ECONOMIC globalisation brings with it opportunities for money laundering involving politics and local and transnational networks.
As cross-border financial flows increase, so too does the potential for cleansing dirty money.
This is particularly apparent in Papua New Guinea, where, until recently, a booming economy has enabled elites to amass state largesse for personal and political advantage.
In 2012, Sam Koim, head of the country’s anticorruption agency Investigation Taskforce Sweep, drew international attention to the millions of PNG kina that have allegedly been laundered into Australia by PNG elites – much of it ending up in the north-eastern Australian property markets.
For its role in harbouring illicit funds, he dubbed Australia the ‘Cayman Islands of the Pacific’. While the Pacific Islands remains one of the most heavily aid-dependent regions in the world, another well-placed observer has commented that “inward flows of development aid are often more than matched by outward flows of illicit money to be stashed or spent abroad, often in the very same countries providing development assistance”.
An investigation by NGO Global Witness and Australian media outlets Fairfax and SBS, shows that the laundering of corrupt monies between PNG and Australia involves a network of banks, real-estate markets, politicians and lawyers.
In June 2015 lawyers in PNG were caught on film explaining how to launder illicit money through Australia.
This system involves politicians paying inflated invoices to Australian and Papua New Guinean lawyers who transfer funds into Australian bank accounts or property, where it can be accessed by corrupt politicians.
While certain parts of the Pacific have a reputation for money laundering, the case of Vanuatu – an offshore financial centre - shows that these problems can also be addressed. In the 1990s, Vanuatu’s politicians (including the prime minister) were embroiled in a money laundering scandal, where US1.1 million dollars of cyclone relief were allegedly syphoned off into the PM’s personal accounts in Singapore and Malaysia.
No money was recovered and no charges were ever laid against officials. Political leaders and government officials also attacked the country’s independently minded Ombudsman Commissioner who had highlighted this and other cases of large scale government corruption, ultimately resulting in her replacement by a commissioner deemed more sympathetic to the government in 1998, after a new authorising Act was passed.
Yet, some years later the country managed to acquire a reputation for good governance. So much so that in 2008, the US government’s Millennium Challenge corporation selected Vanuatu as the first country to receive unconditional aid, due to its reputation for clean government.
Vanuatu has continued to maintain a reputation for responding strongly to corruption.
In 2015, 14 MPs – almost 30% of the country’s Parliament - were successfully prosecuted for corrupt activities, demonstrating that the state’s accountability system was better equipped to respond to political corruption than many other Pacific nations.
Extreme cases of corruption also characterised Solomon Islands’ dramatic decline during its ‘tensions’ period (1998-2003).
The peacemaking process between rival ethnic militias established under the Townsville Peace Agreement in 2000 became rapidly corrupted as domestic rent seekers, including political leaders, sought to appropriate compensation funds set aside as restitution for those who had suffered material loss during the conflict.
As the national economy went into free fall, assorted foreign carpetbaggers sought to capitalise on the collapse of the country’s regulatory and enforcement agencies and the seemingly inexhaustible greed of local elites.
These included efforts by a little known Australian company offering to purchase 80% equity in the Solomon Islands Development Bank and, later, to acquire extensive rights to engage in mining, tourism, logging, fishing, banking, printing and a range of service activities.
Only a timely intervention by the Central Bank prevented the government proceeding further on a detailed memorandum of understanding with the company.
The subsequent deployment of the Regional Assistance Mission to Solomon Islands (RAMSI) - 2003-2017 - and its substantial engagement around institutional strengthening has significantly improved governance and financial management in the island nation, though, by no means, ended the ability of local elites to plunder state coffers or disrupted the ‘money politics’ that continues to animate the prevailing national political culture.
While the case of PNG highlights that economic globalisation helps enable opportunities for money laundering, developments in Vanuatu and in Solomon Islands nevertheless suggest that the negative impacts of these nefarious networks in the Pacific are open to remedial interventions by domestic and international actors.