By Gareth Vaughan
New Zealand has something akin to a phone directory for financial service providers that was set up to help us meet international anti-money laundering expectations back before we had a specific law in place to do this. The Financial Markets Authority can have companies kicked off this directory if they're deemed to be damaging NZ's integrity and reputation. However these companies, which could be operating anywhere in the world, are allowed to remain as NZ registered companies and continue to peddle financial services overseas.
Make sense? Perhaps not. But as odd as this situation may sound it is reality.
The directory for financial service providers is known as the Financial Service Providers' Register (FSPR). It came out of a 2006 government review of financial products and providers that recommended the introduction of a comprehensive register of financial service providers. Among other things, this was designed to help satisfy NZ’s international obligations under the recommendations of global anti-money laundering overseer the Financial Action Task Force. These required the licencing or registration of all financial institutions to ensure effective monitoring of anti-money laundering and countering terrorist financing obligations. Note this was before the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) came into force in 2013.
Since December 2010 anyone providing a financial service has been required to be registered on the FSPR. There are thousands of genuine registered financial service providers within NZ, both companies and individuals. But being on the FSPR alone doesn't mean an entity is actually licensed or regulated in NZ or anywhere else. And the FSPR has been exploited by overseas interests keen to associate themselves with NZ's good international reputation. They've been able to register on the FSPR for services that don't require licensing such as foreign exchange, or forex, services without pre-vetting by a NZ regulator, and they don't have to offer financial services within NZ.
As the Ministry of Business, Innovation and Employment (MBIE) has put it, "Registration on the FSPR allows [some] firms to misrepresent to overseas customers that they are licensed or actively regulated in New Zealand, and enables them to enjoy a lesser degree of scrutiny overseas than might otherwise be the case. The public often interprets 'registration' on the FSPR to mean that an entity is actively regulated in New Zealand."
Interest.co.nz has written extensively about the problems with the FSPR over recent years. You can see more on this here and here, and more on why we have it and why I think it should be abolished here.
Vivier - free to carry on as if nothing changed
In one case a NZ registered but overseas operating company whose situation a court judgment said ought to ring alarm bells was kicked off the FSPR. But the CEO of this company, removed from the FSPR at the behest of the Financial Markets Authority (FMA), effectively shrugged off the court ruling, saying the company could continue to provide services as in the past, without financial service provider registration.
The company was and is Vivier and Company Ltd, and its CEO at the time of the May 2016 Court of Appeal judgment cited was Luigi Wewege.
Vivier may not have legally been able to call itself a NZ registered financial service provider for the past three years, but it remains a NZ registered company to this day. The Vivier case was the first of four FSPR de-registration cases the FMA has successfully defended in court. However the judgment left NZ companies not registered on the FSPR, such as Vivier, free to continue providing financial services overseas so long as these services aren't provided in NZ.
"...Vivier & Co can continue to provide services as in the past, without FSP [financial service provider] registration," Wewege told interest.co.nz in 2016 following the Court of Appeal judgment.
And, for all intents and purposes, Vivier appears to have continued on its merry way as Wewege's comments to interest.co.nz suggested it would, taking deposits and offering assorted financial services overseas with a website boasting "great deposit rates and no fees."
The screenshot from Vivier's website below, featuring the Auckland skyline, shows the company continuing to associate itself with NZ. It includes the sentence; "New Zealand has been named the most honest country in the world and the best for protecting investors." It's not clear, however, who said this or when it was said.
Vivier describes itself as a boutique financial services firm offering a complete banking package including current accounts, online savings accounts, debit cards, international money transfers, escrow accounts, and multi-currency investment accounts. It says its headquarters are in Auckland, and claims to have offices in Dublin, Paris, Madrid, Milan, Munich, Dubai, Johannesburg, Hong Kong and Shanghai. NZ Companies Office records list Vivier's registered office and address for service as level 13, 92 Albert Street, Auckland Central. At this location a Regus business centre provides office space for hire and virtual office services.
Vivier's website, meanwhile, lists detailed deposit rates offered in the euro, NZ dollar, Swiss franc, Aussie dollar, yen, US dollar, and British pound.
