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-Analysis
Papua New Guinea has five months remaining to fix its anti-money laundering and counter-terrorist financing (AML/CTF) systems or face the severe repercussions of being placed on the Financial Action Task Force's (FATF) "grey list".
The FATF has imposed an October 2025 deadline, and the government is scrambling to prove its commitment to global partners.
Speaking in Parliament, Prime Minister James Marape said Treasury Minister, Ian Ling-Stuckey has been given the responsibility to lead a taskforce to fix PNG's issues associated with money laundering and terrorist financing.
"I summoned all agency heads to a critical meeting last week giving them clear direction, in no uncertain terms, that they work day and night to avert the possibility of us getting grey listed," Marape said.
"This review comes around every five years.
"We have only three or four areas that are outstanding that we must dispatch forthwith."
PNG is no stranger to the FATF grey list, having been placed under increased monitoring in 2014 before successfully being removed in 2016.
However, a recent assessment by the Asia Pacific Group on Money Laundering (APG) highlighted ongoing deficiencies, particularly in the effectiveness of PNG's AML/CTF regime.
While the country has made strides in establishing the necessary laws and regulations (technical compliance), the real challenge lies in PNG's implementation and enforcement.
The core of the problem, according to analysts, is a lack of effective prosecution and punishment for money laundering and terrorism financing.
High-risk sectors such as corruption, fraud against government programmes, illegal logging, illicit fishing, and tax evasion, remain largely unchecked by successful legal actions. Capacity gaps within key agencies like the Royal Papua New Guinea Constabulary and the Office of the Public Prosecutor have been cited as significant hurdles.
Recent drug hauls have also highlighted existing flaws in detection in the country's financial systems.
The implications of greylisting are far-reaching and potentially devastating for a developing nation like PNG, which is heavily reliant on foreign investment and international financial flows.
Deputy Opposition leader James Nomane warned in Parliament that greylisting "will severely affect the economy, investor confidence, and make things worse for Papua New Guinea with respect to inflationary pressures, the cost of imports, and a whole host of issues".
If PNG is greylisted, the immediate economic fallout could be substantial. It would signal to global financial institutions that PNG carries a heightened risk for financial crimes, potentially leading to a sharp decline in foreign direct investment.
Critical resource projects, including Papua LNG, P'nyang LNG, Wafi-Golpu, and Frieda River Mines, could face delays or even be halted as investors become wary of the increased financial and reputational risks.
Beyond investment, the cost of doing business in PNG could also rise. International correspondent banks, vital conduits for cross-border transactions, may de-risk by cutting ties or scaling back operations with PNG financial institutions.
This "de-risking" could make it more expensive and complex for businesses and individuals alike to conduct international transactions, leading to higher fees and increased scrutiny.
