Papua New Guinea: How good AML is pushing placement back to the gatekeepers

Effective anti-money laundering programmes in banks are moving the gateposts for placing dirty cash into the financial system back a few steps, into the offices of lawyers, accountants and other professional service providers.  Undercover reporters working with Global Witness have video-recorded two prominent lawyers in Papua New Guinea explaining exactly how to channel a large bribe to a government minister.

Corruption reaches “right to the top” in Papua New Guinea, a representative of the national anti-corruption task force states in the video posted above. Being a government minister is the fastest way to becoming a millionaire, one of the lawyers claims.

Papua New Guinea shares a resource rich island of New Guinea with the Indonesian provinces of Papua and West Papua. As noted by Global Witness,  despite its resource wealth, much of the money made from them fails to reach the majority of the population. Plagued by corruption, the people on the lowest rungs of the economy suffer while those at the top line their pockets.

Right to the top

While bribery may be a well-established norm in PNG, the method of channelling funds to corrupt politicians has evolved, largely due to more stringent anti-money laundering rules and closer transaction monitoring.

The days of  “banging a million bucks into a private account in Singapore” are over, one of the lawyers explained to the undercover reporter.

AML in banks is largely effective – huge investment in compliance expertise and monitoring software has pushed the threshold for placing dirty money into the system away from the banker and towards other professional services providers. Today’s enablers are lawyers, accountants, estate agents and others, employed to help disguise the funds before they reach the financial system.

Australia, according to Global Witness researchers, is providing an open door for anyone to place dirty cash in the country’s financial system. The Australian Federal Police have estimated that more than AUS200m (USD147m) laundered from PNG into Australia annually.

During a conversation with a prominent lawyer in Port Moresby, bribes are referred to as “ministerial improvements” and “mobilisation fees”. Paying bribes in large sums is ill-advised, as it attracts too much attention. “Small dribs and drabs”  – what some of us might call structuring – is recommended as an alternative method of getting the cash to the minister unnoticed.

False accounting – using inflated invoices for legal services – are touted as a method for sending bribe money to the intended recipient’s Australian bank account. The false invoicing method is well used to launder money, but this is the first time we’ve heard a law firm offer its own books to move the cash.

Alarmingly, this once again underscores how significant ‘gatekeepers’ – lawyers, estate agents, accountants – are in enabling financial crime. Both lawyers in this film quicky hid behind a veil of hypotheses once questioned by Global Witness after the recordings. They know how to do this, but for how long can they keep getting away with it? Lawyers and law firms for estate agents exposed in the ‘From Russia with Cash’ film know how to use the  law to protect their clients. But there is something more powerful going on here – an absence of ethics or simply the will to do anything for filthy lucre.

Being a politician provides the quickest route to becoming a property millionaire, one lawyer tells the Global Witness reporter. Well. you’ve got to stash the bribe money somewhere eh?



Regulators Step Up Probe Into Bank Hiring Overseas

The US Securities and Exchange Commission is widening its investigation into whether banks in Asia have cropped-fca-singapore.jpgbreached anti-bribery laws by employing the relatives of high-ranking public officials.

The SEC sent letters in March to Credit Suisse Group, Goldman Sachs Group, Morgan Stanley, Citigroup Inc and UBS AG requesting more information on hiring practices, according to reports. The regulator started to investigate JP Morgan‘s hiring history in 2013.

None of the insitutions have been accused of wrongdoing.

Investigators are examining possible connections between employees hired as a result of referrals from foreign officials and clients, the Wall Street Journal reported, and consequently whether there were connections between hiring  “an unsuitable employee to the bank’s winning a contract or other new business.”

Attempting to influence a foreign official with a view to winning business is a breach of the US Foreign Corrupt Practices Act.