'The loot and the loans' & emails
A 2015 Irish TV report by journalist Conor Ryan of the RTÉ Investigations Unit linked Vivier to tax fraud, money laundering, and English accountant Ian Leaf. Now known as Ian Andrews, Leaf/Andrews was jailed in 2008 for defrauding Britain's Inland Revenue out of more than £50 million. There's more on his background here. Asked by interest.co.nz about the RTE report at the time, Wewege said the programme contained "untrue and defamatory allegations."
Nonetheless the RTE programme, the loot and the loans, remains on RTE's website. And despite having to go to the Court of Appeal to overturn a High Court decision, the FMA succeeded in having Vivier removed from the FSPR in 2016. This was through the use of powers the regulator has had since 2014, through which the FMA can direct the Companies Registrar, currently Ross van der Schyff, to deregister companies from the FSPR. Using these powers the FMA to date has had 85 companies deregistered.
The FMA can direct a deregistration from the FSPR where it believes a company is creating a false or misleading appearance of the extent to which the company provides financial services from a place of business In NZ and the extent to which it is regulated by NZ law In relation to those services, and/or if it's damaging the integrity and reputation of NZ's financial markets and NZ's law and regulatory arrangements for regulating those markets. The FMA getting a company booted off the FSPR doesn't, however, mean the company must surrender its status as a registered NZ company.
Interest.co.nz was recently the recipient, on an unsolicited basis, of a number of Vivier-related emails. Dating from 2016 to 2018, many are from and to Andrews who has been out of prison for some years. Other people featuring in the email chains include Wewege and have Vivier or Consult Partners email addresses. The London-based Consult Partners says it operates "a strong set of businesses in the banking, mortgage lending, collective investment and property sectors." The Andrews email address used is a Consult Partners one with him, on some occasions, making requests and giving instructions.
One email exchange between Andrews and Wewege discusses the FMA court case with Andrews saying the business will continue even if the case goes against Vivier.
Companies Office records currently list Eduardo Goncalves of Auckland and Leonardo Fuentes of Madrid as Vivier's directors. Goncalves is listed as sole shareholder. Wewege, who became a Vivier director in August 2014, stepped down at the end of May 2017. A Wewege website maintains he is now Senior Vice President of Caye International Bank in Belize. He hasn't responded to a request for comment for this story.
Interest.co.nz contacted both Andrews and Goncalves. Andrews declined to answer specific questions about Vivier, simply saying; "Your information is incorrect." Goncalves responded by phone asking for questions to be emailed to him. They were and he's yet to respond. Among other questions we asked both men who Vivier's beneficial owner is.
Vivier's website says it signed a joint venture agreement in September with AC Solutions Group meaning "central management and control" is to be "exercised from Spain." In comments attributed to chief executive officer Leonardo Rodriguez, the note on Vivier's website says "our new majority shareholders are significant players in the energy sector." Nonetheless readers are assured that "services offered, interest rates and other associated benefits will all remain unchanged."
Companies Office says Vivier complying with relevant requirements whilst the FMA has received complaints
The Companies Office comes under the MBIE umbrella. An MBIE spokeswoman says the Companies Office’s Integrity and Enforcement Team has verified the identity and residential address details of Vivier's directors.
"There have been several site visits to the registered office address of Vivier and information was requested from the company to support that Vivier is carrying on business. The Registrar of Companies is satisfied that Vivier is complying with relevant requirements of the Companies Act," the MBIE spokeswoman says.
Meanwhile an FMA spokesman says; “The FMA has received complaints about representations Vivier and Company Limited has made to current and prospective clients regarding its registration status on the FSPR. We’re not able to comment further as complaints are confidential.”
Vivier is not a reporting entity under NZ's AML/CFT Act, meaning it's not supervised for compliance with this Act by any of our three anti-money laundering supervisors; the FMA, the Department of Internal Affairs or the Reserve Bank.
Companies Office records show John David Beckett, or Lord Taylor of Warwick, was a Vivier director between September 3 and November 23, 2014. A member of Britain's House of Lords, he was jailed in 2011 for false expense claims, and disbarred in 2012 for "conduct discreditable to a barrister."
