PNG money laundering: consequences of greylist will be severe

“PNG still falls short of meeting international standards for combating Anti-Money Laundering (AML), terrorism related activities and faces being greylisted a second time,” according to Financial Analysis Supervision Unit Director Wilson Onea.

By ANGELA VAVAR

PORT MORESBY : PAPUA New Guinea is not implementing laws and policies at a level commensurate with Anti money laundering risks and counter terrorism financing risks, says a bank official.

 The Financial Action Task Force (FATF) sets standards for combating Anti-Money Laundering and Countering The Financing (CTF) of Terrorism (AML/CTF) that it expects all countries to meet, including PNG. FATF is an intergovernmental body responsible for that purpose.

“The consequences of the grey list will be severe for the PNG economy. If PNG is greylisted, it will reduce investment opportunities and impact correspondent banking relations, which includes de-risking correspondent banking relationships in PNG and offshore, such as restricting Western Union transactions.

“During this time, PNG will be given an Action Plan by FATF which it will need to show progress against. PNG will need to regularly report to the FATF on its progress against that plan and there will be significant pressure from the FATF and the international community on PNG to demonstrate progress,” he said. In 2010, PNG underwent its first mutual evaluation, an assessment of its technical compliance with the FATF standards. The 2010 evaluation revealed significant deficiencies in this area.

In 2014, due to significant and continuing technical deficiencies, PNG was placed on the list of jurisdictions under increased monitoring which is categorized as grey list. PNG responded to the grey-listing by undertaking the following reforms:

• establishment of the National Coordinating Committee (NCC) on AML/CTF;
• enactment of five suites of AML/CTF laws;
• establishment and operationalizing the Financial Analysis and Supervision Unit (FASU) as the Financial Intelligence Unit (FIU) within the Bank of Papua New Guinea; and
• abolishment of the Sanctions Secretariat within the Department of Prime Minister and National Executive Council.

The above achievements were key in FATF de-listing PNG from the grey list in February 2016. PNG underwent its second mutual evaluation in 2023-2024, with the final Mutual Evaluation Report (MER) being adopted in September 2024. Unlike the first evaluation in 2010, this evaluation focused on both the Technical Compliance and Effectiveness of PNG’s AML/CTF system.

Technical Compliance relates to whether or not PNG has introduced relevant laws, policies, and institutional frameworks to address AML/CTF/CPF and the effectiveness relates to how well those laws, policies, and institutional frameworks have been implemented.

Justice Department Secretary and NCC Co-chair Eric Kwa said “the issue arising is that there are a range of criteria within the FATF Standards where PNG is either non-compliant or only partially compliant.

“Although PNG has relevant laws, policies, and institutional frameworks, their implementation is minimal. This does not mean that PNG is not implementing the laws and policies. Instead, PNG is not implementing these laws and policies at a level commensurate with its AML/Counter Terrorism Finance risks. These shortcomings mean that it is highly likely that PNG will be again placed on the FATF grey list.

“PNG is currently in a 12-month Observation Period which ends in October 2025. During this time, PNG has the opportunity to show significant progress in responding to recommended actions from the MER and PNG may avoid the grey list,” he said.

However, due to the significant steps that PNG needs to take to meet the FATF standards and demonstrate the effectiveness of its efforts, it is expected that PNG will be greylisted.

“This work cannot be completed within the 12-month period; it will take sustained effort from all PNG agencies involved beyond 2025,” he said. (ENDS)