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PNG money laundering

August 27, 2013 7 comments

By James Thomas on Today Tonight

Huge amounts of Australian taxpayers’ money, supposedly supplying aid to our third-world neighbour, is being lost to corruption.

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Australian aid is being lost to corruption, with an estimated $1.7 billion being stolen from Papua New Guinea’s (PNG) budget annually.

The stolen money is then brought to Australia to be hidden in our banks and the Queensland property market.

Around 59 people have already been charged with corruption offences in PNG, and it is alleged much of their illegally obtained money is spent in Cairns.

Professor Jason Sharman, deputy director of the Centre for Governance and Public Policy at Griffith University, is a renowned expert on money laundering.

Professor Sharman along with Sam Koim, head of PNG’s Anti-Corruption Task Force, are on a mission to lift the lid on billions of dollars of dirty money leaving PNG to be laundered in Australia.

“Corrupt politicians, and senior officials are buying houses and gambling. Obviously they need bank accounts to do so, and setting their families up here (in Australia) as well,” Professor Sharman said.

“Most of Australia’s aid program is effectively wasted.”

Mr Koim says they have a number of prominent politicians and businessmen on their radar.

“Almost half of the budget (is being stolen. That is how big the problem is,” Mr Koim said.

“They see Australia as the Cayman Islands. They see that it is the safest place where they can bring their stolen money from PNG.”

There are more than 100 homes in Cairns that belong to Papua New Guineans, a similar number in Brisbane. They inhabit some of the nicest suburbs, and include the prominent PNG politicians and officials.

One such home in Cairns, valued at $585,000, belongs to PNG’s petroleum/energy minister William Duma.

Australia’s banks have a strong presence in PNG, and Mr Koim says the banks are well aware of the corruption.

“The writing is on the wall. There is some clear evidence of suspicious transactions, but they (the banks) turned a blind eye and accepted those transactions,” Mr Koim said.

Mr Koim and his task force informed Australia’s money laundering agency Astrac, the Australian Federal Police (AFP) and the Attorney General’s department in August last year that Paul Paraka – a lawyer who allegedly sent $2.5 million dollars to his family – was a person of interest in their investigation into corruption.

However Mr Paraka was still able to transfer hundreds of thousands of dollars to his wives and girlfriends through the NAB.

In a statement the NAB claim to take money laundering seriously. They admitted that following an investigation in late 2012 that: “…some customer’s accounts were closed and some payments originating from PNG were declined…”

Professor Sharman says few Australians realise how serious PNG’s corruption problem is for Australia. He says for every dirty dollar we harbour, PNG is one step close to ruin, with huge consequences.

“If you give $10 million to a hospital and that money comes in as aid through the front door, and at the same time, $10 million is stolen out the back door through a corrupt official, then the net benefit of Australian aid is zero,” Professor Sharman said.

“If half the budget is stolen, there is a real risk that PNG as a country will simply collapse. One of the things associated with state failure is massive refugee flow. If you were looking to escape PNG, the closest country is Australia.

“So rather than PNG being a refugee solution, it will become a massive refugee problem.”

Response from AFP Assistant Commissioner Serious and Organised Crime, Ramzi Jabbour:

• On 23 May 2013, the AFP Senior Liaison Officer (SLO) in Port Moresby addressed a Royal Papua New Guinea Constabulary (RPNGC) Provincial Police Commanders Conference in Lae, PNG. The comments made were general in nature and related to unconfirmed sources of information.

• I can confirm the AFP does not have evidence of corruption involving PNG public officials.

• Australian authorities are committed to ensuring that Australia is not a safe haven for the proceeds of crime.

Statement from NAB (National Bank of Australia):

National Australia Bank takes all allegations of money laundering seriously. Payments NAB deems as suspicious will be blocked and reported, as required by law.

In late 2012, NAB launched a thorough investigation regarding some funds transfers from Papua New Guinea, based on information provided by the Australian Federal Police and other law enforcement agencies in both Australia and PNG.

Following NAB’s investigation, some customers’ accounts were closed and some payments originating from PNG were declined.

Response from ANZ bank:

• We cannot discuss any individual customers due to privacy obligations.

• However, as part of its global compliance program, ANZ has undertaken an extensive review of all politically exposed people and taken steps to exit relationships with individuals considered to be ‘high risk’.

• We also continually monitor client activity, report suspicious matters to regulators such as AUSTRAC, and our professionalism has recently been recognised by the Australian Federal Police as “being a major disruption tactic to combat corruption in Papua New Guinea”.

• We take our anti-money laundering responsibilities seriously and according to this recent correspondence from the Australian Federal Police, ANZ has been instrumental in “countering the collective effort to combat corruption” within PNG.

