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Posts Tagged ‘money laundering’

Australian doors wide open for money stolen in PNG

March 31, 2017 3 comments

A new Transparency International report says Australia is wide open for corrupt elites from overseas, including Papua New Guinea, to launder the proceeds of grand corruption through the Australian real estate market.

“There is clear evidence that such investment in Australian property is an easy and convenient way to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime”.

The report, Doors Wide Open Corruption and Real Estate in Four Key Markets, says Australia has severe deficiencies under all 10 areas identified in the research and is therefore not in line with any of the commitments to tackle corruption and money laundering in real estate made in international forums.

TI says in Australia, real estate agents are not subject to the provisions of the Anti-Money Laundering and Counter- Terrorism Financing Act 2006. Other professionals such as lawyers and accountants who may also play a role in the sector are not covered either. This means that properties can be bought and sold without any due diligence on the parties.

“Currently there are no requirements for real estate agents or any professional involved in real estate deals to submit Suspicious Transaction Report, even if they suspect illegal activity is taking place, and there are no requirements or rules for verifying whether customers are Politically Exposed Persons or their close associates”.

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Peter O’Neill tells Australian media a bedtime story on corruption

March 31, 2016 Leave a comment
A bedtime story --- Image by © Royalty-Free/Corbis

A bedtime story — Image by © Royalty-Free/Corbis

It was late at night, and the Australian media pack were tired after a long day of following Prime Minister Peter O’Neill.

One sleepy reporter asked O’Neil a delicate question. 

‘It’s been alleged by one of your former colleagues – so that’s Sam Koim – that Australia is the Cayman Islands of the Pacific in the way that it provides unlimited opportunities for corrupt officials to invest here. The ABS – Australian Bureau of Statistics – says Australia has received $5 billion in investment in five years from PNG nationals, a lot of which I gather goes into the Cairns property market. Are you pressing this in your visit here to Australia? And if so, what measures would you like the Australian Government to take?’

Peter O’Neill responded to his sleepy colleague, offering to tell a bedtime story on corruption in PNG. It was a more fanciful tale then they had ever been told before. It went like this:

‘On the issue about Papua New Guinean funds being invested in Australia, let me put it on the record very clearly that there are many successful Papua New Guineans who, in their own right, are able to afford to invest in Australia and of course in the property market in Cairns and elsewhere. There is no doubt that the transfer of funds between the two countries have got vigorous scrutiny. If you wish to even pay bills for you schools, kids who are going to Australia, you have to go through the financial regulations bodies which clear those funds to come. 

So when you talk about corrupt funds coming to Australia there must be substantive evidence. Unfortunately, everybody jumps on the bandwagon of emotional statements without facts to support it. Now, there is no doubt the Australian Government has got access to the records about who owns properties in Australia and how it was applied, and there’s nothing stopping the Australian Government, there is no requests from the Papua New Guinea Government into whether they should investigate further on how some of these properties were acquired. So we encourage Australian Government to do so.

In Papua New Guinea, of course, it’s an easy issue about corruption and politics. But when you look at the history of the country, since 1964 when self government was introduced in Papua New Guinea to date, do a survey of the politicians who are in office and who have left office and find out how many of them are well off because of corrupt funds that they’ve acquired. Over 90 per cent of them today who have either left office or in office are struggling to even pay their own bills. So this notion that there is great wealth being acquired by Papua New Guinean politicians is ridiculous.

We are doing all we can in Papua New Guinea now to introduce legislations like ICAC, which will be of the final reading in this March session, and we will receive overwhelming support from Parliament where the sorts of funds received by individuals in their wealth will be a subject of investigation, and of course they will be held accountable for them. They have to explain whether they had a rich grandmother who passed on a lot of wealth to them. So those are legislations that we are now putting in place to address this issue.

