Pacific Scoop

PNG investigator claims Australia ‘Cayman Islands’ of Pacific money-laundering

PNG walk against corruption

Papua New Guineans “walk against corruption” in a demonstration in Port Moresby earlier this year. Image: PNG Ports Corporation

Papua New Guinea’s new government has given the Task Force Sweep team the freedom to investigate, prosecute and charge anyone they believe to have benefitted from corruption and its proceeds. The plan is to “clean up” laundered money sent to Australia, says an Asia-Pacific Journalism special report.

Pacific Scoop:
Report – By Cassandra Mason

Addressing a Sydney crowd during a recent visit, the head of Papua New Guinea’s new anti-corruption unit Task Force Sweep likened Australia to the “Cayman Islands” for its role in turning a blind eye to investments of PNG government corruption money on Australian shores.

Sam Koim’s presentation at the Australian Transaction Reports and Analysis Centre major reporters meeting “Money laundering in Australia of the proceeds of corruption in PNG” called on Australian authorities to up their game in combating money laundering and cross-border corruption.

He laid out investment figures he said could not possibly have derived from legitimate funds, raising the question “Is the banking industry in Australia doing business with ‘dirty’ money?”

Figures obtained by Gorethy Kenneth for the PNG  Post-Courier in May this year showed that six known PNG politicians have combined property investment in Cairns of A$11.5 million, and according to Asian Development Bank economist Aaron Batten, PNG’s overall investment in Australia has reached A$1.2 billion.

Kenneth also referred to reports earlier in the year that the latest Registrar of Titles figures showed PNG residents were the largest overall investors in the far Australian north. He warned that Cairns would soon be “another PNG city”.

Koim’s presentation used these figures to urge Australian authorities and financial institutions to stop neglecting the obvious source of this money.

“They have bought property and other assets, put money in bank accounts and gambled heavily in your casinos and have never been troubled by having their ill-gotten gains taken off them.

‘Bad guys win’
“Unless the money can be prevented from leaving our country or prevented from entering Australia, the bad guys win and the rest of Papua New Guinea suffers.

“And PNG is suffering.”

Papua New Guinean investigative journalist and researcher Alexander Rheeney says while what has been happening in Australia has been “public knowledge for a long time”, Koim’s declaration signified a turning point.

“Papua New Guineans know that a lot of their politicians, big businessmen and the elite have investments down in Australia – that has been public information for a while.

“What is new is that an entity connected to the PNG government has actually come out and said ‘this is the value of this investment that’s been made in Australian real estate and we reckon a lot of this is actually corruption money.’”

Because of the way the new government has been operating, Rheeney says Prime Minister Peter O’Neill has given Koim and his team the freedom to investigate, prosecute and charge anyone they believe to have benefitted from corruption and its proceeds.

He believes it was on the basis of this freedom that Koim made his statement in Sydney, one that has stirred up a lot of interest in social media, invoking wide criticism of Australia for “harbouring the proceeds”.

Tighter law
Since the change in legislation in 2005 which brought in the Proceeds of Crime Act, banks have become much stricter around the amounts of funds you can invest in accounts both locally and offshore.

This act effectively gave PNG an “opportunity” to successfully prosecute corruption cases, says Rheeney.

“So long as they can prove that Papua New Guineans have moved funds to Australia – if they can successfully prove in court that those funds were obtained through corruption, they could use the Proceeds of Crimes Act to ask Australia to do something about it and get those funds sent back.”

Yet Rheeney points out that while the crux of Koim’s speech is Australia’s failure to return any of these proceeds, the PNG government has not yet used the legislation to try to recoup any of the money either.

“It has put the government in a bad light.

“PNG actually has to fix up its backyard first before it can start pointing fingers at Australia.”

And fixing PNG’s backyard is a mammoth task. Since its independence in 1975, state powers and functions have been decentralised in a bid to address issues of service delivery and diversity.

As Dr Ray Anere wrote last year in his article “Papua New Guinea in 2011: Politics Confused, but Democracy Stable”, this decentralisation process has led to fragmentation, legislative loopholes and systematic corruption.

Embezzled funds
It is estimated that one billion kina (about A$471 million) of public funds are embezzled through corruption each year. At the same time, 37 percent of the population lives below the poverty line, with only seven per cent with access to electricity.

For a country MP Dame Carol Kidu once described as “blessed with too many natural resources”, PNG has failed to benefit from its abundance of copper, forestry, oil and gold. Corruption in forest laws and land deals has deprives the Papua New Guinean people of millions of dollars every year.

Where the population should be enjoying the benefits of their resource wealth, the proceeds don’t get translated into development and services that reach them.

The loss of aid money to corruption has also been an ongoing struggle for PNG – to the extent where development agency AusAID called for funding to PNG’s National AIDS Council Secretariat to be suspended earlier this year.

The rationale for this was, as reported by ABC, that “development projects have been exposed as effective tools for money laundering and it is estimated that half of development money is lost through corruption.”

Weak governance
The year 2004 saw the establishment of the National Anti-Corruption Alliance but weak governance and a lack of human resources and capacity have prevented the success of its anti-corruption strategies.

Following years of inquiries and few prosecutions, the PNG government announced the appointment of anti-corruption unit Task Force Sweep in August last year.

