THE Proceeds of Crime Act 2005 (POCA) demands that banks conduct due diligence on financial transactions. Chairman of Task-Force Sweep, Mr Sam Koim said this in response to statements made in Parliament recently.
On Thursday 19th February, Member for Nuku District, Hon Joe Sungi asked if the government could intervene in cutting down the lengthy process at the banks because it is slowing down development in their districts. “Mr Sungi is not alone in raising this complaint as many of his colleagues did come out publicly on this earlier and hence prompted me to say this, the following.” Mr Koim said
Whilst the politicians enjoy scapegoating the banks for the delays, they should question themselves why their transactions are subjected to such a scrutiny. Is the procurement process free of political patronage and corruption? If there is no integrity in the procurement process, every ensuing transaction is tainted and hence questionable.
Politicians want unchecked power and more discretionary funds at their disposal. They have given themselves K15 million to expend through a near non-existent and corrupted procurement processes.
“Projects” has become the “perfect excuse” for their political expediency and rent-seeking agendas. We hear of millions of kina being poured into districts every year but are the people receiving their money’s worth of projects. We have come across cases where the MP (Chairman of JDP&BPC) and District Administrator would draw up fictitious meeting minutes and contracts to justify illicit transactions.
The POCA established a final safety net to prevent fraudulent transactions. The Act places an onerous duty on the financial institutions to ensure that they are not engaging, directly or indirectly, in transactions where they know or ought reasonably to know, to be proceeds of a crime. That duty extends to maintaining an Anti-Money Laundering division and routinely submitting suspicious transactions reports to the PNG Financial Intelligence Unit.
The prevalence of corruption of government funds in PNG increases the level of risks for the banks. Whilst the politicians may escape, as they do at most times, the banks will live with the trace of transactions. For banks, it’s their reputational risks. Banks live or die by their reputation. Banks therefore have to know their customer and conduct the appropriate level of due diligence on the transactions.
Off course financial institutions routinely have to make judgment calls balancing profitability with anti-money laundering and anti-corruption. It costs money to put in place prevention systems and, if one is inclined, there is big money to be made out of turning a blind eye.
The revelation by the Minister for Finance on the floor of Parliament that bank officials are receiving commissions to clear transactions is not surprising. It is an indication of collaboration between politicians and bank officials to subvert even the remaining red flag systems at the banks. We came across instances where certain bank officials who deal with major government transactions would deposit non-salary cash into their accounts in the same banks they work for, every time they clear a major government transaction. Those who supply the bribes are as guilty as those who demand for it.
PNG is part of the international financial system and through the Asia/Pacific Group (APG), is a member of the global Financial Action Task-Force (FATF). PNG has recently been graded on the 'grey list' of countries open to money laundering and terrorist financing. It won’t be long before we get on the “black list” if we fail to take active steps to correct the deficiencies in the anti-money laundering regimes we have.
Authorized for Release by
Sam Koim, LLB [Hons]
Sam Koim (centre) from Taskforce Sweep. On the right is Dr Ray Anere from PNG's National Research Institute. — at Deakin University Waterfront Campus.
VIDEO: Investigation Task Force Sweep (ITFS) Chairman Sam Koim has broken his silence on the involvement of banks in potentially corrupt financial transactions by politicians.Koim, who has successfully avoided media controversy in recent months, responded to questions raised by politicians on the floor of parliament yesterday regarding delays in the clearing of public discretionary funds at the banks.