Companies Office deregisters a swag of financial service providers as yet more offshore entities take advantage of NZ's simple company registration rules

Companies Office deregisters a swag of financial service providers as yet more offshore entities take advantage of NZ's simple company registration rules

By Denise McNabb

The Registrar of Companies has deregistered 151 financial service providers and advisers in the last two months for failing to meet the provisions of the Financial Services Providers (Registration and Dispute Resolution) Act 2008.

The move comes in the wake of adverse publicity about some overseas companies registering in New Zealand to offer financial services - effectively pseudo banks - for offshore clients, at what transpires to be little more that mailbox addresses with pop-up management.

Deregistration is done under the act when FSPs are no longer qualified, are not in the business of providing financial services, make a false or misleading representation or cannot pay fees.

Some of those struck off include New Zealand Savings & Loan and Panamanian-registered entity Trillion Private Wealth Management, companies that have been under media scrutiny in New Zealand and overseas for what appeared to be questionable operations. As of yesterday, however, their business websites, along with others on the deregistration list were still active.

Peace of mind

The Financial Services Providers register was set up under the Companies Office umbrella 18 months ago to give investors peace of mind by making financial providers and advisers engage via a disputes resolutions company and be subjected to stringent criteria. It followed the cataclysmic collapse of a slew of New Zealand finance companies since 2006.

But as fast as these companies are being struck off operators calling themselves specialist brokers and international consultants are appearing in New Zealand and countries overseas such as Greece and Britain, touting their services to set up FSP’s in New Zealand. They claim it takes just “two easy steps” and have the advantage of operating outside the Securities Act when clients are offshore.

The World Bank and International Finance Corporation rank New Zealand the easiest, of 183 countries surveyed, in which to start a business, pointing out a company can be registered by the Companies Office in just a day. The Companies Office itself notes "starting a company online (incorporating) is as simple as reserving your company name (NZ$10.22), completing the incorporation application (NZ$153.33) and returning your signed consent forms."

But despite numerous New Zealand registered companies abusing this simple registration process by committing crimes and/or being involved in dubious behaviour overseas, the Government has no plans to make company registration more difficult.

Greek-based 'banking services package' skirts NZ law

As Greek-based international law and tax adviser Global Money Consultants (GMC) explains on its website: “A financial service provider that offers financial services using a New Zealand-based company and all its clients are based outside New Zealand, the FSP then will operate outside the geographical scope of Part II of the Securities Act 1978 and it will not be subject to regulation by the Reserve Bank as a non-bank deposit taker.”

GMC says this means no need for prospectus and other compliance measures that FSP’s offering services in New Zealand have to comply with.

Though FSPs are not banks and are forbidden from being promoted as such, GMC brazenly calls its services to set up an FSP for a client in New Zealand a “banking service package.”

For $US115,000 the package will cover all the application paperwork, office space, furniture, a manager and secretary in Auckland for three months, legal agreements, a SWIFT number, a website and secure hosting.

Various fees for setting up FSP in New Zealand are around $1600. A new $350 levy will be charged on top of that by the Financial Markets Authority from August 1 to cover its regulatory role.

NZ & the tax havens

GMC lists New Zealand FSPs alongside offshore banking jurisdictions such as the Cayman Islands, Vanuatu, Panama, the Cook Islands, Switzerland and other countries that are generally viewed as tax havens.

NIS.DEV, touting itself as a broker company owned by a UK financial group with 75 years of financial and banking services with offices in London and Auckland, has set up www.newzealandfsp.com specifically to offer clients one-stop shop services to set up FSP’s in New Zealand.

It claims there are nearly 1900 FSPs with almost 1200 owned by New Zealanders for domestic loans and credit services, suggesting 700 foreign FSPs are operating in New Zealand, before the deregistrations.

Those FSPs struck off are a mix of advisers and providers with foreign and New Zealand domiciled directors and shareholders. A couple of providers have gone into liquidation.

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What do you have to do to open a bank account in New Zealand?
What documentation is required?
 
Is the formation of a registered NZ domiciled company simply a means to obtain the bona-fides to open a New Zealand Bank Account?
Once the account is opened it can be used legitimately to transfer foreign currency in and out of the country. No problem.
 
Question is - what happens to the bank account when the Companies Office de-registers the company?

There clearly needs to be some process put in place to verify these companies are bona-fide and no being opened by offshore parties to simply launder money etc.

John Key's much-touted financial hub is already here.