
the Convention
Ministry of Business, Innovation
Enhance the intelligence
Labour exploitation
July 2017
and Employment
picture to gain a better
understanding of the scale and
scope of labour exploitation.
(ODESC Action from May
2017 meeting)
MBIE
Design of a procurement
Procurement
Late 2017
capability index to assist
government agencies to self-
assess procurement
performance against a range
of measures, including
governance, accountability
and good procurement
practice.
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Agency
Work
Key risk area
Completion date
All agencies covered by the
Government Rules of Sourcing
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will be required to complete
the Procurement Capability
Index. New Zealand
Government Procurement will
report the findings to Ministers.
SSC
Integrity guidance topics for
Awareness
TBA
the State services including:
New Speaking Up standard is
• bribery and corruption risks
now published:
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• preventing fraud risks
http://www.ssc.govt.nz/speaking-
•
state-services
ethical decision-making
• gifts and benefits
• hospitality
• speaking up, and
• endorsements.
SSC
Conflicts of interest guidance
Conflicts of interest
TBA
for the State services, along
with a training module.
SSC
Whistling While They Work:
Improving the reporting and
Mid-late 2018
Research into the
management of reports of
management of reporting of
wrongdoing in or by an
suspected wrongdoing in New
organisation, including bribery
Zealand and Australian
and/or corruption by private
organisations
and public sector employees.
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Agency
Work
Key risk area
Completion date
SSC
Scoping a review of the
Ineffective legislation that does
2017 - 2018
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Protected Disclosures Act
not support reporting concerns
2000
of bribery and corruption
Egmont Group Centre of
Police (Financial Intelligence Unit)
July 2017
Excellence and Leadership
(ECOFEL) Establishment
project that incorporates a
focus on anti-corruption and
money laundering. The set-up
phase has begun with training
operations to start in 2018.
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C
APPENDIX C
Summary of draft report on international legislation to
prevent bribery and corruption
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Purpose
This paper provides a summary of the draft report that responds to Chief Executives’ direction to the
Ministry of Justice to assess New Zealand’s corruption prevention legislative framework against
international best practice.
Background
New Zealand has a strong culture of, and reputation for, integrity and our institutions remain free from
systemic corruption. That reputation and progress has been built, in part, upon a relatively strong
legislative foundation. However, there is now consensus among experts that corruption is increasingly
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occurring in New Zealand and that it is almost certainly more pervasive than we currently understand.
Given the increasing risk, it was considered timely to take a comparative look at New Zealand’s
legislative framework.
Methodology
The Ministry of Justice identified seven topics recognised as being of importance in preventing
corruption, many of which were identified in Police’s 2017 Strategic Assessment of corruption in New
Zealand. These topics are:
• Corruption prevention bodies
• Procurement
• Financial disclosure systems
• Reporting duties, incentives and protections
• Auditing
• Compliance regimes, and
• Lobbying regulations.
For each topic, New Zealand’s legislative or policy approach is briefly described, followed by an
assessment of any observable international trends which may indicate a “best practice” approach. Each
topic chapter closes with three to four examples of legislation from other countries.
The content of the draft report was developed through a literature review, engagement with other state
sector organisations, and consultation with a number of international experts from the relevant countries,
including the United Kingdom, France, Canada, Australia, Finland, and the Netherlands.
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Example of country profile
FRANCE – SAPIN II
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Sapin II, enacted in December 2016, established the Agence Française Anticorruption (the Agency). The
Agency’s main focus is prevention, but it does have a role in monitoring compliance with their new obligations
under Sapin II, including the requirement to put in place anti-corruption policies.
While the Agency is not fully independent, it is headed by a magistrate who may not be given instructions by the
Government.
The Agency has some investigative powers, including the ability to conduct on-site review, make document
requests and conduct interviews. In the event of a violation, or if a company’s anti-corruption procedures are
deemed insufficient or ineffective, the Agency’s enforcement committee has the power to issue warnings or
orders to comply. The Agency may also impose administrative sanctions (up to EUR 1 million for companies and
EUR 200,000 for individuals, together with the possible publication of the sanction).