• We are continuing to strengthen our anti-money laundering procedures. For example, ANZ has set aside $75 million to strengthen our financial crime detection capability this year, including around $25 million on anti-money laundering programs.

• All of ANZ’s 47,000 staff are required to complete annual training to make sure they are able to spot and report suspicious activity. Any staff that do not complete this training are disciplined which could include termination of employment.

Response from Attorney General’s department, spokesperson Mark Dreyfus:

I’m writing to you with regard to the Head of Papua New Guinea’s anti corruption taskforce Sam Koim’s Aug 2012 speech, in which he accused Australia of being the Cayman Islands of the Pacific with respect to money laundering.

 

He alleges our Government is turning a blind eye to large scale money laundering through property purchasing and casino use (among others), of sums up to hundreds of millions each year. He stated that the banking industry of Australia is doing large scale business with “dirty money”.

We are doing a story relating to these allegations.

 

The Australian Government rejects these assertions. Australia has a robust framework to deter and detect money laundering, and to ensure that Australia is not a safe haven for the proceeds of corruption. Banks and other regulated businesses are required to have appropriate controls to counter the money-laundering risk posed by corrupt foreign officials and politicians.

 

Consistent with its commitment to tackle corruption domestically and overseas, the Australian Government supports the work of the Government in Papua New Guinea (PNG) to address corruption and stands ready to continue providing assistance to strengthen PNG’s capacity to combat corruption.

Australia’s law enforcement agencies work closely and cooperatively with PNG authorities on a range of complex issues relating to anti-corruption.

 

For example, in May 2013 the Australian Government announced Phase Three of the Australia-PNG Policing Partnership for increased policing support. Foreign Minister Bob Carr has discussed with Foreign Minister Rimbin Pato plans for further strengthening this cooperation by building PNG police capacity and supporting PNG’s Fraud and Anti-Corruption Directorate.

 

Australia also provides ongoing training and mentoring on anti money laundering and proceeds of crime to PNG law and justice officials. This includes work with the Proceeds of Crime Unit and PNG prosecutors to increase capacity to pursue the proceeds of corruption under PNG law, providing case-specific mentoring on PNG proceeds of crime matters, and working with PNG Department of Justice to jointly review the PNG Proceeds of Crime Act to strengthen PNG’s capacity to detect and recover proceeds of crime.

 

With regard to the Attorney-General’s Departmental regime to fight money laundering, we wish to discuss what measures the Department is currently taking including your involvement with the Financial Action Task Force and AUSTRAC.

 

• The Australian anti-money laundering and counter-terrorism financing (AML/CTF) regime predominantly operates at the point at which money enters the financial system.

 

• Under the AML/CTF regime, financial institutions have an obligation to assess the money-laundering risks when they engage with professionals such as real estate agents.

 

o Based on the risks, financial institutions may choose not to conduct the transaction, or may be required to report information about the transaction to AUSTRAC.

 

• AUSTRAC assists reporting entities understand their obligations by various means, including awareness-raising forums such as the Major Reporters Forum at which Mr Koim made his presentation. Raising awareness among reporting entities assists in improving the quality and quantity of transaction reports submitted to AUSTRAC.

 

• Reports from financial institutions are gathered and analysed by AUSTRAC, producing financial intelligence which can be shared with law enforcement and other government agencies to assist them to identify illegal activity and take action.

 

• Legislation is in place for the AFP to receive and assess referrals from foreign governments in regards to these types of allegations. The Commonwealth Proceeds of Crime Act 2002 provides a comprehensive scheme to trace, investigate, restrain and confiscate criminal proceeds. The Act can apply to ‘foreign indictable offences’ if a benefit from such an offence is derived in Australia or transferred to Australia. The Commonwealth can also repatriate funds that are recovered from the registration of foreign proceeds of crime orders.

 

• The Attorney-General’s Department provides ongoing training and mentoring on anti-money laundering and proceeds of crime to Papua New Guinea. 

 

Given Australia’s recent billion dollar aid assurance to Papua New Guinea, what measures is the Department taking to ensure it is not stolen and laundered?

 

• Australian aid is not routinely provided directly to foreign governments.

 

• AusAID has world-class anti-fraud measures in relation to our aid spending. Aid funding is provided to international organisations such as the UN, the World Food Programme and the like for projects in recipient countries. These organisations have excellent, internationally recognised anti-fraud measures.

Statement from AUSTRAC:

Measures in place to prevent the laundering of stolen funds through Australia

Australia’s AML/CTF regime includes a range of measures to address and mitigate the risk of overseas entities (including individuals) misusing the Australian financial system. Australia’s regime is based on international Financial Action Task Force (FATF) standards.

