FinCrime Central - Latest AML/CFT News & Vendor Directory

Papua New Guinea’s Central Bank Scandal: Money Laundering Allegations Rock Leadership

papua new guinea elizabeth genia central bank money laundering

In a move that has raised serious concerns about governance and financial oversight, Elizabeth Genia was appointed as the governor of the Bank of Papua New Guinea (BPNG) despite being the subject of an ongoing police investigation into suspected money laundering. Court documents obtained by the Organized Crime and Corruption Reporting Project (OCCRP) reveal that Genia fought in court to block the probe but has not been formally charged.

Officers from Papua New Guinea’s National Fraud and Anti-Corruption Directorate conducted searches at the central bank’s offices in August and September 2023. The investigation focused on Genia, who was suspected of depositing substantial amounts of money from undisclosed sources into her bank account. Additionally, investigators alleged that she received personal payments by check from two companies engaged by BPNG for services. The specifics of these services remain unclear.

Genia mounted a legal challenge, arguing that the probe violated her privacy rights and protections against arbitrary searches. While her case initially delayed the investigation, the courts later dismissed her legal challenge, labeling it an “abuse of the Court process.” Despite this, Genia was permanently appointed as the bank’s governor in early 2024.

In addition to the money laundering probe, documents reveal that Genia was also previously investigated by the police fraud squad over a questionable firearms procurement deal for BPNG’s security team. This case, originating from a whistleblower complaint, accused the central bank of awarding a contract without a proper tender process to a company that was not a licensed firearms dealer. The contract involved the disposal of three old pistols and the purchase of 10 new firearms.

The whistleblower, a former head of BPNG’s security, alleged that the contractor failed to deliver the firearms for over a year despite full payment and did not provide evidence that the old weapons were destroyed. Court records confirm that police obtained a warrant for documents related to the deal in 2020, though the status of this investigation remains unclear.

National Fraud and Anti-Corruption Directorate head Robert Volo declined to comment on whether either investigation is still active. Meanwhile, Genia has not responded to repeated requests for comment on both cases.

A Troubled Tenure and the Threat of FATF Grey Listing

Genia’s appointment comes at a turbulent time for Papua New Guinea’s financial sector. The Financial Action Task Force (FATF), the global body responsible for combating financial crime, has warned that the country is at risk of being placed on its “grey list” due to inadequate anti-money laundering controls. The grey list includes countries identified as having significant deficiencies in their financial systems that facilitate illicit financial flows.

FATF’s concerns include public corruption, tax evasion, and illegal activities such as logging and fishing. A grey listing could significantly damage Papua New Guinea’s financial credibility, making it harder for businesses to access international banking services and investment.

Paul Barker, director of the Institute of National Affairs in PNG, expressed concern about the impact of the scandal on the country’s financial stability. “The revelations about police investigations into Genia come amid a slippage in standards at the central bank,” he said. “Papua New Guinea is clearly entering a hazardous period for its critical financial and banking system.”

The Power Struggle Behind the Scenes

The appointment of Genia follows a contentious leadership battle at BPNG. Her predecessor, Benny Popoitai, had led the bank’s Financial Analysis and Supervision Unit (FASU), which provided the intelligence that led to the fraud squad’s investigation into Genia’s financial transactions.

Popoitai, who was forced into retirement in early 2023, launched a legal battle against BPNG and Genia to reverse his dismissal but was ultimately unsuccessful. Under his leadership, FASU took an aggressive stance on financial crimes, including launching civil and criminal complaints against Puma Energy, a subsidiary of the global commodities giant Trafigura.

Puma Energy was accused of money laundering by transferring over $200 million of PNG’s foreign currency reserves overseas without obtaining the central bank’s permission. The dispute led to a fuel crisis in the country as Puma scaled back operations. However, the company defended its actions, stating that the transactions were necessary to secure fuel imports.

A subsequent court case ruled in favor of Puma Energy, dismissing the central bank’s claim for an injunction. The company maintains that there are no ongoing legal disputes between it and BPNG.

Conclusion: What Lies Ahead for Papua New Guinea’s Financial Stability?

The appointment of a central bank governor under investigation for money laundering and fraud raises serious concerns about governance, regulatory oversight, and the integrity of Papua New Guinea’s financial system. As the country faces a potential grey listing by FATF, the credibility of its banking sector is at stake.

The lack of transparency and accountability in Genia’s appointment signals a troubling precedent for financial governance. With continued uncertainty over the fraud squad’s investigation and international scrutiny on PNG’s financial practices, the country’s economic future hangs in the balance.

As concerns over corruption grow, the international financial community will be closely watching how Papua New Guinea navigates this crisis and whether reforms will be implemented to restore confidence in its financial system.