Conclusions
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There are a number of difficulties in assessing international best practice in relation to corruption
prevention. For example, legislative practice varies significantly and there is no entirely reliable way to
assess precisely how effective legislation is in the area.
The draft report also notes that, how the legislation is applied in practice is at least as, if not more
important, than the words of the legislation itself.
Given these difficulties, the draft report takes a reasonably high level approach to drawing conclusions
and does not make specific recommendations about the individual topic areas.
However, the preliminary conclusion is that there is a case to be made that New Zealand is falling behind
the international community in finding new ways to prevent corruption.
There appears to be relatively little tailoring of our legislative solutions to specific risks of bribery or
corruption. This contrasts with a number of pieces of legislation from around the world which have been
drafted and enacted with clear intent to address concerns around probity and integrity. Some countries
have opted for broad-based anti-corruption laws, as in France with Sapin II. Countries like the US,
meanwhile, take a more piecemeal, but still very targeted, approach in their legislative solutions.
The common thread throughout the draft report is that New Zealand appears to rely more heavily on
willing compliance and culture, rather than dedicated anti-corruption legislation and compliance
frameworks.
This approach has largely served us well in the past. But while we are yet to experience a massive
‘shock’ in terms of corruption, increasing incidents of corruption may stress our legislative frameworks
and erode trust in the public sector’s ability to prevent, detect and investigate corrupt practices.
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D
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Terms of Reference
Development of an Anti-Corruption Work
Programme to enhance New Zealand’s
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integrity framework
August 2017
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Purpose
1.
To develop an Anti-Corruption Work Programme that enables system-wide consistency and co-
operation to reduce the risks of corruption and enhance New Zealand’s integrity framework.
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Rationale
2.
Corruption is a global problem that damages businesses, markets, democratic institutions, and
the social fabric of societies everywhere. Widespread corruption undermines the rule of law and
erodes  justice. New  Zealand  is  considered  secure, resilient,  and  prosperous  and  continuously
features in the top five of global anti-corruption surveys.
3.
The  structure  of  New  Zealand’s  entities  and  legislation  provides  the  basis  for  a  strong  anti-
corruption ethos, but evidence now suggests that corruption in New Zealand is almost certainly
more  prevalent  than  generally  acknowledged.  This  is  supported  by  the  draft  risk  profile
developed by the Department of Prime Minister and Cabinet (DPMC) which rated the corruption
risk in New Zealand as ‘very high’.
4.
The Officials Committee for Domestic and External Security Coordination (ODESC) convened a
group of relevant Chief Executives on 3 May 2017 where it was agreed that the Serious Fraud
Office (SFO)  would provide a  Terms of Reference for a  project to  develop  an  Anti-Corruption
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Work  Programme  (the  Work  Programme)  to  mitigate  the  risks  posed  by  corruption  in  New
Zealand and that:
• Ministers would be consulted about the proposed project and work programme
• The project and work programme would be supported by relevant agencies
• The  resulting  Work  Programme  may  indicate  the  need  to  develop  a  national  anti-
corruption strategy or action plan.
Benefits
5.
Deliver a cohesive, consistent and sustainable approach that ensures New Zealand continues to
have  a  strong  culture  of  integrity  and  anti-corruption  so  it  is  seen  as  a  global  leader  in  anti-
corruption efforts.
6.
Shared understanding of the required standards of conduct by government (central and local)
and  the  New  Zealand  private  sector  and  not-for-profits.  This  will  be  supported  by  robust
compliance, regulatory and legislative mechanisms.
7.
Enhanced compliance with international commitments including the United National Convention
against Corruption (UNCAC), Organisation for Economic Co-Operation and Development (OECD),
strategic  plan  of  APEC  Anti-Corruption  Fora  and  the  London  Anti-Corruption  Summit
commitments (2016)1.
8.
Contribution  to  the  Government’s  Business  Growth  Agenda  of  building  a  more  productive,
confident  and  competitive  New  Zealand  economy,  through  tackling  corruption  and  financial
crime.
