Foreign trust rules 'must change for the sake of NZ's reputation', official inquiry finds

New Zealand's foreign trust rules are inadequate and must change, a Government-ordered inquiry has found.

ONE News, RNZ and Nicky Hager have led reporting of the Panama Papers in NZ Source: 1 NEWS

The inquiry was ordered after reporting of the Panama Papers led to accusations foreign trusts in New Zealand are being used to hide dodgy money and avoid tax.

John Shewan's inquiry into Foreign Trust Disclosure Rules, released this afternoon, finds the rules are "not fit for purpose in the context of preserving New Zealand's reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practices".

Mr Shewan says the initial registration requirements for Foreign Trusts must be strengthened, and regulatory agencies allowed to search the register.

It also says foreign trusts should be required to file an annual return, including their financial statements and details of distributions.

ONE News, along with RNZ and Nicky Hager, have led the reporting on this issue over the past two months after working with the Consortium of Investigative Journalists on the Panama Papers.

The inquiry did not find evidence of inadequate compliance or enforcement.

"However, the inquiry does not consider the mere existence of these regimes is a sufficient basis to conclude that foreign trusts are not used or able to be used for illicit purposes such as hiding funds or evading or avoiding tax."

Finance Minister Bill English says the Government will look to implement the recommendations after officials have examined the inquiry in detail and reported back to ministers.

A formal response will come in the next few weeks.

Changes to money laundering rules are also being recommended.