NOOSA – Transparency International PNG (TIPNG) has strongly supported PNG’s financial regulator after Central Bank governor dissociated his bank from action it had taken to investigate possible money laundering.
TIPNG chair Peter Aitsi called on the government and the private sector to respect the independence of the Financial Analysis and Supervision Unit (FASU).
The unit came under attack after it revealed an investigation into the local Bank of South Pacific (BSP) has found "detailed and compelling evidence" of contraventions of PNG’s Anti-Money Laundering and Counter Terrorist Financing Act 2015 (AMLCTF).
FASU director Benny Popoitai said “the nature of BSP’s non-compliance was serious enough for FASU to have issued an infringement notice, however FASU has chosen to apply a formal warning instead.”
But even this mild regulatory knuckle rap didn’t stop Central Bank governor Loi Bakani distancing himself from FASU, an operationally independent unit of the Bank with its functions and powers specified by law.
“The Bank of PNG disassociates itself from the statement made by FASU,” Bakani said. “FASU should have consulted BPNG on the statement before releasing it.
“BPNG is concerned about the adverse impact of the media statement by FASU on BSP, PNG’s largest bank and the stability of the financial system, which have been achieved and sustained well before the AML/CTF Act came into being.”
Aligning himself even further with BSP, Bakani reassured the public that the banking system, including BSP, was sound and meets all regulatory requirements and standards.
Bakani’s dash for cover followed a torrent of strong criticism of FASU from political and business leaders, while BSP’s own response was a blanket denial and threats of legal action.
“What happens in someone’s account is not BSP’s doing every time,” said PNG prime minister James Marape, adding that it had always conducted itself well.
High profile critics of FASU made no acknowledgement of the deficiencies revealed by FASU including that BSP had failed to identify legitimate reasons for several million kina in payments made by one customer to another who was described as a "politically exposed person".
FASU also contends that BSP - recently listed on the Australian stock exchange as the BSP Financial Group Ltd (BFL) - had failed to conduct effective screening of customers who had allegations of money-laundering against them.
Stepping forward to defend FASU, TIPNG’s Aitsi said that “a diligent independent regulator is expected to undertake its responsibilities and dutifully assess the conduct of operators against the relevant laws.
“An independent and well-functioning watchdog is of significant benefit to the PNG banking and finance sector as it acts as a shield to deflect attempts by corrupt individuals who may attempt to coerce or threaten businesses to breach these laws.”
Aitsi said that earlier this year, FASU director Popoitai had revealed he had sent about 10,000 files to different law enforcement agencies but there had been no prosecutions resulting from these referrals, indeed no action at all had been taken.
“This is particularly concerning for PNG as it is scheduled for a mutual evaluation by the Asia-Pacific Group on Money-Laundering (APGML) next year,” Aitsi said.
“This trend of inaction on suspected money-laundering activities cannot be ignored lest PNG falls back into the APGML grey list.”
Nations are placed on the grey list if they are seen as posing a risk to the international financial system due to their inability to effectively prevent money-laundering and combat terrorist financing.
If this happened, Aitsi said “it will gravely impact the confidence of the international financial markets in PNG’s banking and finance system and also reflect poorly on the reputation of PNG government.
“To avoid such an outcome, the government and private sector must actively encourage and support the efforts of an independent and effective regulator.
“In terms of PNG’s overall governance, the role of independent and effective regulators is vitally important if we are serious about reducing the level of corruption in our country.”
FASU has given the world yet another insight of how the PNG elite closes ranks whenever a matter is flagged that portends major high level corruption.