minister responsible<\/a> for tackling organised crime, police have identified \u201chundreds of millions of dollars\u201d moving through shell company structures.<\/p>\n\u201cThe true scale is likely to be higher.\u201d<\/p>\n
The briefing, delivered in August, states that the multi-agency working group is \u201cprogressing 42 activities\u201d across enforcement, intelligence, tax, immigration, employment, and company director settings to address this significant issue.<\/p>\n
The sections labelled \u201cregulatory and reputational risks\u201d and \u201crisks and sensitivities\u201d have been redacted from the report released under the Official Information Act.<\/p>\n
Mitchell and Costello were not asked to take any action at this stage.<\/p>\n
But a report by a panel of experts advising the Government on how to tackle organised crime has previously recommended that \u201chigh-risk\u201d industries like construction and horticulture should be banned from paying wages in cash.<\/p>\n
The advice was set out in a report to Costello in May last year which explained how weaknesses in the financial system were exploited to shift criminal profits overseas.<\/p>\n
While most legitimate businesses in New Zealand prefer to make digital payments, cash is crucial to the criminal economy because it provides anonymity.<\/p>\n
The sales of drugs, firearms and stolen property were conducted on the black market with cash, along with crimes linked to migrant exploitation and tax evasion, which made it difficult to monitor.<\/p>\n
\u201cIn a perfect world, removing cash from the economy completely would have the greatest impact on organised crime,\u201d the ministerial advisory group wrote to Costello.<\/p>\n
\u201cBut we recognise this is not realistic at this time and New Zealanders should be assured of their ability to use cash for lawful purposes.\u201d<\/p>\n
The expert panel, chaired by senior prosecutor Steve Symon, pointed to Sweden as a country that had introduced policies to reduce the prevalence of physical cash over time.<\/p>\n
Another example is France, where monthly salaries in excess of $2800 must be paid through the banking system. In Italy, the payment of wages in cash is prohibited.<\/p>\n
Similar measures could be introduced in New Zealand, the advisory group wrote, including a mandate for electronic wages payments in \u201chigh-risk\u201d industries such as construction, hospitality and agriculture.<\/p>\n
\u201cPayment of wages with cash is common in a range of industries \u2013 usually increasing the risks of tax evasion and exploitation of migrants and other vulnerable workers,\u201d the panel wrote.<\/p>\n
\u201cNumerous countries have introduced statutory requirements to ensure that wage payments are made through verifiable, electronic means, to enhance compliance and combat financial misconduct.\u201d<\/p>\n
In a recent interview with the Herald, Costello said she thought the idea had merit and would put it on the agenda of the chief executive board, recently established to support her new ministerial role.<\/p>\n
She floated the idea of making electronic payments for wages mandatory as part of the compliance conditions of any contract, especially for procurement in any publicly funded projects.<\/p>\n
Similar clauses could be introduced to ensure no exploited migrants worked on the construction sites, which puts the onus back on the industry to ensure the integrity of its labour supply chain.<\/p>\n
\u201cI think it is workable,\u201d Costello said.<\/p>\n
While the scale of cash wages money-laundering was \u201cstaggering\u201d, the NZ First MP \u2013 who has a background in investigating labour exploitation \u2013 said there was a human cost beyond the obvious crime.<\/p>\n
\u201cIt\u2019s not just about the money,\u201d Costello said. \u201cIt\u2019s about the anti-competitive nature of this.\u201d<\/p>\n
According to the Operation Scuba presentation to the construction industry, subcontractors paying cash wages (avoiding tax and other associated employer costs) could charge out labourers at $30 an hour and still break even.<\/p>\n
This means they can undercut their law-abiding competitors who would have to charge around $50 an hour.<\/p>\n
\u201cGood, safe operators that have been employing New Zealanders for decades cannot compete with businesses using exploited labour. It\u2019s driving legitimate businesses into the ground,\u201d Costello said.<\/p>\n
\u201cIn the meantime, we have these vulnerable workforces that are being treated poorly.\u201d<\/p>\n
