This is the process of applying for bankruptcy in New Zealand
Petition mills – This scheme revolves around keeping an individual from being evicted from his or her dwelling.Multiple filings – filing for bankruptcy is different states by utilizing true personal identifiersFalse statement - omiting property, debt or income from an official form required in a bankruptcy caseTrustee fraud -
Bankruptcy court – bankruptcy judges hear the cases involving debtors and creditors rights and conduct hearing and trials to resolve disputes.U.S Trustee - They are responsible to administer the bankruptcy cases, appoint trustees, examiners and committesCourt-appointed or panel trustee are usually individuals or firms, such as accountants or lawyers, who identify and collect debtors assets and then allocate those assets to creditorsExaminers – generally appointed by a bankruptcy judge to investigate allegations of fraudDebtor – the person or entity who is the subject of the filingCreditors – the one who holds a valid claim against the debtorAdjusters – assist the trustee by performing such duties as securing business facilities and assets.
If the perpetrators go off without filing for bankruptcy, the unpaid lenders and suppliers may file an involuntary bankruptcy against the company.In that case, the lenders and suppliers may find few or no assets left in the company with which to pay off the company debts.
Here are some of the indicators of bust-out schemes.
Here are some indicators of concealment
It involves three steps:Placement - the launderer inserts “dirty money” into a legitimate financial insitution. This usually involves making cash deposits to a bank. This is quite risky as large cash deposits raise red flags. Banks are also required to report on details regarding large cash transactions to the government.The Layering stage is the most complex stage. The purpose of this stage is to make the dirty money difficult to trace. This involves conducting various financial transactions to make it difficult to follow the funds.The Integration stage – the money re enters the economy in a form that appears to come from a legal transaction. This involves the sale of other assets bought during the layering stage
Here are some red flags that may indicate money laundering.
Chapter 16 B Artika
Bankruptcy is the legal process that allows a
debtor to work out an orderly plan to settle
debts or liquidates a debtor’s assets and
distributes them to creditors.
(Albrecht, Albercht, Albercht & Zimbelman,
To enter into a bankruptcy an individuals
total debt needs to be more than $1000.
The usual term of the for the bankruptcy is
three years but has been extended in some
(Ministry of Economic Development, 2013)
Section 7 states the nature of the
Bankruptcy affects the legal status of a
person and has important consequences.
(a) the bankrupt's property vests in the
(b) the bankrupt is limited in the business
activities he or she can undertake:
(c) the Official Assignee may be entitled to
recover assets that the bankrupt has
transferred before bankruptcy
What is bankruptcy fraud?
There are four forms of bankruptcy fraud.
When debtors conceal assets to avoid having
to forfeit them.
Individuals intentionally files false or
Individuals file multiple times using either
false information or real information in
It involves bribing a court-appointed trustee.
(Legal Information Institue, 2013)
The monies that are defrauded from a
bankruptcy never reaches the pockets of
deserving creditors and investors.
There is a consequence of bankruptcy fraud.
As it occurs more frequently, creditors and
investors lose faith that their interest will be
This loss of faith has a ripple effect in the
Tightening of credit
Raising interest rate
Subsequent economic reactions
A debtor who files several bankruptcies in
two or more states lists nearly identical
assets and liabilities in each filing.
The debtor becomes discharged from the
If the debtor fears of getting caught, then
the debtor travels to another state and files
for another bankruptcy.
Conceal property of a debtor’s estate from
Make a false oath or account in a bankruptcy
Make a false declaration, certification,
verification or statement – omitting property
from an official form required in a
Present a false proof of claim against the
This applies to anyone engaged by a court
officer to perform a service for a debtor’s
The statute makes it crime for such persons
to ―knowingly and fraudulently appropriate
to [their] own use, embezzle, spend, or
transfer‖ any property or hide or destroy any
documents belonging to the debtor’s estate.
It involves intentionally obtaining loans or
purchasing inventory on a credit basis and
concealing the proceeds from the loan or
sale of inventory.
Insolvency is declared and bankruptcy is
The creditors are unable to find assets which
can be used to pay them.
If the scam works the perpetrators retain the
cash proceeds but escape the liability for the
A bust-out may involve setting up a new
Fraud perpetrators set up and operate the
new company legitimately for a while in
order to establish credibility.
The new company may take a name similar
of an existing company due to the reputation
of that company.
The scam company may also submit
intentionally misstated financial statements
to the suppliers or the creditors.
This is to inflates its financial position and
The second type of bust-out:
The perpetrators quietly buy an established
company that already has a good reputation
and credit rating.
The perpetrators rely on the established
credit rating to get credit from suppliers and
loans from bank.
The perpetrators buy large amounts of
inventory on credit from numerous suppliers
At first, the perpetrators pay the suppliers
promptly in order to build up their credit
Then, the perpetrators buy larger and larger
amounts of inventory on credit and
eventually stop paying creditors.
They stock-pile the inventory.
They either conceal the inventory for a sale
in another location or secretly liquidate it at
The perpetrators can either claim insolvency
and file for bankruptcy or simply close up the
shop without filing for bankruptcy.
The company will appear to be insolvent
because the sales of inventory at bargain or
liquidation prices reduced profits and cash
The intent is to make a company insolvent
and to file bankruptcy in a scheme to
A bust-out is difficult to detect.
If a company claims insolvency and files for
bankruptcy, creditors may find it difficult to
determine that insolvency was deliberately
taken for the purpose of perpetuating fraud.
A company’s only listed address and phone
number are a post office box and an
A new company is owned and managed by
persons from another state.
A sudden change is made in a company’s
management especially if the change is made
without public notice.
The inventory is suddenly deleted, without
Some ways in which assets or income can be
Payments may be made to fictitious
individuals or vendors and the amounts are
diverted to the debtor.
Sales may not be reported in the debtor
company’s books, instead the sales proceeds
Inventory may be shipped to an off-site
location or sold to a related party.
Cash received in payment of receivables may
be diverted to another entity.
Assets or income may be shifted to another
entity controlled by the debtor.
Transfers of property or large payments to
related parties or individuals.
Unusual or rapid reductions in assets.
Missing, inaccurate, or damage records.
Unusually large and unexplainable payments
The phrase ―money laundering‖ implies that
money which is ―dirty‖ because it was
generated illegally is ―laundered‖, or made
to appear that it came from legitimate
(Albrecht, Albercht, Albercht & Zimbelman,
Purchasing large assets or paying periodic
expenses with cash.
Using a post office box or general delivery
address instead of a home address when
dealing with contracts.
Owning expensive assets without legitimate
means of being able to afford them.
This Act came into force on 30 June 2013
The Act places obligations on New Zealand’s
financial institutions and casinos to detect
and deter money laundering and terrorism
The Act will ensure that businesses take
appropriate measures to guard against
money laundering and terrorism financing.
(Department of Internal affairs, 2013)
The agencies that will supervise the new
The Reserve Bank - supervises banks, life
insurers, and non-bank deposit takers.
The FMA - supervises issuers of securities,
trustee companies, futures dealers,
collective investment schemes, brokers, and
The Department of Internal Affairs -
supervises casinos, non-deposit taking
lenders, money changers, money remitters,
payroll remitters, debt collectors, factors,
The Ministry of Justice - responsible for
drafting and administering the AML/CFT Act
(Department of Internal affairs, 2013)