Overview and Key Requirements
Papua New Guinea is a member of the Asia Pacific Group on Money Laundering (APG), and has committed to implement programs to prevent PNG’s financial system from being used for money laundering or terrorist financing activities.
The Financial Action Task Force’s (FATFs) 40 Recommendations are international standards that PNG has chosen to implement by virtue of its membership with the Asia Pacific Group (APG) on Money Laundering. APG is an autonomous and collaborative international organization founded in 1997 and consists of members within the Asia-Pacific region and a number of international and regional observers. One of the key objectives of the APG is to participate in, and co-operate with, the international anti-money laundering network – primarily with the FATF and with other regional anti-money laundering groups by ensuring that its member countries are implementing and complying with the internationally FATF requirements.
This prudential standard is also designed from the backdrop of the Bank of International’s (BIS)/Basel Committee’s 2011 revised, “core principles of effective banking supervision.” In particular, core principle 29- Abuse of Financial Services.
Beyond meeting obligations under international financial relationships, strong anti-money laundering measures support efforts to reduce corruption and tax avoidance and protect against PNG being used for criminal activities. The requirements under this Prudential Standard are consistent with the Proceeds of Crime Act 2005 (POCA) and regulations.
This Prudential Standard aims to ensure that each Authorised Institution (AI) documents and implements robust Know Your Customer (KYC) and anti-money laundering processes, meets obligations under the POCA and Financial Intelligence Unit (FIU)guidelines and operates to prevent the AI from being used to facilitate money laundering, corruption, tax avoidance and other criminal activity including terrorist financing. Greater understanding of customers and their financial arrangements through KYC procedures, also assists the Authorised Institution to develop and fine tune risk management processes.
The key requirement is that an Authorised Institution must implement a documented KYC and AML policies and procedures that incorporate:
- Customer Acceptance Policy;
- Customer Identification Procedures;
- Monitoring of Transactions; and
- Risk management.
In addition, each Authorised Institution must implement a program to review and remediate existing customer files to ensure appropriate risk categorization, completeness of files including identification of beneficial ownership, sources of wealth and political exposureTable of Contents
- This Prudential Standard applies to each Bank and Licensed Financial Institution authorized under the Banks and Financial Institutions Act 2000 (BFIAwhich are collectively referred to as Authorised Institutions (AIs) for the purposes of this prudential standard.
- It is a condition of the license of each AI and also responsible person to ensure that the AI complies with all requirements of this Prudential Standard.
- This Prudential Standard should be read in conjunction with:
- The Proceeds of Crime Act (2005); and
- Guidelines issued by the Papua New Guinea Financial Intelligence Unit under Section 14 (c ) of the Proceeds of Crime Act 2005
- Refer to BPS 001 Bank of Papua New Guinea Prudential Standards – Glossary and Definitions for a complete set of definitions and glossary of terms used in this Prudential Standard. Defined terms are hyperlinked in the electronic version of this Prudential Standard.
- For the purposes of this prudential standard, a ‘Customer’ is:
- a person or entity that opens, closes, operates or maintains an account, conducts a transaction and/or has a business relationship with the AI;
- a person on whose behalf the account is maintained (i.e. the beneficial owner) even if that person’s identity is unknown to the AI;
- beneficiaries of transactions conducted by professional intermediaries, such as chartered accountants, solicitors, stock brokers, trusts and similar;
- aperson or entity connected with a wire transfer or electronic funds transfer as either sender, correspondent or beneficiary either domestically or internationally in which the AI is involved;
- a person or entity that engages in transactions involving high demand value demand drafts or cash or obtains a stored-value instrument from the AI;
- a person or entity that applies for, opens, holds or uses a deposit box;
- a person or entity that obtains or holds a loan or mortgage;
- a person or entity who transacts on a third party account or conducts transactions on behalf of another person or entity; and
- a person or entity who attempts to do any of the above but is rejected or refused by the AI.
- For the purposes of KYC a “politically exposed person” is:
- a natural person who is or has been entrusted with prominent public functions whether in PNG or a foreign country;
- immediate family members of such a person; or
- associates of such a person, where“prominent public functions” includes the roles held by a head of state or province, a head of government, government ministers, senior and/or influential civil servants/officials entrusted with control of significant government assets or important government administrative role, senior judicial or military officials, senior executives of state owned corporations, and senior political party officials.