Construction industry responds<\/p>\n
![\"The]()
The construction industry is working together to tighten the integry of the labour supply chain after being briefed on cash wages money laundering, says Master Builders chief executive Ankit Sharma. Photo \/ NZME<\/p>\n
Since first being briefed by police and MBIE in December, Ankit Sharma, the chief executive of Master Builders, said his members \u201cmoved quickly\u201d to reduce the risks posed by cash wages money-laundering.<\/p>\n
\u201cThe vast majority of our members operate legally and ethically, and they are equally concerned about activity that puts workers at risk and allows dishonest operators to undercut legitimate builders and tradespeople who meet their tax and employment obligations,\u201d Sharma said.<\/p>\n
\u201cIn the immediate term, members are reinforcing checks before awarding work, setting clear requirements around further subcontracting, and strengthening verification of who is working on their sites and who employs them.<\/p>\n
\u201cAuditing and confidential channels for workers to raise concerns can also help identify warning signs early and reduce opportunities for criminal activity to become embedded within otherwise legitimate projects.\u201d<\/p>\n
Master Builders is also working on a permanent response to address the problem.<\/p>\n
Sharma said his organisation\u2019s Vertical Construction Leaders Group, made up of chief executives from major commercial firms, was working with Site Safe to develop a supply chain integrity framework.<\/p>\n
\u201cThe framework will build on existing systems to strengthen checks on businesses and workers, improve visibility of subcontracting arrangements and provide greater assurance across construction supply chains,\u201d Sharma said.<\/p>\n
A pilot is planned to start in the next financial quarter.<\/p>\n
\u201cFor builders, the key is to know who you are doing business with and who is working on your sites,\u201d Sharma said.<\/p>\n
\u201cThat means checking the businesses they engage, requiring transparency around further subcontracting, and maintaining accurate records of workers and payments. Those checks should continue throughout a project, rather than simply being undertaken when the subcontractor is appointed.\u201d<\/p>\n
Jared Savage covers crime and justice issues, with a particular interest in organised crime. He joined the Herald in 2006 and has won a dozen journalism awards in that time, including twice being named Reporter of the Year. He is also the author of Gangland, Gangster\u2019s Paradise and Underworld.<\/p>\n","protected":false},"excerpt":{"rendered":"The subcontractor then invoices the construction project for the labour services provided, with the subsequent payment made into…\n","protected":false},"author":2,"featured_media":618769,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[74,674,138,10166,304686,1568,6147,129428,12474,3401,23966,50326,1872,63975,266,48879,24176,2454,55143,232,6721,45076,177903,26477,8219,120,4380,300,78837,2686,111,139,69,1118,15290,31425,675,9324,184922,766,98897,242781,1109,21533,304688,6211,17178,165,210,28066,17293,203027,304687,58922,26697,1455,6123,2963],"class_list":["post-618768","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-after","tag-building","tag-business","tag-businesses","tag-cashpaid","tag-construction","tag-crime","tag-dodge","tag-dollars","tag-drug","tag-enough","tag-exploiting","tag-face","tag-gangs","tag-government","tag-greater","tag-hundreds","tag-industry","tag-jared","tag-jobs","tag-labour","tag-launder","tag-laundered","tag-leaders","tag-legitimate","tag-likely","tag-millions","tag-money","tag-moneylaundering","tag-moving","tag-new-zealand","tag-newzealand","tag-nz","tag-of","tag-operators","tag-organised","tag-police","tag-profits","tag-reckoning","tag-reports","tag-robust","tag-savage","tag-scale","tag-simply","tag-subcontractors","tag-system","tag-systems","tag-their","tag-through","tag-true","tag-uncovered","tag-undercut","tag-unscrupulous","tag-via","tag-warn","tag-warning","tag-while","tag-zealands"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/618768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=618768"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/618768\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/618769"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=618768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=618768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=618768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}