1 This includes the recent appointment of a New Zealand representative to the Governance Board of the International Anti-Corruption
Coordination Centre (IACCC) and MBIE is exploring the establishment of a public central register of company beneficial ownership
information.
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9.
Increased  collaboration  across  the  criminal justice sector  by  increasing collective capability  to
achieve shared goals.2
10.
Contribution directly and indirectly to the Government’s Better Public Services’ key priority areas
specifically:
• Result 7: Reducing crime
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• Result 9-10: Improving interaction with government.
Themes
11.
The Anti-corruption Work Programme will be developed around four key themes (illustrated in
Diagram 1 with more detail in Appendix A):
• Theme One: Prevent - address the conditions that allow corruption to occur in New Zealand,
including  exploring  whether  a  specific  agency  should  have  ongoing  oversight  of  New
Zealand’s anti-corruption efforts.
• Theme Two: Detect and enforce - ensuring robust detection and enforcement programmes
and capabilities are in place so that agencies proactively identify and act on individual cases
using current, reliable and complete intelligence.
•
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Theme  Three:  Engage  and  educate  -  enhancing  and  co-ordinating  domestic  and
international engagement opportunities, to raise awareness, educate and reduce the risks
of corruption in New Zealand.
• Theme Four: Understand and inform - develop a shared understanding of corruption and
how this relates to New Zealand’s capability to inform and diagnose the common areas of
risk.  This  may  include  introducing  consistent  key  performance  indicators  and  reporting
mechanisms to understand New Zealand’s overall risk of corruption based on consistent
and reliable information.
Diagram 1 Anti-corruption themes
2 Criminal Justice Sector Strategic Intent 2018 4-Year Plan.
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Stakeholders
12.
The  project  to  develop  the  Work  Programme  will  be  led  by  the  Serious  Fraud  Office  (SFO),
supported by the wider ODESC system and agencies.
13.
The other key stakeholder agencies are:
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• Department of Prime Minister and Cabinet (DPMC)
• Ministry of Justice (MoJ)
• State Services Commission (SSC)
• New Zealand Police (NZP)
• Ministry of Business, Innovation and Employment (MBIE).
14.
Other agencies and stakeholders from other agencies, local government and the private and not-
for-profit sectors are being identified and will be engaged throughout the development of the
Work  Programme.  This  will  ensure  actions  and  plans  are  aligned  to  deliver  benefits  for  all
stakeholders.
15.
The SFO will deliver the Work Programme development from within its existing appropriation
and there are likely to be opportunities for secondees from relevant agencies to participate in
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some work streams.
Governance and project management
16.
The Minister for the SFO and State Services with the Minister of Justice are the Joint Sponsoring
Ministers to develop the Work Programme.
17.
The  governance framework/group  for  the  Work Programme  will come  under  the  umbrella of
ODESC and be chaired by the Chief Executive of DPMC, Andrew Kibblewhite. The ODESC Anti-
corruption  Governance  Group  will  be  made  up  of  relevant  Chief  Executives  (or  their
representatives) from the key stakeholder agencies as reflected below:
Julie Read
Serious Fraud Office (SFO)
Howard Broad
Department of the Prime Minister and Cabinet (DPMC)
Peter Hughes
State Services Commission (SSC)
Commissioner Mike Bush
New Zealand Police (NZP)
Carolyn Tremain
Ministry of Business, Innovation and Employment (MBIE)
Andrew Bridgeman
Ministry of Justice (MoJ)
Stephen Town
Auckland Council (AC)
18.
The  Controller  and  Auditor-General  will  attend  meetings  as  an  observer  but  due  to  their
constitutional role will not have decision making authority.
19.
The NSS Directorate within DPMC will support the Anti-corruption Governance Group and Chair,
who will have accountability for reporting through to the Joint Sponsoring Ministers.
20.
The Project Executive is the SFO General Manager Investigations, Rebecca Rolls, who is working
closely with DPMC as the conduit to the Anti-corruption Governance Group.
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21.