Vivier is certainly not alone in having been removed from the FSPR at the FMA's behest on the one hand, but able to remain as a registered NZ company on the other hand. Of the 85 companies the FMA has had removed from the FSPR, 18 remain as registered NZ companies.
These include FXBTG Financial Ltd, which recently went to the High Court in an unsuccessful attempt to overturn its FSPR deregistration. FXBTG has been the subject of warnings from the Hong Kong Securities and Futures Commission, the Central Bank of Ireland, and Denmark's Financial Supervisory Authority. In his judgment Justice Francis Cooke noted FXBTG's office "is located in the living room of an apartment in Mount Roskill where there is a computer." And the FMA pointed out FXBTG's customers are all overseas, it has only one employee in its NZ office, provides foreign exchange service via an online platform, Meta Trader, which is licenced by a company based in the Bahamas and operated from FXBTG's own server in Hong Kong. Quite the potential for regulatory arbitrage.
Another dumped from the FSPR at the FMA's behest but still a NZ company is Starfish Markets Ltd. Interest.co.nz reported in 2017, after Starfish had been removed from the FSPR, that it claimed daily trading volume of $30 billion, said services were managed from an office in England, and referred to a Vanuatu licence authorising it to deal in securities including foreign exchange and forex trading.
Then there's the registered NZ building society Pacific Eagle Capital, formerly General Equity which was deregistered from the FSPR in 2016. Interest.co.nz first wrote about this overseas operating NZ building society in April 2012. Among other things we highlighted that a General Equity fund claimed to hold almost US$5.5 billion of equity through unnamed mines, gold, silver and granite ore, and that a key figure at General Equity had been banned by the Australian Securities and Investments Commission from managing a corporation for 18 months.
Last year MBIE proposed a series of changes to the 1965 Building Societies Act to tackle the likes of Pacific Eagle Capital which was issued an infringement notice by the FMA in October 2018, and fined $7,500, for failing to file financial statements by its due date. The proposed changes include; all services provided by NZ registered building societies will have to be provided to people living or incorporated in NZ; NZ building societies will be required to have a director either living in NZ or Australia - bringing building society director rules in line with those of NZ companies; building societies must primarily be in the business of advancing loans to members that are secured over residential property in NZ, and; all members of a building society are living or incorporated in NZ and are not related parties.
An MBIE spokesman says its intention is to include these changes in the next Regulatory Systems Bill.
"These are omnibus bills that propose amendments to a number of Acts administered by MBIE. All going well, this Bill will be introduced into Parliament in the second quarter of 2020," the MBIE spokesman says.
'You're pushing your luck pal'
Then there's Breder Suasso. Interest.co.nz first wrote about Breder Suasso in September 2015 noting it was a NZ registered financial service provider that tells potential clients of NZ bankrupts who still live in mansions and drive Ferraris owned by their trusts. Breder Suasso featured in another three or four interest.co.nz stories during 2015. Some months later we were contacted by an overseas reader asking what had happened to these stories. Although the stories were still published, all mention of Breder Suasso had been removed from them. This was not done by interest.co.nz. We put back the missing stories, or in one case the single line mentioning Breder Suasso that had been removed. We also informed the FMA about what had happened and subsequently our website security was tightened.
In August 2017 Breder Suasso was deregistered from the FSPR at the FMA's behest, with the regulator deeming its registration to have, or be likely to have, the effect of creating a false or misleading impression to investors that the business provides financial services in NZ and is regulated under NZ law.
Late last year interest.co.nz was contacted by a representative of a European accounting firm who had seen our Breder Suasso stories. He said he was trying to recover tens of thousands of euros deposited with Breder Suasso by the firm on behalf of clients. The accounting firm had been trying to contact Breder Suasso representatives for six months to get the money back to no avail, he said.
At the time Breder Suasso was also using the Regus business centre on Albert Street as its registered office. Interest.co.nz visited late last year and was told by a Regus employee the firm had locked Breder Suasso out in November 2018 because it had defaulted on payment, and failed to provide anti-money laundering documentation. Interest.co.nz also attempted to contact Breder Suasso's NZ-based director, David Paul Daniel. This involved twice visiting the Auckland address he had provided to the Companies Office. With no one home we left letters explaining the situation and asking Daniel to get in touch.
