https://pacificsecurity.net/blog/how-should-papua-new-guinea-respond-to-its-latest-greylisting/

A decade after Papua New Guinea was removed from the Financial Action Task Force’s (FATF) ‘grey list’, the country is back on it.

Assessments by the Asia Pacific Group on Money Laundering (APG) in 2023 (report published in 2024) identified significant weaknesses in PNG’s anti-money laundering, counter-terrorist financing, and counter-proliferation financing (AML/CTF/CPF) framework.

Last month, FATF placed PNG on the list of jurisdictions under increased monitoring – known as the ‘grey list’ – announcing the country had made “a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime”.

The technical reasons for greylisting are clearly set out in the APG report, but the more important question is what reforms PNG must undertake not only to get off the grey list, but to stay off it.

PNG was previously greylisted in 2014, removed in 2016 after legislative amendments, and now relisted in 2026. This cycle points to a deeper issue: reforms have tended to be reactive and compliance-driven.

The challenge now is using the FATF grey list to reform institutions and practices that address the root causes of recurring deficiencies.

Weak links in the chain

In the latest listing, the FATF identified seven requirements for PNG to action to get off the grey list, including that PNG improve its understanding of money laundering risks and increase money laundering prosecutions.

The APG concluded that the Financial Assessment and Supervision Unit (FASU), PNG’s financial intelligence unit, is the only entity with comprehensive awareness of money laundering risks.

At the same time, APG found that prosecutions are not proportionate to the level of risk identified in national assessments.

Knowledge of money laundering and successful prosecution are intrinsically linked.

PNG’s anti-money laundering framework is intended to operate through a chain of responsibilities. Reporting entities (banks, law firms, real estate agents, and money changers) as well as relevant government agencies such as forestry, the Internal Revenue Commission, and border and immigration authorities, report suspicious transactions to FASU.

FASU analyses these reports and, where money laundering thresholds are met, disseminates an ‘intelligence product’ either to the police for criminal investigation, or to other relevant government agencies for regulatory or administrative enforcement. In cases referred to the police, where sufficient evidence is established, arrests are made and the Public Prosecutor pursues charges before the courts.

This chain depends on capacity at each stage.

FASU has reportedly disseminated approximately 5,000 intelligence products but police have lacked both the specialised skills and sufficient manpower to pursue them. At one point, only three officers were reportedly assigned to handle these 5,000 financial crime matters. The consequence has been negligible money laundering prosecutions despite the volume of intelligence products generated.

Barriers to prosecution

Several interrelated factors explain the low rate of prosecutions in PNG.

The first relates to the limited awareness and training in anti-money laundering laws and methods across enforcement agencies. Money laundering involves placement (the introduction of illicit funds into the financial system), layering (a series of transactions designed to obscure the origin of those funds), and integration (the reintroduction of funds as legitimate assets).

Effective investigation requires the ability to interpret financial records, trace transaction chains, analyse corporate structures, and gather admissible evidence which the prosecution team can use. Intelligence products, however well prepared by FASU, are insufficient if the police are not trained and/or equipped to use it.

Furthermore, anti-money laundering, counter-terrorist financing, and counter-proliferation financing laws are not taught at the only law school in the country, the University of Papua New Guinea. While this is not the sole explanation for weak prosecutions, it contributes to a knowledge gap, particularly when state lawyers confront politicians and elites represented by highly specialised foreign counsel.

Second, political interference in investigations in PNG is well documented. The defunding and disbanding of Investigation Task Force Sweep in 2014, after it pursued a high-level corruption case against the prime minister at the time, shows the vulnerability of anti-corruption bodies. The legal and structural conditions that enabled such interference in 2014 were never reformed. Consequently, high-profile investigations remain politically sensitive. Research shows that prosecutions of politically exposed persons have declined since 2008.

Lastly, funding inconsistencies undermine investigations. Although budget allocations to integrity agencies may appear adequate, discrepancies exist between approved allocations and actual disbursements. Enforcement agencies often receive less funding than budgeted. Limited funding, combined with the technical demands of complex financial investigations, reduces the likelihood of independent prosecutions.

What can PNG do?

To be removed from the grey list, PNG must do more than amend legislation or adopt new policies to satisfy FATF’s technical compliance requirements. It must also demonstrate effectiveness: tangible results in investigations, prosecutions, and asset confiscation.

Historically low prosecutions for corruption and limited confiscation of criminal proceeds present a significant challenge in this regard. While political leaders have expressed optimism about PNG’s ability to exit the grey list swiftly, what ultimately matters to FATF is results.

The Prime Minister initially assured the country that PNG would avoid greylisting; following the decision, the assurance shifted toward getting PNG off the grey list as quickly as possible.

The dominant narrative in PNG now centres on exiting the list rather than addressing the structural weaknesses that led to it. There is a real risk that PNG could meet quantitative enforcement thresholds by prosecuting lower-level actors while leaving entrenched power structures untouched. Such an approach may satisfy FATF metrics and facilitate removal from the grey list, but it would not produce meaningful change.

Laws must be strengthened to prevent political interference in the appointment and tenure of leaders of integrity institutions, including the police, the Public Prosecutor, the Ombudsman Commission, and the Independent Commission Against Corruption.

Budget allocations must be consistent and protected to ensure operational independence. Institutional capacity in financial investigation and prosecution must be strengthened through sustained training and investment.

Ignoring the underlying issues contributing to PNG’s greylisting leaves room for the cycle to repeat. As I argued previously, greylisting may in fact be beneficial if it compels reforms that PNG would be unlikely to undertake without sustained external pressure.