The SFO has engaged a Project Manager to manage project activities. The SFO Senior Leadership
Team will provide advisory support, in particular in agreeing outcomes, measures and suggesting
overall accountabilities in the Work Programme.
22.
An  Anti-corruption  Cross  Agency  Working  Group  will  be  established,  comprising  of  Senior
Officials from the key stakeholder agencies. This will build on the group that formed during the
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development  of  the  DPMC  Corruption  Risk  Profile  and  the  recently  completed  Strategic
Assessment on Corruption in New Zealand.
23.
The Working Group will collaborate with a number of Stakeholder Groups defined by matters of
common  interest  and  sector  positioning  (e.g.  private,  not-for-profit  sectors)  in  order  to  the
progress specific work streams.
24.
An illustration of the governance and management of the project is detailed in Appendix B.
Delivery
25.
The SFO has initiated the project (based on the ODESC decision, 3 May) and it is anticipated that
the  ODESC  Governance  Group  will  be  in  a  position  to  report  back  to  the  Joint  Sponsoring
Ministers in November 2017, and Cabinet by the end of 2017 if required.
26.
The November report back will detail the Work Programme, which will outline the initiative, the
delivery timing and potential costs (where available). This will enable decisions to be made on
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any  initiatives  requiring  new  or  additional  investment  to  deliver  the  longer  term  benefits  of
mitigating New Zealand’s corruption risks.
27.
The Work Programme will contain prioritised initiatives, under the four work streams, along with
identification  of  the  lead  agencies  that  will  be  accountable for delivery  of  those  actions. This
ensures  the  longer  term  benefits  of  co-ordinating  activity  through  the  Work  Programme  are
realised, i.e.:
• Immediate improvement of the risk mitigation capability through consistent plans, to raise
awareness and improve system capability.
• Long  term  improvements  in  the  integrity  learning  system,  risk  governance  and
partnerships.
• Current and future needs of the integrity system are defined to enable sustainability of
efforts.
• Minimal duplication of effort in a joined up integrity system.
28.
To  develop  a  national  Work  Programme  the  following  activity  as  illustrated  in  Diagram  2  is
planned.
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Diagram 2 Project activity and phases to November 2017
•Establish project resources and structures.
Initiate
•Seek endorsemet from Ministers & Cabinet to scope and intent.
(Complete)
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•Confirm corruption risk areas and definitions of corruption and integrity.
•Undertake a stocktake of agency activities that are focused on reducing corruption and/or
Analyse
integrity risks.
(Aug/Sept)
•Assess New Zealand's legislative framework against international best practice (underway).
•Identify gaps and weaknesses in 'New Zealand Inc's' integrity framework and anti-corruption
practices.
Define
•Formulate solutions and actions under the four anti-corruption themes.
(Oct/Nov)
•Design the Work Programme to be the basis of a strategy or action plan for New Zealand's
approach to integrity and anti-corruption practices.
Design
•Define benefits and measures that will ensure realisation and ongoing visbility of New
(Oct/Nov)
Zealand's corruption risks.
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Appendix A: Anti-corruption Themes
One: Prevent
Address the conditions  that allow corruption to occur in New Zealand, including exploring whether a
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specific agency should have ongoing oversight of New Zealand’s anti-corruption efforts.
By  ensuring  that  there  is  a  consistent  and  accurate  narrative  around  the  causes  and  effects  of
corruption we can influence organisational culture and controls to engender an anti-corruption ethos
across New Zealand. This will enable New Zealand to prevent corruption before it occurs. The roles and
responsibilities of agencies across the anti-corruption landscape will be explored to understand where
gaps or duplication of effort exists.
Two: Detect and Enforce
Ensuring robust detection and enforcement programmes and capabilities are in place so that agencies
proactively identify and act on individual cases using current, reliable and complete intelligence.
To really understand the scale of corruption and integrity risk New Zealand has we must have robust
data  on  the  extent  and  nature  of  corruption,  to  enhance  efforts  to  detect  and  prosecute  corrupt
behaviour and inform how we might measure behaviour and test systems.
