Late in 2024, a 226-page report by the global Financial Action Task Force was quietly published online that may, according to the experts, have a significant impact on Papua New Guinea’s banking and finance system. Business Advantage PNG takes a closer look.

PNG’s new Anti-Money Laundering Joint Taskforce involves a number of different government agencies. Credit: Khaosai Wongnatthakan

The Asia/Pacific Group on Money Laundering (APG), a regional group affiliated with global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF), published a 226-page Mutual Evaluation Report on Papua New Guinea late last year.

In a nutshell, the report reviewed how well PNG is set up to deal with two global criminal activities: money laundering and the financing of terrorism.

PNG did not receive a clean bill of health.

On the plus side, the Bank of PNG’s Financial Analysis and Supervision Unit (FASU), which polices the country’s financial system, is described as “the only competent authority with a reasonable understanding of PNG’s money laundering risks and a developing understanding of PNG’s terrorism finance risk”.

“FASU comes out of the report in a very positive fashion, recognised for all the efforts that they’ve made over the last several years,” Mark Robinson, CEO of the country’s largest bank, BSP Financial Group, tells Business Advantage PNG.

However, the report also assesses that PNG currently lacks the ability and willingness to detect, prosecute and punish money laundering and terrorism financing effectively.

“PNG is not prioritising or pursuing money laundering and asset recovery in line with its money laundering risks,” the report states, further observing that “the Royal Papua New Guinea Constabulary, the Office of the Public Prosecutor, and other relevant competent authorities all lack skilled capacity and institutional resources for, and prioritisation of, their money laundering and asset confiscation functions.”

“The potential greylisting needs to be treated as a national economic emergency.”

Why does this matter?

The APG report provides a list of recommended fixes for PNG to deliver in order to avoid being reviewed by the FATF’s International Co-operation Review Group – a status informally known as being “greylisted”.

“The report gives PNG 12 months to implement a number. If they’re not implemented, then the risk is that the country will go on the greylist,” explains Robinson.

PNG will want to avoid any significant period of time on the FATF’s greylist, according to Herbert Maguma, Managing Partner at Deloitte PNG.

“What greylisting does is unfortunately increase the risk premium for PNG as a country,” he tells Business Advantage PNG. “We’ve seen in other economies where they’ve been greylisted that GDP is impacted between three and seven per cent.”

It’s not the first time PNG has faced this challenge.

“If you go back ten years ago to 2014, PNG was greylisted then,” says Maguma.

“While it got off the greylist quite quickly, some corresponding banks [overseas banks through which PNG banks access global currencies] decided to cut ties with PNG, which made it very difficult for payments to happen between PNG and other jurisdictions.

“Greylisting also means that additional compliance requirements are placed on financial institutions: there are more forms to tick, there are more checks to do. And that increases the cost of delivering financial services in PNG.”

“The perceived risks of operating in a country increase with greylisting,” observes Lachlan Halstead, Managing Director of ANZ in PNG.

“Correspondent banking could become more challenging, which is even more critical at time when we have new entrants in PNG’s banking sector.”

“The government and the private sector have to address the potential greylisting head on.”

What’s PNG doing about it?

To its credit, PNG’s government has already acknowledged the need to address the issues raised by the report and has taken the first steps towards mitigation.

An Anti-Money Laundering Joint Taskforce was established in December 2024 to create a coordinated and effective response to the report.

The taskforce, which will meet on a monthly basis, includes PNG’s recently established Independent Commission Against Corruption, FASU, PNG Customs Services, the Immigration & Citizenship Services Authority, the Investment Promotion Authority and the Auditor General’s Office. Additional agencies, including the Office of the Public Prosecutor, Royal Papua New Guinea Constabulary, Department of Justice and Attorney General, and Internal Revenue Commission, are expected to join the taskforce this year.

There is a sense of urgency, given the short timeframe.

“It’s an uphill task for PNG,” says Maguma.

“The FATF have done similar mutual evaluation reviews around the globe including giving countries a set of recommendations to implement over a certain period. There have only been a handful of situations where greylisting was avoided.

“The private sector can play a critical role in this process in terms of agitating for change and being open and honest with key stakeholders.

“For PNG to turn the tide, the potential greylisting needs to be treated as a national economic emergency, something that the government and the private sector have to address head on.”