It’s Mayday, and so a good time to write. Not much happens here in New Zealand, unlike offshore. But a few things have happened recently in the tax haven and AML situation, with the regulators actually enforcing the rules. But before referring to that, a comment on the media, and it’s handling of a story derived from the Panama Papers.
Last week both publicly owned broadcasters, TVNZ and RNZ, published a brief apology on their websites to Akezhan Kazhegeldin. Kazhegeldin is a former Prime Minister in Kazakhstan who was mentioned in one of the stories that emerged from the Panama Papers in 2016, that RNZ and some TVNZ staff had access to via Nicky Hager. The particular story has been removed from official websites but can still be found on-line. It implied that Kazhegeldin had used New Zealand trusts, and companies set up in the British Virgin Islands, for the investment of his wealth into London properties. And it showed that constructing stories based on public figures, who happen to have used the offshore industry, was easy at the time, but the story needed an actual AML angle.
The rather terse apologies simply state that Kazhegeldin had provided documentation that proved that these property investments, handled by his daughter, Dianna Battaglia, were all above board. Hence he wasn’t the typical kleptocrat from Kazakhstan, but was being falsely accused of money laundering. Kazhegeldin, or his daughter, were involved with the Cone Marshall firm in Auckland, whose New Zealand Trust Corporation acted as trustee for a Venezuelan Trust, and Zarek Investments Ltd in the British Virgin Islands. The original story simply referred to the doubts that Mossack Fonseca had about politically exposed people from Kazakhstan, given that Battaglia had used exactly the same method of London property investment as her father’s arch rival, the longstanding president of Kazakhstan, Nazarbayev.
So did the New Zealand media have to cave in, given what we already knew about Mr Kazhegeldin? In a lengthy article in the New York Times from 2006, entitled ‘Oil, Cash & Corruption’, Ron Stodghill laid out the links between Kazhegeldin and some American operatives. It seems that Kazhegeldin was similar to the other oligarchs emerging from the post-Soviet state, he even trained with the KGB. Although he made his fortune in chemical fertilizer exports, Kazhegeldin was investigated over oil trading, even if this was connected to his presidential challenge against Nazarbayev in 1999. Kazakhstan obviously has a lot of oil, but is favoured by Washington, unlike Venezuela. And the fact that Kazhegeldin has remained a vocal critic of Nazarbayev suggests protection.
I had referred to some other links between Kazakhstan and Cone Marshall in the post titled ‘Strange Brew’. And in the post titled ‘Great Danes?’, I also wrote about the activities of two other Auckland-based trust companies, Equinor Trust and Denton Morrell. It seems that Denton Morrell has now received a formal warning from the Department of Internal Affairs, for not complying with the new AML/CFT Act requirements. In particular, the regulators state that it has failed to ensure due diligence concerning its offshore clients transactions, and has not implemented the AML/CFT programme it should have, though it has not actually been accused of facilitating money laundering. This is the third formal warning, apparently, but the previous offender, Equity Trust International, was struck off before it could implement an AML programme. Denton Morrell came under further scrutiny because it was linked to cases first exposed by Daphne Caruana Galizia, and pursued by Nicky Hager in 2018 for RNZ, related to the Azerbaijan government.