Since then, the team, headed by Koim, has made dozens of arrests of current and former government ministers, MPs and businessmen and produced a report calling corruption “institutionalised”, reported Global Information Network in June this year.

According to Dr Anere, the operation has so far recovered 20-50 million kina ($9-24 million) of public funds. Koim says it is corrupt officials like these that have turned PNG’s constitutional democracy into a “mobocracy”.

Yet others believe that while Task Force Sweep is on the right track with its mandate, the restrictions it faces as acting within a government still suffering from corruption will limit its success.

Journalist and former Transparency International PNG employee Henry Yamo says it will take the current government a long time to achieve change while people from the former government are still in positions of power.

“These people are not going to change their practice in accordance with the new government.

“If we need to really get to the bottom of really ending corruption then we need to look at more drastic measures than putting in place a Task Force.”

‘Band aid’ approach
Yamo says Task Force Sweep is “more of a band aid approach” than what PNG needs long-term.

“Task Force are doing what they’re supposed to under the powers they have been vested with, but the team can’t act alone – other agencies have to come in and do their part.

“They can do the investigations, get people and lock them up but if the police are not cooperating with them… investigations can be in vain.”

The perception that agencies like Task Force Sweep are rendered impotent by the lack of cooperation across networks and the lack of capacity to properly equip them is something widely discussed in the Pacific.

In his 2009 article “Cleaning up the Pacific: anti-corruption initiatives”, Dr Manuhuia Barcham wrote of the pressing need to ensure “vertical and horizontal integration” within and across agencies involved in anti-corruption work.

He urged that a prerequisite for the fight against corruption must be “an environment of mutually reinforcing accountability. The one “key impediment” to this integration, he wrote, was a general lack of capacity.

Capacity stretched
“The problem is that many current anti-corruption frameworks are often created without any real sense of the resources required to implement them, thus complicating the affordability of government and stretching the already low capacity of many developing country states.”

Yamo says this integration must be seen as cooperation and a common focus between the police, the courts and the Task Force.

“All these agencies need to work together towards common goal.

“All must be equally committed.”

He says if the government is truly dedicated to eradicating corruption, they will take it further than just a “witch hunt”.

“You can’t stub out corruption just by hunting out the people that are involved.

“You also need to empower society and people in the community.”

Corruption silence
Yamo attributes a silence on corruption to a culture of fear, born out of decades of powerlessness.

“Most of these people are witnesses to corruption and they can’t always speak out.

“They are afraid of the repercussions.”

If the government is serious about fighting corruption, it needs to empower people by passing legislation that protects freedom of speech, he says.

“PNG is a socially networked kind of society where people depend on each other.

“People will talk about it if they feel protected by law. Right now, nobody’s protected so they are really vulnerable.

“You can be killed and it’s done in a way that makes it difficult to know who has committed the crime.”

Australian responsibility
But the reach of this responsibility is not limited to within PNG. It is also the responsibility of countries like Australia not to facilitate corruption through lack of regulation.

Yamo agrees with Koim’s statement that Australia has anti-money laundering obligations, saying it is very reasonable to request that Australian banks conduct due diligence on their customers.

This due diligence is made up of questions that Koim describes as a “means test”. The test requires banks to ask for tax returns, bank statements, income declarations, salary slips and other means of telling where the money has come from and whether it has been obtained by legitimate means.

Koim warned in his presentation that financial institutions would need to show proof of these processes if the AFP “come knocking”.

He acknowledged that the responsibilities “may seem onerous” but added that the stakes were high.

Yamo says he thinks the means test is made up of “very reasonable requests” for Australian financial institutions to implement.

“That is one way Australia can help prevent corruption from happening in PNG because Australia is fuelling it by allowing it to happen, allowing money to cross countries and come in.

Checks, balances
“[Right now] they’re not keeping checks and balances to see where the source of the finance is and how the people have money – are they public servants and politicians or are they just ordinary citizens?”

Knowing that they have nowhere else to invest their money, Yamo says it is more likely corrupt officials will try to invest it inside their country, making it easier for investigators to catch them.

He thinks there are other things Australia could be doing to help, pointing out that Australia’s history of pouring aid and development money into PNG while failing to prevent it being laundered back through its own country is illogical.

“The first step should be Australia looking at such things and [ensuring] that money should stay inside and contribute to the development of the country.

“And then maybe we won’t need Australia’s aid money.”

Yamo says following Koim’s speech, the media would have picked up on the accusations and defended their institutions’ policies. Yet since that story came out, Yamo says he hasn’t seen anything crop up in Australia’s defence, causing him to believe that Australia might never have been enforcing policies to stop this.

And so the question falls back on PNG’s “backyard”. Should PNG be working on improving its own anti-corruption legislation and enforcement before it accuses Australia?

Yamo says it lacks the political will.

“There is no political will to tackle this from the leaders. If there was political will to get rid of this, things would happen. Investments are done by politicians so if they go ahead and tackle this, it’s going to affect them so they just don’t want to do it because it comes back to them.”

Cassandra Mason is a Postgraduate Diploma in Communication Studies student journalist on the Asia-Pacific Journalism course at AUT University.