Source: WSJ


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Why Thailand needs

Thailand is in turmoil. Anti-government whistle-blowers are still on the streets of the capital, the general elections of February 2nd FCA - YLdefacedwere peacefully disrupted. In many parts of Bangkok and in southern Thailand, where I live, the elections did not happen at all. I scoured this island for a polling station yet found nothing but a few defaced posters of PM Yingluck Shinawatra. The voting in south Thailand never happened because Post Office workers refused to release the ballot papers in time for voting.

Tourism numbers are officially down although all guest-houses on this island appear to be full. Foreign governments are issuing travel warnings to would be tourists. Few have issued a travel ban as yet, but it appears the medical tourists are steering clear, opting to put up with un-botoxed brows until the rallies stop. Even the once-loyal rice farmers have moved on Bangkok to express their anger at not receiving promised subsidies for their crops.

Anti-corruption civil sparks

The protests were sparked in November by a mass public action and social media campaign to stop the passing of an Amnesty Bill, which would have been a green light for exiled politicians – with Thaksin Shinawatra at their helm – to return to Thailand without fear of prosecution for electoral fraud. Thai people want to stop corruption in their country, as do the ex-patriot residents and business owners. Thai people have taken to the streets and to social media sites to do voice their opposition. Anti-bribery sentiment is strong among the foreign community, but uncoordinated and there are few outlets for publicising attempted bribes and blatant corruption. A Facebook group called Corruption and Business in Phuket is providing an excellent stream of news on anti-bribery efforts in the province. This week, Phuket citizens called for a public meeting on bribery and corruption, following a blockade of one of the islands busiest beaches in protest at an alleged TBH20,000 (USD609) paid to three Tourist Police Officers. The funds were allegedly returned to the briber by the officers during a “private meeting.”

Official channels

Although not well publicised, Thailand has a National Anti-Corruption Commission, staffed by more than  1,000 people dedicated to pursuing bribes made to state officials and government contracts; private bribery is beyond the commission’s remit. Led by Dr Sirilaksana Khoman, the commission is government funded but has autonomy in investigations and prosecutions. In an interview with The Big Chilli ex-pat magazine, Dr Sirilaksana outlines why she believes corruption has changed in Thailand since 1997, (the Asian economic crisis, the concentration of political power under a “charismatic” new leader and numerous allegations of large scale corruption), three “grand”corruption cases she has worked on since 2007 and the pre-emptive work NACC carries out by scrutinising the accounts of major infrastructure and technology projects as they happen.

The NACC does accept reports of bribery and corruption from the public, which must be signed by the complainant. The NACC uses a system to anonymise the letters once received, by cutting the names/signatures off and placing them in an envelope kept in a heavily guarded safe. It gave no figures on how many letters it receives annually. From the outside, this system looks less  than appealling to anyone who has just been stopped by a traffic cop and asked for a bribe to avoid getting a ticket. Accessibility and anonymity are two fundamentals of any whistle-blower scheme and, reporting on a state employee who has just tried to extort funds from you is blowing the whistle.

I am a huge fan and supporter of the Janaagraha led  I Paid A Bribe initiative, set up in 2010 initially to estimate the total amount paid in bribes each year  in India. In India, as in Thailand, there are fixed bribery rates for certain services.  For example, getting your passport processed, getting the stamp on the deeds of your house, getting the electricity company to turn on the supply are all covered by a recognised and regularised extra payment directly to the civil servant. The I Paid A Bribe portal collects information on bribes paid, bribes requested by not paid and incidents of meeting an “honest officer.” Those submitting stories can remain anonymous or publicise their names.

The IPAB intitiative has grown beyong india, and now has sites operating for 11 countries in Asia, Africa and Europe, with plans for portals in North and South America. Regrettably, Thailand is not yet part of the IPAB plans for Asia but this country could really benefit from this service.

This is a shout out to IPAB and anyone in Thailand, via Corruption and Business in Phuket, Eyes of Thailand and to Dr Sirilaksana herself to support the launch of in Thailand.  Let’s get this started.

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