Stopping fraudsters worthy investment

Otago Daily Times

10-07-2025

Sadly, throughout history, whenever value has been ascribed to anything crime has soon followed.
Our ancestors once had to be wary of cut purses or coin shavers; these days hackers and phishers attack several times a day via spam emails and other nefarious means.
New Zealand has always had enforcement agencies to protect us. Some are obvious and visible, such as police. Others less so, such as those who deal with specialised types of offending like financial crime.
For most it would be unthinkable that police would not pursue criminals because their taxpayer funding had reached its limit.
However, this is a real concern for other enforcement and regulatory bodies, especially those which monitor financial crimes.
In recent years the spotlight has been on the Serious Fraud Office. It has often been claimed that the office takes few prosecutions because it is underfunded and during the 2020 election campaign then National leader Judith Collins pledged to double the SFO budget.
That has not happened since the change of government in 2023, although the government did recently announce additional funding to target foreign bribery.
The focus shifted last week when Financial Markets Authority released its statement of expectations for the coming year, in which the FMA noted that it had overspent its legal budget for the previous year — expenses which it had covered from its dwindling reserves.
"With multiple cases in the pipeline, forecast litigation expenditure for 2025-26 is expected to exceed the annual litigation funding appropriation of $5 million," it warned.
While this might be good news for dodgy accountants and financial advisors, it is bad news for the rest of us.
The FMA plays a critical role in ensuring that New Zealand's financial system runs smoothly. It licences a range of firms and individuals who provide financial services, supervises the sector and acts to prosecute those who try to game the system.
For southerners, the FMA may be fresh in the mind due to its successful prosecution of disgraced Dunedin financial advisor Barry Kloogh, who was imprisoned for stealing $15 million-$18 million from his clients.
Kloogh was recently declined parole, the board saying that despite having served five years behind bars so far Kloogh still lacked insight into what had caused his 25 years of plundering from his clients, and the impact that it had had on them.
Although a relatively straightforward prosecution — some of Kloogh's methods of bilking people who had every right to trust a licensed financial advisor were far from sophisticated — it still took a couple of years before Kloogh's day in court came. Investigators are still working on tracing where some of the money placed, allegedly safely, with Kloogh finally ended up.
Dealing with such crimes takes time and money — and even more so for more elaborate embezzlers than Kloogh. For New Zealanders to have trust in the markets, they need to know that the likes of the SFO and FMA can step up and take action without checking their wallets beforehand.
This need for reassurance is even more necessary as the government makes moves to overhaul New Zealand's Anti-Money Laundering and Countering Financing of Terrorism laws.
Introduced with the best of intentions, to protect innocent people against fraud and malfeasance, they have ended up imposing large costs in terms of both money and staff time on firms — many of them small operations — to ensure that they comply with the rules.
So they should, but the government feels that there needs to be a balance of compliance commensurate to level of risk.
It is a makeable argument, but the Kloogh case is a salient reminder that just one person can cause immense heartbreak for hundreds of others.
Amidst the proposals in the government's consultation document is one that a levy be raised to provide more funds for enforcement services. This is a sensible quid pro quo to any lessening of financial regulations. Should the unintended consequence of any such move be an increase in illegal activity, investigators should be properly resourced to detect and then prosecute criminal activity.
The government also, yesterday, announced an "anti-scam alliance" between the public and private sectors — a promising development.
Ultimately, this is about protecting families and their financial future, and that must be a priority.