Home > Corruption, Papua New Guinea > PNG money laundering

PNG money laundering

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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  1. Shelly
    August 27, 2013 at 3:24 pm

    Why hasn’t this been brought to light as an Election issue rather than all the focus on “the boat people” Talk about a smoke screen!

  2. Jimmy Lae
    August 28, 2013 at 6:48 am

    This was a good interview. God bless and good luck to my friend Sam Koim.

    My brothers and sisters should also go on asking why Chaimen Daveona of Bouganvillie is conducting business with Patrick Salera through the newly created ‘PNG Capital Limited’…. Patrick Salera is bankrupt in his home of Australia and not aloowed to do bussines in his own country so why he allows to come here scaming us and frauding us for logging projects, china satalite communication programme, and fake school training projects?

    • Bill McConnell
      November 26, 2013 at 2:30 pm

      Hi Jimmy,

      Send me an email at bill19764@yahoo.com and I’ll tell you some interesting things

  3. Robert Sam
    September 1, 2013 at 10:01 am

    I do not think that story of Aus AID money being stolen is true. AusAID manages its own money. It asks PNG to identify projects, it then calls for tenders, and it manages the projects. Contractors are Aust companies and Project Managers are Australian firms/Consultants. Thats where the boomerang Aid thing comes in. AusAID is never incorporated into the PNG Budget. It only complements funding for certain projects

  4. Bonip Panuta
    September 5, 2013 at 11:48 am

    I concur with Robert Sam. AusAID money has never been stolen. It goes back to Australia so let us be careful and not pass out ignorance to the public. Thanks.

  5. John Doe
    September 5, 2013 at 3:08 pm

    Ruddy Kevin is so focused on other thing to win the election, that he not doing a thing about it and it is coming out of our pocket. RUDDY KEVIN!!!!!

  6. September 6, 2013 at 12:30 pm

    The Truth about Corruption in Papua New Guinea

    PNG is rich in natural resources and has enjoyed continued economic growth for well over a decade at the back of high commodity prices for its mineral resources and other natural resources such as timber and fishery. Yet the country still remains a poor third world country but why?

    Read the full article and soon you will know why and the truth about corruption in Papua New Guinea.

    Soon after Papua New Guinea gained independence from Australia in 16th September, 1975, the leadership which, the new country was handed over to have never developed a nationalized long-term development plan, where the country’s wealth would be fairly and equally distribute to develop all people and all parts of the country.

    For instance, they never had a long-term development plan supported with strategies to build satellite townships in all districts in every province including plans to have three quarters of the population as working-class population or plans to establish rural housing schemes to replace bush buses with permanent houses and so on.

    In the absence of such long-term development plans, all subsequent governments has resorted to temporarily or short-term measures, usually on an ad hock or reactive basis. Development funds were then just thrown away for leaders to use and spend on anything as they wish.

    Politicians realized then that they can have easy access to huge public funds at their disposal, something neither they nor their ancestors used to before. They also realized that they can buy anything in the world with money; a life they never thought would possible, let alone their parents.

    In a country where everyone else were illiterate and poor around that time, the leaders soon become the gods and celebrity figures in their families, clans and tribes. Everyone started looking upon them and worship them. It was the start of the emergence of PNG’s “money big man culture” – big man with money takes everything and is above the laws of this land. The leaders slowly transit into the world of the Colonial Masters – Western Civilization, ahead of their fellow Papua New Guineans.

    They started developing an appetite for misusing, abusing, and stealing public funds to buy the kind of life that commands great respect from the poor ordinary Papua New Guineans. The appetite they developed is now responsible for swallowing billions of development funds every year.

    Since then the misconception of politics as a means of wealth creation emerged and it has now grown into a cultural norm.

    Politicians or PNG’s big men begin their political careers as ordinary persons, or civil servants, and graduate as business entrepreneurs after their discontinuation from office. The emergence of politicians-turned-businessmen or vice versa after 1975, and the difficulties in separating business from politics, had sent out false signals to aspirants to political office. Contesting elections today has become a god sent opportunity to wealth accumulation.

    This quite clearly explains why ordinary persons, civil servants, priests and pastors when voted into parliament disappear and reappear as business entrepreneurs. This also explains why elections in PNG these days are increasingly becoming marred with violence, bribery and cheating. Leaders are not contesting the elections to serve the people and the country but to serve their greed for money and personal wealth creation.

    As a result, a culture of greed and corruption developed, where anyone as long as they have connections to the political masters could easily establish schemes, which could then be used to divert and siphon public funds away from the people and development. Slowly, a network of cronies and their masters developed. Cronies mostly come from the bureaucratic mechanism and some relatives and business associates of leaders. Bribery, wantok system and nepotism then become the norm. Currently, the network is multiplying every year and with every new government.

    To contain and feed their greed, political leaders have been always looking for easy ways to bring in big money into the national coffers so that more money can be floating around in the system for them to steal and feed their huge appetite and greed for money.

    Sadly, our natural resources have been the constant subject of their quest for easy money, in the disguise of growing and sustaining the economy. They have been giving tax breaks to multi corporations in the disguise of attracting foreign investment while neglecting other sectors of the economy such as Agriculture. Perhaps this explains why we are still poor despite our riches in natural resources, foreign aids and loans.

    Over the years we have been asking why our politicians are not serious about stopping corruption in the country. Well, the answer is obvious now. Neither they can punish themselves for stealing nor can they stop themselves from stealing public funds. They love money and all that money can buy and earn for them. They have been addicted to greed and money from the start. There is no quick and easy way out for the country as long as they maintain control over the national coffers.

    Sadly, while they have been enjoying a life their ancestors never had enjoyed before with money, they have been leaving behind the rest of the people of Papua New Guinea poor and beggars in their own rich country.

    As a result, every place that has been once a village still remains village. Even villages that host multibillion dollar projects still remain a village. A typical example is the people of Kutubu in the newly created Hela province. They still live in shacks built from sago leaves without electricity and water supply despite oil has been taken out of their land for more than twenty years – generating billions of Kina in revenue for the State.

    Despite the grim scenario, every subsequent government has over the years spent billions and billions of kina for development. These monies never get to the people as they still remain as villagers in villages. Before there were few bush houses in villages. Now that number has tripled twice with increasing population growth. Obviously a backward development trend as our leaders has lost the plot from the beginning to fairly and equally distribute the country’s enormous wealth.

    If we continue down this path, this country would probably remain the same or worse as we are witnessing violent crimes which, we have never witnessed before.

    Our forefathers were not beggars but we are beggars now. We would have survived better on our land of untold wealth and beauty without Western Civilization like our forefathers. Civilization has brought us nothing good but greed for only a few to exploit our natural resources and wealth for their own selfish gain.

    The dilemma facing this generation is, whether to join the past generation of leaders to continue follow the footsteps of our so called founding fathers of this nation and remain beggars in our own natural resource rich country. Or challenge the leadership that has run the country down and liberate the country so that the country’s wealth can be equally and fairly distribute to all people. The people of this nation deserve to have equal opportunity to a better life if they choose to work hard.

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