Countries/Jurisdictions of Primary Concern - Papua New Guinea
Papua New Guinea (PNG) is not considered a major financial center. It has a relatively stable banking system closely integrated with the financial systems of Australia and New Zealand. Smuggling and public corruption are problems in PNG.
Corruption is one of the main sources of illegal proceeds, especially related to misappropriation of public funds linked to the extraction industries, related licensing procedures, and through fraudulent compensation claims. The risk of domestic corruption is likely to be enhanced as PNG’s rapid economic growth continues, fueled by large scale foreign investment in the mining and petroleum sectors. Corruption is also a serious issue in party politics. Misappropriation of government funds occurs via government payments which, according to the authorities, are generally placed through the banking sector and used to purchase real estate or high-value vehicles, distributed in cash, or moved offshore.
The techniques to launder proceeds from other large-scale crimes in PNG, such as illegal logging, arms trafficking, and fraud are less clear. Transshipment of drugs and other illegal goods en route to Australia is an emerging risk. The financial intelligence unit (FIU) reports that criminals are increasingly using corporate entities to hide funds and move them offshore. Limited PNG capacity in border control and the presence of organized criminal groups pose significant risks for money laundering. PNG relies on assistance from Australia to deter illegal cross-border activities, primarily from Indonesia, including illegal narcotics trafficking.
In PNG, the financial sector is small and provides little reach to the very large informal, rural, and self-employed segments of the population. Approximately 85 percent of the adult population lacks access to the formal sector. The financial sector is in development and trying to increase its outreach to rural areas.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, finance companies, savings and loans, and microfinance entities; superannuation funds; insurance and securities companies; gambling houses, casinos, and lotteries; lawyers and accountants; dealers of precious metals and stones; real estate agents; and money changers and remitters
Number of STRs received and time frame: Not available
Number of CTRs received and time frame: Not available
STR covered entities: Banks, finance companies, savings and loans, and microfinance entities; superannuation funds; gambling houses, casinos, and lotteries; investment managers and insurance companies; real estate agents; dealers in precious metals and stones; money exchanges and remitters; lawyers; and accountants
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 0 in 2012
Convictions: 0 in 2012
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Papua New Guinea is a member of the Asia/Pacific Group on Money Laundering, a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.apgml.org/members-and-observers/members/details.aspx?m=3f87fdab-7836-49ec-85de-62ceb17b97f1
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Papua New Guinea’s FIU believes close to half of the PNG budget is lost to fraud and laundered through the country’s banks. There is little attempt to hide the source of the funds because of the low perceived risk of penalty. The FIU has adopted a proactive approach to combating this activity, focusing its efforts on crime prevention using financial intelligence. As part of this program, the FIU has issued new guidelines on government checks and payments to prevent criminals from being able to process government payments at financial institutions. The FIU claims it is inadequately staffed and resourced to fully address money laundering in PNG. The Government of Papua New Guinea should continue to build the capacity of the FIU.
There appears to be no clear political-level commitment to ‘follow the money’ to tackle corruption and other crimes, and no demonstrated commitment by financial sector regulators to regulate and supervise AML obligations, which severely hampers the authorities’ ability to tackle financial aspects of corruption. The ease with which allegedly corrupt PNG officials and businessmen can transfer money to Australia is becoming an increasing concern for law enforcement officials in both countries. The government has had difficulties recovering stolen government funds in Australian bank accounts or invested in Australian real estate. The government should ensure the FIU, police, customs, and the National Fraud and Anti-Corruption Directorate are sufficiently resourced to be able to gather data and evidence, mount investigations, and bring charges.
Legislatively, authorities should criminalize terrorism financing, and the Ministry of Foreign Affairs and implementing agencies should develop and implement policies and procedures to implement the relevant UNSCRs. The government also should establish a legislative framework to ensure the immediate freezing of funds belonging to persons or entities designated under UNSCR 1267 and to ensure that lists of persons and entities so designated are distributed among financial institutions. PNG also should develop and implement a comprehensive system for the declaration or disclosure of cross border transportation of cash.
Papua New Guinea should become a party to the UN Convention against Transnational Organized Crime and the 1988 UN Drug Convention.