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Some criticisms of the Australian Banking System, and Government

by MICHAEL J PASSINGAN

Recent attempts to transfer money from Papua New Guinea to Australia highlight growing concerns about money-laundering between the two countries.
The Prime Minister, Peter O’Neill, transferred K200 million to Australia late last year, and shortly afterwards one of his special lady friends, Ni Cragnolini, transferred K50 million.
Some years before more than K100 million of public funds was washed through the Commonwealth Bank in Lismore, NSW, in a self-evidently illegal transaction.
The Australian authorities refused to take action on this transfer when requested to do so by PNG. Indeed, the then Australian Treasurer, Wayne Swan, did not even bother to reply to requests for action.
It is not known whether AUSTRAC, Australia’s money-laundering watchdog, stopped the latest transfers, or whether it even knew about them.
It is not known whether the PNG and Australian banks involved reported the transactions as possibly suspicious.
The chances are that the answer is no on all counts.
The transfer by the Prime Minister should certainly have been reported. It is known to have been “expedited” through the PNG banking system. Due process was not followed.
The reason for the inaction is that the Turnbull Government in Australia, like its predecessors, is hopelessly compromised by the need to keep the Manus refugee centre open for business no matter the cost.
This has given comfort to PNG politicians and other criminals, and the PNG authorities with whom they are aligned.
Numerous commentators have pointed out the failure of the current Australian Government to act on bilateral money-laundering and other crime and official corruption, including the misappropriation and misapplication of Australian aid.
Meanwhile, with immunity from international scrutiny and action, O’Neill regime corruption reaches epic proportions as the Prime Minister uses Australia’s weakness to further undermine accountability and transparency.
Anti-corruption watchdog Transparency International is increasingly concerned about the Australian Government’s failure to act.
Late last month its Australian branch produced a position paper on Illicit Financial Flows, which explicitly mentioned money-laundering between Australia and PNG.
The paper said: “According to evidence from PNG (Operation Task Force Sweep), corrupt senior officials have used opportunities through regular travel to Australia, business relationships, or their relatives in Australia to invest corruptly obtained funds in Australian real estate.”
The paper rightly questions Australia’s commitment to tackling the problem.
It said there are “significant questions as to whether AUSTRAC … has been delivering on its mandate; and whether the Australian Federal Police has an effective mandate to investigate money laundering offences committed by entities such as banks and other entities ‘regulated’ by AUSTRAC.
The incoming chairman of TI Australia, Anthony Whealy QC, recently told the ABC that lack of action by successive governments to curb public sector corruption was the reason Australia continued to slide down international corruption rankings.
"The delay in responding to these issues has now made reform critical and a commitment to ramp up efforts to tackle foreign bribery, which has particularly impacted perceptions of Australia, is now urgent," Mr Whealy said.
The inflow of illicit foreign funds into Australia's property market is also cited as a problem.
Mr Whealy said unless Australia strengthened its anti-money laundering regime it would continue to fall in the corruption rankings.
"We need to have better vision and control of where money is coming from, he said."
Banks in Papua New Guinea and Australia are a major problem. There are only three major banks in PNG, and two of them are Australian (the ANZ and Westpac). Sectoral capacity and regulation are weak.
Because of the small PNG market and the dominance of the domestically owned Bank South Pacific, the attractions of international business are obvious.
The volume of bilateral transactions and the revenue and relationships involved are very significant - the ANZ has been notable for its loud support of the corrupt O’Neill regime in its efforts to drum up more of this lucrative business.
And there is evidence to suggest that the central bank, the Bank of Papua New Guinea, is increasingly compromised.
It was involved in a highly questionable commercial arrangement devised by Prime Minister O’Neill and one of his advisers, Dr Jacob Weiss, himself an adviser to the central bank, for the K145 million ($A 70 million) purchase of power generators for the Government.
The illegal $1.1 billion (K3 billion) state borrowing from UBS Australia to finance the Government’s purchase 10 per cent of Australian-listed Oil Search shares should also have required central bank approval.
The central bank should also have considered the Prime Ministerial transfer of K200 million to Australian under standard forex transaction procedures. However these procedures are known not to have been applied properly, at the very least so as to avoid PNG’s tight forex rationing.
A paper written in 2012, Applied Forensic Accounting – Experiences from the Papua New Guinea Financial Intelligence Unit, highlights the many weaknesses in the PNG banking system.
Its authors, PNGFIU commander Bernard Barrum and AFP secondee John Chevis, proposed a number of initiatives to reduce official fraud, corruption and money-laundering.
The banking system was a primary concern, but the PNGFIU’s proposals were hampered by a number of factors – the sheer volume of potentially corrupt transactions, strong opposition from the commercial banks, and a focus on public servants.
Politicians led by the Prime Minister and his cronies, are at the heart of official corruption, but other beneficiaries include a coterie of corrupt Australian businessmen and women alongside a growing number of new Asian businesses.
Nevertheless the PNGFIU had a significant impact with the measures that it was able to implement against public service fraud and money-laundering.
However their paper makes it clear that banks in markets such as PNG, or transacting large volumes of business with regimes known to be corrupt, must take a higher level of responsibility for preventing corrupt dealings.
“A bank in a developed country like Australia that fails to prevent the placement of drug proceeds into the banking system is less likely to impact on the viability and stability of the nation and health and welfare of its citizens,” they say.
“For a bank that facilitates (or is used to facilitate) grand corruption in a country like PNG, that risk is considerably higher, particularly where such transactions are repeated week after week, year after year.
“Banks in such environments should arguably be held to a higher standard of accountability.”
This is a strong argument relating to Australian banks domestically and in Papua New Guinea given their position in the PNG market, the volume of transactions between the two countries, the extremely high levels of corruption in PNG, and the influence that Australia could bring to bear were it not for the Manus imperative.
Meanwhile, TI Australia notes that Australia’s international corruption reputation continues to tumble.
Today it was revealed that world-wide perceptions of the level of corruption in Australia’s government sector continue to worsen, with Australia’s CPI score falling to 79, down from 85 in 2012, 81 in 2013 and 80 in 2014,” it said in a media release last month.
“Australia is now ranked 13th out of the 168 countries included in the Index – down six positions since 2012, and joining countries like Libya, Brazil, Spain and Turkey as big decliners over that period.”
Australia’s most pressing corruption problem is right on its doorstep, but the PNG Government has shown how little it has to fear while the Turnbull Government is compromised by Manus.