In March, after the second visit, a message from an unidentified caller and an untraceable phone number was left on my phone.
"...stop leaving stupid letters in my house and stop talking to other people that are none of your business. You're pushing your luck pal," the message said.
The European accounting firm's representative contacted a NZ lawyer about pursuing the money said to be owed by Breder Suasso through legal channels, but ultimately decided not to.
Breder Suasso was removed from the Companies Register in January this year with MBIE saying this was because van der Schyff had reasonable grounds to believe it had ceased to carry on business; and there was no other reason for the company to continue in existence.
'Damage to the integrity & reputation of NZ's financial markets & NZ's law and regulatory arrangements is not a ground under the Companies Act to initiate removal of a company'
Interest.co.nz asked MBIE; If a company is kicked off NZ's FSPR because our regulators deem it to be damaging the integrity and reputation of NZ's financial markets, should this company be able to remain a NZ registered company?
In response MBIE says; "The deregistration of a financial service provider that is a company, regardless of the reason for the deregistration, does not affect the company’s registration as a company under the Companies Act 1993. The grounds for removing a company from the Companies Register are set out in section 318 of the Companies Act. Damage to the 'integrity and reputation of New Zealand's financial markets and New Zealand's law and regulatory arrangements for regulating those markets' is not a ground under the Companies Act to initiate removal of a company."
Whilst an FMA spokesman says the FMA can't comment because this is a policy question for the Government, interest.co.nz put some questions to Commerce and Consumer Affairs Minister Kris Faafoi. In particular, we asked Faafoi, does he think it would be useful, in order to protect the reputation and integrity of NZ companies, to change the Companies Act so that companies removed from the FSPR would also automatically be removed from the Companies Register?
A spokesman for Faafoi says deregistration of a company means it ceases to exist, potentially having adverse implications for unsecured creditors of the company.
"In order to be paid, the creditor may be forced to seek legal advice with a view to having the company reinstated."
"The Companies Office does conduct follow-up visits with companies that have been deregistered as financial service providers. Some such companies have also been removed from the companies register on the basis that they are not carrying on business or are not complying with their other Companies Act obligations," Faafoi's spokesman says.
"There are no plans to amend the Companies Act to make deregistration of the company automatic as a consequence of deregistration as an FSP, given the potential harm to creditors and other third parties who have dealt with the company in good faith."
Asia Finance Corporation is a former registered NZ financial service provider that contributed to a trail of destruction for thousands of investors from Europe to Taiwan. It was booted off the FSPR at the FMA's behest in 2015. It was subsequently liquidated on the petition of a Marshall Islands company, with the identity of this company's shareholders and directors not even known by the liquidator himself. The liquidator then questioned whether four of seven creditors to file proofs of debt actually existed. Ultimately six creditors shared $368,000, the liquidator got $72,569 and lawyers $39,126 for their troubles. Asia Finance Corporation was recently deregistered as a company.
Overseas operating NZ companies kicked off the FSPR at the FMA's behest tend not to be normal companies. Perhaps NZ authorities ought to establish a special statutory management scenario for companies removed from the FSPR at the FMA's behest as they strive to clean up the FSPR.
Under law changes due to come into force in mid-2020 following the passing of the Financial Services Legislation Amendment Act, van der Schyff will be able to deregister from the FSPR any entities that only have overseas customers, unless the provider is required to be licensed or registered by another Act, or the provider is a reporting entity to which the AML/CFT Act applies.
MBIE also plans to seek Cabinet approval for policy proposals that aim to improve the transparency of the beneficial ownership of NZ companies and limited partnerships, but not trusts. MBIE notes criminals can obscure the true ownership of a corporate entity using a web of intermediaries and different business structures based in multiple jurisdictions. Such complex ownership structures can be used to enable money laundering, terrorism financing, drugs or arms trafficking, tax evasion and to hide assets, MBIE says.
*This article was first published in our email for paying subscribers. See here for more details and how to subscribe.