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Improved  intelligence  gathering  and  information  sharing  would  lead  to  earlier  identification  of
indicators of potential corruption, and a better understanding of threat and systemic risks, including
where these intersect with other types of crime. Investigation and prosecution are important tools in
demonstrating New Zealand’s commitment to anti-corruption which will also be enhanced by a more
complete  intelligence  picture.  This stream  also encompasses  development  of  awareness  to  align  all
remedies  in  our  response  tool  kit  (e.g.  prosecution,  asset  recovery  action,  prohibition  from
directorships) to inform a tactical response framework.
Three: Engage and Educate
Enhancing and co-ordinating domestic and international engagement opportunities, to raise awareness,
educate and reduce the risks of corruption in New Zealand.
Corruption  is  an  issue  which  cannot  be  solved  by  one  agency  or  country  alone.  Perhaps  our  most
important  engagement  effort  is  domestically  where  we  need  to  ensure  cross-system  efforts  are
understood and coordinated to realise synergies. Engagement also needs to reach across the economic
community  through  private  and  not-for-profit  sectors  particularly  with  international  groups such  as
Transparency International.
We will address this by building on guidance material (such as codes of conduct) already available to
New Zealand organisations and ensuring they are clearly communicated and easily accessible. The initial
focus will be on  at-risk sectors or  activities, for example conflicts of interest and  gift disclosures,  to
enable  proactive  identification  of  gaps  or  areas  for  improvement  in  our  legislation  and  governance
structures and how this is communicated
In an increasingly globalised world, we must also ensure that our international bilateral and multilateral
relationships are healthy. In addition to our presence at the International Anti-Corruption Co-ordination
Centre (IACCC), New Zealand agencies are well known for our work in the Pacific and New Zealand is a
respected  member  of  the  OECD  Working  Group  on  Bribery,  we  have  recently  ratified  the  UNCAC
convention and completed the first review phase. We are also active in APEC Anti-corruption fora where
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opportunities may exist due to New Zealand hosting APEC in 2021. This engagement together with the
development of a strategy as a whole would enhance New Zealand’s reputation and be effective in
meeting international obligations.
Four: Understand and inform
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Develop a shared understanding of corruption and how this relates to New Zealand’s capability to inform
and  diagnose  the  common  areas  of  risk.  This  may  include  introducing  consistent  key  performance
indicators and reporting mechanisms to understand New Zealand’s overall risk of corruption based on
consistent and reliable information.
Organisations need to sufficiently understand the capability they have to respond to their own internal
and external risks, as well as how this contributes to system improvements and connectedness. In order
to achieve this, they need to know how best to utilise the ‘course of business’ information they hold
and collect but evaluate it from a hygiene and risk perspective. We will seek to work with entities to
look  at  current  practices  and  identify  potential  for  enhancement  of  their  engagement  with  their
information and consider it through an anti-corruption lens.  This will also enable them to identify links
to any system impacts they may be in a position to influence. A diagnostic dimension is required in this
approach in that not only does an organisation need to be prepared to identify examine any weaknesses
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but they need to be alive to what the relevant indicators are and be in a position to respond.
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Appendix B: Proposed governance structure – Anti-corruption
Joint Sponsoring Ministers – Anti-corruption
Deputy Prime Minister Bennett (responsible for the SFO and SSC) and
Minister of Justice Adams
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ODESC Governance Group – Anti-corruption
Chair: DPMC Chief Executive, Andrew Kibblewhite
•
Design
outcomes
•
Develop
Project Executive
measures
SFO General Manager Investigations, Rebecca Rolls
•
Identify
accountabilities
•
Set priorities
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Project Manager
SFO Project Manager, Emma Kelly
Technical/Advisory Group
SFO Senior Leadership Team & Specialists
Project Support Function
SFO Corporate Support
Anti-corruption Cross Agency Working Group
SFO, DPMC, MoJ, SSC, MBIE, NZ Police
Prevent
Detect and
Engage and
Understand
Workstream
Enforce
Educate
and Inform
Workstream
Workstream
Workstream
Stakeholder Groups
To include central and local government, private and not for profit sectors.
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Document Outline