Even today, when you put more than 10,000 kina, transferring it out of Papua New Guinea, you must declare them to the financial intelligence unit who will give the necessary approval for you to do so. It must the banks are working very closely, all the big banks who work in Papua New Guinea like Westpac, ANZ, BSP, all enforcing these regulations and rules to the strictest terms possible. So there is no uncertainty in that.’

By the time O’Neill had finished his tall tale, the press core was fast asleep.  

Download the full transcript of Peter O’Neill speaking at the Press Club

Under The Umbrella: Tax Haven Cocktails

November 8, 2013 1 comment

Mike Seccombe | The Global Mail

Australia is cleaning up some of its own tax-avoiders, but for those with money to launder – especially from Papua New Guinea – it’s a nice place to wash up.

Australia is getting better at protecting its own revenue base from tax dodgers, but remains far too complacent about accepting investment from those who have dodged the taxes of other countries, according to a new report.

The 2013 update of the Financial Secrecy Index, compiled every two years by the international Tax Justice Network (TJN), finds that Australia still hosts “significant quantities of illicit funds from other jurisdictions”, notably from Papua New Guinea.

The secrecy index scores countries according to the openness of their financial systems as well as the amounts of dubious money flowing through them.

The “secrecy score” is compiled by assessing each country against 15 indicators, and the results are represented on a 100-point scale, on which a higher score represents greater secrecy, and a lower score greater transparency.

“Australia has been assessed with 47 secrecy points out of a potential 100, which places it in the lower mid-range of the secrecy scale,” the Australia section says.

Of 82 jurisdictions assessed by the group, Australia came in about half-way down, at number 44.

It remains a “tiny player” in the global scheme of things, says the report, because it accounts for less than 1 per cent of the global market for offshore financial services. Nonetheless, as we have reported before, wealthy Australians and Australian multinational companies are enthusiastic users of tax havens overseas. A survey earlier this year found the majority of Australia’s top 100 companies had subsidiaries in tax havens – in some cases, scores of them, as you can see in this interactive graphic.

“Australia has taken significant steps to address tax evasion and tax avoidance, especially as it relates to revenue loss from Australia,” the TJN report, released November 7, says.

The most notable of those steps, it says, was Project Wickenby, “the multi-agency taskforce … focused on tax evasion activities by Australians and Australian companies through secrecy jurisdictions. Indeed, it is seen as a model for other countries to follow in curbing tax evasion and tax avoidance.”

Not only had Project Wickenby raised over $1 billion in tax liabilities and collected over $563 million over five years to June 2011, the report notes, it had seen the flow of funds from Australia to various secrecy jurisdictions fall dramatically: by 80 per cent to Liechtenstein, 50 per cent to Vanuatu, and 22 per cent to Switzerland.

“Overall fund flows from Australia to 13 secrecy jurisdictions decreased by 22 per cent between the 2007- 2008 and 2010-2011 financial years, from $55 billion to $43 billion,” says the report.

Nonetheless, Australia continues to lose huge revenues to tax dodging; the report cited one estimate that in the period from 2005 to 2007, €1.1 billion was lost through profit shifting on trade with the European Union and USD1.5 billion through profit shifting on trade with the US.

The report noted, with approval, the changes to Australia’s general anti-avoidance rule made last year, by the Labor government, and also the passage of legislation that allowed the Tax Office to make public the tax liabilities of companies with revenues of more than $100 million, which it called “a small step towards greater tax transparency by transnational companies”.

So Australia is apparently getting better at protecting its own revenue base from tax avoiders.

But the report was critical of Australia’s performance when it came to co-operating with other countries trying to take on tax avoiders and evaders.

It stressed that PNG was a particular victim of “Australia’s role as a host for illicit finance”, and highlighted the accusation by the head of PNG’s anti-corruption body, Task Force Sweep, Sam Koim, that Australia has acted like the “Cayman Islands in relation to laundering and housing the proceeds of corruption from Papua New Guinea”.

