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Billions lost through fraud each year

AS much as half of Papua New Guinea's A$3.5 billion development budget over three years has been lost to graft or dodgy overseas investments, the head of the Pacific nation's government anti-corruption task force says. Task Force Sweep (TFS) chairman Sam Koim says Australian financial institutions have been complicit by turning a blind eye to dirty monies being redirected to Australian connections.

A TFS analysis of PNG's 7.6 billion kina development budget from 2009 through 2011 shows almost half was lost to corrupt practices by public officials and government departments.

"We have uncovered a lot of instances where there was no recourse to budget and people were spending money left, right and centre, squandering funds and using them for private purposes," Mr Koim told AAP on Monday.

"Given the trend of corruption and seeing that there is nothing on the ground level to show for the expenditure of public funds, we have reason to believe that at least half of the budget we were investigating was wasted, mismanaged or stolen.

"Government systems and control mechanisms have, over time, been corroded. It is safe to say (the money) has been stolen."

Despite being often described as "an island of gold on a sea of oil" because of its abundant natural resources, the nation of seven million has heavily degraded infrastructure, poor health services and a severe lack of access to education.

Mr Koim, who has previously described Australia as PNG's Cayman Islands because of to the amount of money invested there, denied local media reports claiming most of the stolen funds had been invested in Australia alone.

However, he said Australian financial institutions had turned a blind eye to transactions and investments from high-profile PNG public servants and politicians on Australian shores.

"The banks think their responsibility ends once they ... send a transaction report," he said.

"PNG is a high-risk country. Instead of just sending a report and accepting this transaction, they should go further and say we are not going to accept this money ... they have been complacent in allowing those monies to enter the financial system in Australia."

At a presentation in Sydney last week, Mr Koim told the Australian Transaction Reports and Analysis Centre (AUSTRAC) that six PNG politicians had invested heavily in property in Cairns, and he intimated that the money invested far outweighed their salaries.

Declining AAP's request to name the politicians, who are the subject of the "intelligence gathering" stage of an investigation, in conjunction with Australian agencies such as the Australian Federal Police, Mr Koim told AUSTRAC the funds amounted to A$11.5 million in property deals in Cairns and northern Australia.

The property deals are divided into tranches of A$3.8m, A$1.9m, A$2.3m, A$2.3m, A$2m and A$1.45m, he said.

"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," Mr Koim told the conference on Thursday.

"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