Customer identification requirements

Australia’s AML/CTF laws require reporting entities (including banks and casinos) to have in place customer identification procedures appropriate to their particular business. These procedures are designed to identify overseas customers who may pose an increased money laundering risk and to report any suspicious transactions undertaken by customers.

Financial transaction and suspicious matter reporting requirements

AUSTRAC’s reporting entities are required to report certain threshold cash transactions, as well as international funds transfers and suspicious matters.

Reporting entities are required to report to AUSTRAC suspicious matters if the entity has reasonable grounds to suspect that a transaction may be related to money laundering or any other offence under a Commonwealth, state or territory law.

 

AUSTRAC is not an investigatory or law enforcement body. Where AUSTRAC receives reports relating to possible instances of illegal activity, AUSTRAC refers that information to its relevant partner agencies, such as law enforcement agencies.

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Pacific Games Contract Blowout Whiffs of National Provident Fund Fraud

August 21, 2013 16 comments

Pacific Games contractor, China Harbour Engineering Company (CHEC) has been blacklisted by the World Bank for “fraudulent practices”. They have also been found by the Bangladeshi courts to have acquired contracts through bribery.

So when CHEC was handed a massive roads deal (K318 million) by the NCD, PNGxposed’s eyebrows were raised. So were Governor Parkop’s when he discovered through a viral social media campaign what his auditors had not, and he duly suspended the contract.

Now we learn CHEC has been given the contract to build the 2015 Pacific Games village at the University of PNG. According to the Good Governance Advocacy Forum the project is costed at K190 million, yet CHEC was allegedly awarded an astronomical K263 million, that is a K73 million excess. Other contractors we are told bid around K190 million.

The argument that CHEC are a ‘world class’ outfit worth the extra splurge has been definitely torn apart by the Jamaican Minister for Transport, Works and Housing, who following an audit inquiry, reported that CHEC had, “wanton disregard for conventions and procedures established by the Government of Jamaica for projected implementation, administration and management. These breaches of existing procurement guidelines have drained precious budgetary resources and undermined the very foundation of public institutional integrity”.

So why would the PNG government allegedly pay an extra K73 million to a company blacklisted by the World Bank and slammed for shonky work by the Jamaican government?

The answer may lie in another anti-corruption investigation conducted into the National Provident Fund, by esteemed judge Tos Barnett. Here it was alleged that Peter O’Neill, Jimmy Maladina and Herman Leahy conspired to inflate contract costs, and each took cuts of the excess.

Of course, the Pacific Games is being organised under the watchful eye of Justin Tkatchenko. Should we be worried, surely he would not allow untoward graft to take place? If past anti-corruption inquiries are anything to go by, be worried.

In 1999 a Special Investigation into Fraud, Corruption and Financial Mismanagement at the National Capital District Commission, done by TSK International, found that Justin Tkatchenko as Acting City Administrator fraudulently obtained a total of K12,000 through two cheques in the sums of K4,000 and K8,000.

In 2003 the Parliamentary Accounts Committee was asked by Parliament to conduct an investigation into alleged corruption in the Parliamentary Service. The Committee submitted its report in September 2003 after summonsing witnesses and hearing evidence given on oath.

The PAC investigation found Justin Tkatchenko’s company Kitoro No.33 was awarded a K1.5 million contract to maintain parliamentary gardens, in breach of procurement procedure. The Kitoro tender was received 3 months AFTER the closing date. The tender submitted was only for twelve months but a three year contract was awarded. The original contract amount of K490,000 was K190,000 above the limit imposed by the Public Finance Management Act. The lowest bid for the project tender was just K12,000 per year. Kitoro was awarded contract totalling K837,738 that did not go to public tender.

The PAC recommended the contracts with Kitoro No.33 be terminated immediately and the officers responsible for the tendering, awarding and executing of the contract face ‘appropriate action’.

It seems inflated contracts are something of a tradition among NEC colleagues, if the anti-corruption reporting is anything to go by. Perhaps this could explain why a blacklisted Chinese company was gifted K73 million by the PNG government, a gift its own citizens are much more in need of.

New Dawn FM backing Rio Tinto and the reopening of Panguna?

August 20, 2013 3 comments

Bougainville Radio Station, New Dawn FM, was very quick to publish the media release below from the European Shareholders of Bougainville Copper, but their listeners would have been bemused as to what it was all about as New Dawn had totally failed to cover the story from PNGexposed that Sturm was responding to – Leaked Documents reveal secret ABG plan to reopen Panguna. 

