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Corruption Down Under: Is New Zealand Losing Its Grip?

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For many years, New Zealand has found itself in the top three of Transparency International’s corruption perception index. In the most recent installment, NZ was still near the top, but the country’s score in three of the eight metrics comprising the index fell. In the second of his two-part series, Calvin London looks at some of the challenges New Zealand faces in fighting corruption.

New Zealand has long been held in high international regard when it comes to fighting corruption, and Transparency International’s most recent index bears that out, with NZ tying Finland for second place. But while a second-place tie is hardly something to mourn, New Zealand’s placement represents a drop from the previous year, when the country was tied for first. And while NZ continues to lead the Asia-Pacific region (Singapore is fifth, Hong Kong 12th and Australia 13th), details of the NZ score indicate that anti-corruption progress may have stalled in the country.

Current perception

In a recent survey of bribery and corruption in Australia and New Zealand, 35% of NZ participants reported suffering some form of bribery or corruption in the past five years; 17% in the past 12 months. The survey revealed that 91% perceived bribery and corruption to be a risk to their organization — 76% from the public sector, 66% from the private sector and 67% from nonprofit organizations.

The survey also revealed that only 27% felt their organization had a clear investment in anti-bribery and corruption cultures and that this was still very much underestimated by organizations.

Notable cases in New Zealand

There is little evidence of systemic corruption within NZ, but there are signs that it could be coming and the country could become exploited by sophisticated criminal groups. In 2018, for example, an Auckland police officer was caught selling police information to criminal groups. In 2019, a Ports of Auckland supervisor with African connections helped move a shipping container, believed to have drugs inside it, and was rewarded with $100,000 in a shoebox. In 2021, baggage handlers at Auckland Airport were being used to smuggle drugs into the country. One of the handlers had $250,000 stuffed into the roof cavity of his new home.

Motorcycle gangs have also made a discernible impact on the local drug market, particularly with the level of violence they are willing to use. Their influence, experience and global connections have made NZ a target for larger quantities of drugs and has introduced organized crime to NZ.

Earlier this year, more than $18 million of alleged bribes from a South American corruption scandal were frozen in NZ after police managed to untangle a web of international bank accounts.

A slipping image

NZ’s clean country image portrayed by the 2022 corruption index is starting to crack. Once noted for the integrity of its public service and a judiciary system that kept it at the top of the rankings with a high level of public trust in the government is changing. There is a growing consensus that the risk of corruption in NZ is increasing and that it may be more pervasive than is generally acknowledged. Though numbers remain low overall, the number of bribery- and corruption-related complaints and investigations has increased in recent years.

Recent cases include the manipulation of an Auckland council, abuse of a public leadership position to fraudulently obtain $1.3 million of public funds, corruption and bribery. Residents have long held public workers to a high ethical standard, and the news media is always ready to report on corruption cases if for no other reason than because of their infrequency and novelty. 

In a response to the 2022 ranking of NZ, the Ombudsman noted that the country’s score had declined from 91 to 87 and there had been a gradual decline in three of the eight indices used. 

Times are changing, and the public view of corruption is being marred by the failure of public servants to address other landmark issues. For example, NZ is now near the bottom of the OECD for access to modern medicines, with cancer treatments going unfunded that are widely available elsewhere. Doctor waiting times are now among the worst in the OECD, and emergency room waiting times have further deteriorated, with more than one in five people waiting at least six hours even for urgent treatment. 

The increase in corruption in NZ (albeit small by comparison to other countries) is largely being blamed on the government, fueled by the apparent failure in areas of public concern. Public perception of the ability of the government to protect the country from corruption is diminishing, and some doubt that it has the infrastructure to combat corruption as a result of spending too long in a clean environment.

Not your classic type of corruption

The changing status in NZ resulted in New Zealand’s citizens becoming significantly less trusting of the individuals and bodies that are in place to uphold the law (and keep corruption low or non-existent). The classic forms of corruption associated with Transparency International’s index are still low in NZ, but corruption associated with untrustworthy public servants or dishonest behavior in government are increasing.

University of Auckland associate professor Timothy Kuhner told Newsroom, “If we wanted to invest more money to increase our awareness of corruption, we would find more corruption.” 

For example, policies on political donations have been called into question. The country currently has no limit on individual or corporate donations to political campaigns or political parties, although new legislation (the Electoral Amendment Act 2019) imposes limits on foreign donations.

Like Australia, NZ is one of only four countries where facilitation payments are allowed as an exception in the bribery laws — South Korea and the U.S. being the other two countries. These laws apply only when they are made abroad and, paradoxically, remain illegal in their own domestic laws. The growing international recognition that facilitation payments are nothing more than disguised bribes seems to have been missed in both Australia and NZ. 

International fraud

New Zealand is also becoming a bit player in the market for secretive offshore finance. Official analysis shows at least $1.35 billion of income for money-laundering is generated inside New Zealand each year, but authorities have no idea how much is channeled into or through the country by global fraudsters using New Zealand-registered companies, citing corporate opacity as the problem, making it difficult to obtain adequate and accurate information.

New Zealand’s complicity in international fraud was also exposed by the 2016 Panama Papers, which labeled New Zealand as a tax haven. NZ has also been linked in the multi-billion-dollar Malaysian 1MDB fraud. Foreigners could place assets in trusts that were based in New Zealand but did not have to disclose information about their activities.

A new operating structure

NZ has an established Serious Fraud Office (SFO), and active and passive bribery in the private and public sector are prohibited by the Crimes Act and the Secret Commissions Act. The SFO is the lead law enforcement agency for investigating and prosecuting serious financial crime, including bribery and corruption. In 2020, the SFO reported that it had seen a 40% increase in cases involving public officials and central and local governments in the past five years.

NZ is still a haven for the illicit flow of offshore finance. Funds are channeled through the Pacific Island nation at a rate quite at odds with its clean, ethical global image. 

It has ratified several important international conventions, such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the United Nations convention against corruption but is still recognized as having limited enforcement capabilities in a 2022 Transparency International report. There is also talk about the creation of registers to track ownership and the use of trust funds. 

As previously touched on, NZ has a growing problem with uncontrolled donations (individual or corporate) to political parties and the power of politics over ethical considerations that have already been shown to be a dangerous combination in other countries.

Legislation is complemented by various other measures. A code of conduct sets out the minimum standards of integrity and conduct required of all public servants, but the ongoing challenge is to back up legislation with results if public trust is to be retained.

NZ does not seem to have a good record when it comes to responding to ethically gray areas of public concern. Although the SFO has filed charges in cases involving unlawful political donations, the office also has complained about inadequate funding and that it is struggling to keep pace with the volume of cases. NZ has resisted calls to create an independent anti-corruption agency. The country’s conflict of interest legislation is not up to the standard of most OECD countries, nor does it have laws covering misconduct in public office.

NZ, perhaps because of its long-standing record at the top of the CPI, is slow to act because it still does not believe corruption to be a threat and has adopted a somewhat blasé attitude about the need for greater control. As evidence has shown, corruption like a cancer grows. For NZ, like its Tasman neighbor, it would be prudent to enhance its anti-corruption stance before it’s too late.

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