In 2012, Mr Koim told officials of Australia’s major investigator of money laundering, the Australian Transaction Reports and Analysis Centre (AUSTRAC), that the Australian financial system was being used to systematically launder tens of millions and possibly hundreds of millions of kina.

Mr Koim complained, and the Tax Justice Network report reiterates, that Australian authorities have done very little to assist in providing intelligence about suspicious investments, particularly in real estate in North Queensland.

“[This is] an issue that has become increasingly pertinent as PNG investments in Australia have recently reached over $1 billion,” the report says.

“One reason for the failures [to make progress against widespread corruption in PNG] appears to be weaknesses in Australia’s anti-money laundering laws.

“In 2007 the Federal Government released draft legislation to extend anti-money laundering provisions to real estate agents in relation to the buying and selling of property, dealers in precious metals and stones, lawyers, accountants, notaries and company service providers.

“Yet this legislation was never implemented.”

Among the 15 criteria used by the network to compile its “secrecy index”, Australia was found inadequate in six and seriously wanting in another four.

These four most serious failures are that: Australia does not maintain company ownership details in official records; it does not require that company accounts be made available on the public record; it does not require country-by-country financial reporting by all companies; and it does not participate fully in Automatic Information Exchange.

And the man who prepared the Australian section of the report, Mark Zirnsak, director of the Justice & International Mission for the Uniting Church, fears the new Abbott government lacks commitment to the cause of tightening up on tax avoidance.

He cites the November 5 announcement that the new government intends to drastically water down so-called “thin capitalisation” rules that apply to companies operating here.

The previous government moved to reduce and cap the size of tax deductions available to big companies that use disproportionate amounts of debt to fund their Australian projects.

“Now it appears that instead of a blanket limit on the amount of interest and debt you can claim repayments on, they’re going to go for an approach of investigating each case,” says Zirnsak.

“I think that’s likely to be ineffective. It will be highly resource intensive to try to identify any examples of tax avoidance and to do anything about them.

“It is a worrying sign about how serious this government is about cracking down on corporate tax dodging within Australia, and it also sends a bad signal as to their will to investigate and crack down on companies that may be involved in tax evasion in developing countries in particular.

“I’m concerned that the political will to investigate tax dodging by Australian companies overseas is very low,” says Zirnsak.

Still, by comparison with many countries, Australia doesn’t look so bad.

Of the 82 jurisdictions assessed by the Tax Justice Network, the most egregious contributor to global tax avoidance is – no real surprise here – Switzerland.

It ranks top of the list, not because it has the most secretive financial regime – that dubious honour goes to Samoa – but because of a combination of great secrecy and great capital flows.

Some of the other jurisdictions in the top 10 are more surprising.

Luxembourg, which the network describes as “the dark horse of the offshore secrecy world”, comes in second.

“Offering a toxic cocktail of secrecy, tax loopholes and lax financial regulation, it is serviced by a huge offshore financial services industry and has recently been working with Switzerland to derail emerging European transparency initiatives,” the TJN says.

Hong Kong, the Cayman Islands, Singapore, the United States, Lebanon, Germany, Jersey and Japan round out the top 10.

The TJN finds some small improvement in the openness of some of the European countries since the publication of its last report, but not much, and also points to an eastward movement of the tax-avoidance centre of gravity – which it says has come about largely as a result of the greater wealth now concentrated in Asia.

“Some positive trends are evident,” says the TJN.

“With public tolerance for offshore financial secrecy having fallen sharply in many countries since our last index in 2011, we see potential for real political change: for example, citizens are demanding full disclosure in public registries of the beneficial owners that lie behind offshore shell companies, trusts … foundations and so on.”

However, despite increasing lip service paid to addressing the issue in western countries, particularly in the UK, it says, “little has been done so far to rein in the menagerie of offshore trusts, foundations, shell companies, loopholes and subterfuges that make up the global secrecy system.

“Rolling back the secrecy that shrouds up to $32 trillion in offshore financial assets remains one of the great challenges of the 21st century.”

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.