Be interesting to know if their are any funding links between Rio Tinto or the Australian government/ AusAID and New Dawn…

Screen shot of the New Dawn website

Madang Corruption Scandal: All laws, decisions null and void

August 20, 2013 3 comments

Jeffrey Elapa

ALL decisions, including laws, appointments and contracts by the Madang provincial government over the past 20 years are null and void, the Public Accounts Committee inquiry revealed yesterday.

The inquiry has uncovered irregularities and corrupt dealings of the Madang Development Corporation, the business arm of the provincial government, besides other serious financial discrepancies and illegal transfers and sales of land and properties.

Chairman of the inquiry, John Hickey, said the Auditor-General report of 2011-12 found that appointments of several boards such as that of the Madang Development Corporation and the Madang Cultural Bureau, any laws and legislation passed, appointments made and contracts awarded by the provincial government have never been gazetted as there were no copies of all decisions for the past 20 years.

“I’m told the Madang provincial government has not produced any provincial gazette since 1994,” Hickey said.

“This means any bills and laws passed by the provincial government that has not been gazetted is illegal and unenforceable.

“This puts you in a serious legally sensitive situation that would cost the provincial government millions.

“It is the gazettal that makes it become law and it is lawful to execute and therefore over the past 20 years any decisions are null and void, including the appointments of boards of Madang Development Corporation, other boards and contracts that have been awarded.

“The Madang Cultural Bureau board also is illegal although they claim themselves as a board. Now we direct you to tell them that they are not members of the board,” he told administrator Bernard Lange.

He said there was a recent Lands Board appointed by the provincial government and if there are no gazettal of the appointment, that board is also illegal.

Leaked Document Reveals Secret ABG Plan to Reopen Bougainville Mine

August 19, 2013 16 comments

A document leaked to Rio Tinto shareholders lobby group, ESBC, by disgraced landowner leader, Lawrence Daveona, allegedly for cash payments, reveal the façade of democracy surrounding the Bougainville mine’s reopening.

Over the last three years ABG officials have told the public that the mine will only be opened if there is a democratic consensus supporting it. Corporate lickspittle, Jemima Garrett, summarises the official ABG tagline, “discussion and consensus-building are central to Bougainvilleans’ traditional way of doing things”.

Documents recently leaked to PNG Exposed reveal the ABG government’s commitment to the Melanesian way is a sham; for several years the ABG has had secret plans in place to reopen the mine, regardless of public opinion or consensus.

According to MEETING MINUTES taken in November 2011, the Panguna Management Consultative Committee (PMCC) was told by ABG officials that the mine was going to be opened regardless of popular sentiment. The Mining Minister, Michael Oni, informed the meeting “that there was no two ways about [it, the] Panguna mine [is] being opened in the not too distant future”. President Momis in agreement added, the mine “must be opened and there is an important need for a Unified Stand by ABG and Panguna Landowners”.

According to the minutes: “Discussions transpired and the general position on the re-opening was obvious and both ABG and the Executive Committee Members of PMCC fully supported and endorsed that Panguna mine must be re-opened”.

So much for public consultation – it appears the decision to reopen the mine was made years ago in closed door meetings by political elites. Recent consultation forums are nothing more than a fig-leaf, or more accurately a cynical sales pitch – complete with threats of PNGDF reoccupation and forced marriage to mainlanders – designed to manufacture consent for a decision already made by those who stand to directly profit.

Indeed, as the meeting minutes reveal women’s groups are the deeply opposed to the mine reopening – and why not it was women who nursed dying children during the conflict, endured rape as a weapon of war, and picked up the pieces after the many village burnings. No wonder then the landowner ‘leaders’ groups supporting Rio Tinto are dominated by men, and no wonder then that ABG leaders such as Minister for Veteran Affairs would tell  women opponents of Rio Tinto that PNG has “hidden plan[s] … that all Bougainville single women will be married by outsiders to own the land”, unless they agree to the mine reopening in time to ‘finance independence’.

And like between 1962-1989 the silent majority – especially the women – whose opinion is irrelevant to political power brokers, will bare all the costs of the mine reopening and the subsequent conflict it generates as the conniving behaviour of the political elite, and its corporate allies, is gradually exposed to a new generation of Bougainvilleans.

Sadly it would seem history is repeating itself, the first time as tragedy and the second time as farce.

PNG Inquiry Into Madang Government Uncovers Big Issues

August 18, 2013 4 comments

Update to on the corruption in the Madang Provincial Administration

Committee finds defects, failures, weaknesses largely unaddressed

By Jeffrey Elapa

The Public Accounts Committee (PAC) inquiry into Papua New Guinea’s Madang provincial government yesterday found a serious lack of accountability and reporting.

