Bank of PNG governor Elizabeth Genia said while grey listing does not impose sanctions, it acts as a red flag. Photo: 123rf.com
As Papua New Guinea stares at the possibility of being placed on the Financial Action Task Force (FATF) grey list early next year, government agencies are racing against time to fix the problem.
Grey listing by the FATF, the global body that sets standards for fighting money laundering, terrorist financing and the financing of weapons proliferation, stands to complicate trade, investment and banking for the country.
For PNG, the stakes are high.
The country depends heavily on international trade, foreign investment, and banking relationships with global institutions. If grey listed, international banks could apply stricter checks, delay transactions, and even restrict services.
Investors may view PNG as a higher-risk environment, potentially slowing down new projects. For ordinary citizens, the consequences may mean higher costs for banking and difficulties in sending or receiving money across borders.
Bank of PNG governor Elizabeth Genia Photo: Supplied
Speaking at an inaugural meeting discussing anti-money laundering efforts, Bank of PNG governor Elizabeth Genia said while grey listing does not impose sanctions, it acts as a red flag.
For governments and businesses that rely on smooth international flows of money, it can feel like a penalty. In some countries, grey listing has added an estimated 7-10 percent to the cost of doing international business, she said.
Genia acknowledged the seriousness of the situation but stressed that it is also an opportunity.
"Grey listing is a challenge, but it does not define us. What matters most is how we respond, and whether we can show the world that Papua New Guinea is serious about building a resilient and trusted financial system," she said.
What the FATF found
The hurdles are relatively complicated.
The FATF's 2024 mutual evaluation of PNG's anti-money laundering and counter-terrorist financing (AML/CFT) framework painted a sobering picture. The report identified shortcomings in technical compliance and major gaps in enforcement.
Information-sharing between agencies was inconsistent. Suspicious transaction reports were often not acted upon. Coordination between regulators, prosecutors and law enforcement was patchy, undermining the ability to bring cases to court.
A large part of PNG's problems stem from existing agency specific laws that prevent the sharing of information between organizations and this in turn has impacted enforcement.
PNG's Financial Analysis and Supervision Unit (FASU) director Wilson Onea said the weaknesses in enforcement impacts on PNG's credibility.
"The key performance indicators are high level. For example, what is your involvement in on cross border issues?
"What's your commitment? Are you interacting with your regional partners, in following the money and in in sharing information to deal with organized crime and crime syndicates that are operating in this country?"
Authorities have begun implementing reforms.
The Central Bank is leading work to update the National Risk Assessment, which maps out vulnerabilities across sectors.
Inter-agency task forces are being created to improve intelligence-sharing. Draft amendments to the Proceeds of Crime Act will give investigators stronger powers, and new rules are being prepared to regulate virtual assets like cryptocurrency.
Prime Minister James Marape's government's Failure to demonstrate progress could prolong the country's stay on the grey list. Photo: Supplied
The government has signalled its commitment by declaring AML/CFT a national priority.
Cabinet has directed agencies to align under a coordinated plan, while donor partners such as Australia and the Asian Development Bank are funding technical assistance and training.
Genia said the reforms must translate into visible enforcement.
"Success will not be measured by the number of meetings or reports we produce. It will be measured by prosecutions, convictions, and the recovery of stolen assets. That is what the FATF wants to see, and that is what will restore confidence," she said.
ICAC and it's role
The Independent Commission Against Corruption (ICAC), still in its early years of operation, has also joined the fight. In late 2024, ICAC used the FATF evaluation and the national implementation plan as a framework to build its own operating procedures.
ICAC commissioner Dallas Henderson said cooperation between agencies has already yielded results, including the freezing of bank accounts suspected to hold the proceeds of crime.
"Despite being an independent commission against corruption, independence does not mean isolation. We rely on cooperation and collaboration with other government agencies to do our work effectively," she said.
ICAC has signed agreements with the Investment Promotion Authority and engaged with Immigration to monitor corrupt actors seeking to shift funds offshore. Its investigators are now working closely with the Financial Intelligence Unit to identify corruption hotspots.
IPA and the transparency challenge
For the Investment Promotion Authority (IPA), transparency is both a goal and a challenge.
The agency pioneered e-commerce in government a decade ago by creating an online registry of all companies.
IPA managing director Clarence Hoot Photo: Supplied
But IPA managing director Clarence Hoot said access to information is often undermined by a lack of cooperation from other agencies.
"We can build systems and databases, but if agencies do not share information, then transparency suffers," Hoot said.
"The only way forward is through real inter-agency cooperation, backed by technology and laws that allow us to connect and act together."
The IPA has hosted regulator summits to push for interoperability between government ICT systems. Hoot argues that embedding laws and regulations into digital platforms would allow agencies to access critical data instantly, reducing the opacity that enables corrupt actors to hide their tracks.
The road ahead
The challenge now is to prove that reforms are not just plans on paper. The FATF will be looking for tangible results: more investigations into money laundering, more successful prosecutions, and the confiscation of criminal assets.
For PNG, the next year will be decisive.
Failure to demonstrate progress could prolong the country's stay on the grey list, damaging its economy and reputation. Success, however, could restore confidence and strengthen the financial system for the long term.