The inquiry, citing an Auditor-General report of 2011 and 2012, has found gross abuse of public funds while the province lacked accountability issues.

PAC chairman John Hickey said the province has breached the Public Finances (Management) Act, Appropriation Act and the Financial Instructions.

He said the committee has carefully studied the audit report for 2017-10 and found that the provincial government has made slight improvements in a few areas but generally the defects, failures and weaknesses  remain unaddressed.

“Today, we consider the state of provincial accounting and reporting and governance in 2011,” Hickey said when resuming the inquiry.

However he said the report indicated that the province failed to furnish financial statement.

A statement from the provincial government was not correct and has errors such as the statement of balance not being certified.

In 2011, the reconciled balances of the provincial revenue and grants revenues did not agree with the revenue fund balance, while other inconsistencies were identified.

The PAC found other irregularities such as funds totaling K805,000 [US$341,682] not being properly acquitted.

It was revealed that one officer in the provincial government was paid more than K388,508 [US$164,902] as advance but did not acquit the funds, which is illegal.

Hickey directed that those officers who received these funds be charged and repay the money within 14 days.

It was also found that funds have been used outside the budget while the province lacked monthly budget reviews and reporting, meaning that it failed to monitor the budget.

Hickey said the reports were not correct while the province lacked competent paying and receiving officers as casual and retired officers were engaged to carry out the duties.

He said revenue collection was not done properly as they do not have records while the 2011 records indicated an under-collection of K97,400 [US$41,341] from liquor licenses against the budget while there were not database to monitor fees.

“It seems clear that budget control, revenue collection and accounting is in a mess,” Hickey said.

“The law is not obeyed, criminal activities exist, no oversight is in force, public money and properties are treated with contempt and still the PA (provincial administrator) and treasurer hold the positions. All these are clear breach of financial instructions.”

Hickey has directed that a full report containing accounts of fees collected from each district is submitted to the committee.

The inquiry also announced that, because the provincial government failed to properly gazette decisions since 1994, all laws, appointments and contracts since that time are now null and void.

Australia ignored PNG request to bar fraudster

August 16, 2013 Leave a comment

By Richard Baker, Nick McKenzie in the Brisbane Times

Australia allowed one of Papua New Guinea’s most wanted men to enter the country on a 457 visa despite a PNG government request he be barred, diplomatic cables reveal.

The decision to allow accused fraudster Eremas Wartoto to stay in Australia and avoid prosecution prompted Australia’s High Commissioner in Port Moresby, Deborah Stokes, to declare the case could be used to ”prove that Australia is a haven for the proceeds of crime from PNG”.

The PNG government’s request to ”bar businessman from travelling to Australia” was documented in a cable sent by the Australian High Commission to Canberra on August 24, 2011.

At that time, Mr Wartoto, a politically connected businessman, had been arrested in PNG as part of a fraud inquiry into misappropriation of taxpayer funds involving allegedly corrupt politicians and bureaucrats.

Despite the PNG request, Mr Wartoto – who is being represented by a law firm owned by PNG’s foreign minister – was granted entry to Australia on a 457 visa in September 2011. His skilled worker visa was issued after the Cairns car hire company he owns sponsored him on the basis there was a shortage of ”general corporate managers” in the area.

However, despite knowing he was residing in Australia to avoid prosecution, the federal government made no effort to force Mr Wartoto to return to PNG to face charges.

Fairfax Media revealed in May Mr Wartoto had been able to use his visa to return to Australia after regular trips around Asia. He made these trips despite his lawyers lodging medical certificates in PNG’s National Court stating he was too ill to return home.

Frustrated anti-corruption investigators and police in PNG believe Mr Wartoto’s case is a prime example of Australia failing to act on suspected corrupt politicians, officials and businessmen using Australian banks and real estate markets to hide ill-gotten gains.

The May revelation that Mr Wartoto was being sheltered in Cairns was embarrassing for the Labor government, which was negotiating the settlement of asylum seekers with PNG on Manus Island and had launched a crackdown on foreign workers using 457 visas in the belief they were taking jobs from Australians.

Shortly after Fairfax Media revealed Mr Wartoto’s presence in Australia, Senator Carr cancelled Mr Wartoto’s visa using laws that allow the foreign minister to revoke visas belonging to people deemed to pose ”a risk to the health, safety or good order of the Australian community”.

Much of the information in declassified diplomatic cables obtained by Fairfax Media under Freedom of Information laws has been redacted by the Department of Foreign Affairs and Trade on the basis Australia’s international relations could be harmed.