Papua New Guinea Approaches FATF Grey List: What it Means for Business, Government, and Citizens

Papua New Guinea (PNG) is rapidly moving toward being placed on the Financial Action Task Force’s (FATF) grey list by February 2026, a development that has raised alarm across the country’s financial, political, and social spheres. The FATF grey list identifies countries with significant deficiencies in their anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks, putting them under heightened international oversight. The reasons for PNG’s potential listing are deeply rooted in governance failures, specifically weak enforcement against financial crimes like gold smuggling, money laundering, tax evasion, and illegal resource extraction.

Wilson Onea, Director of the Financial Analysis and Supervision Unit (FASU), highlighted these enforcement lapses before the Special Parliamentary Committee on Public Sector Reform and Service Delivery.

“PNG will be grey-listed by February next year,” Onea warned, “and a large part of that is because of the ineffectiveness of state agencies to enforce their respective mandates. We’ve shown some capability, but more needs to be done, particularly in investigating and prosecuting offenders.”

Northern Governor and Committee Chairman Gary Juffa pressed on the connection between enforcement weaknesses and illicit activities in the alluvial gold mining sector, which he identified as a major contributor to the issue.

“Is FASU aware of the gold smuggling activities happening in the country? With poor enforcement in this area, does this push PNG toward grey-listing? And is FASU able to pinpoint the bad actors involved?” Juffa asked.

Onea confirmed that gold smuggling is indeed a significant factor in FATF’s assessment but emphasized a critical structural limitation.

“FASU is an intelligence-gathering agency. We do not have prosecutorial powers,” he explained. “We depend on law enforcement agencies to act on the intelligence we provide, and that’s where the current system is breaking down.”

This failure signals not only operational shortcomings but suggests deeper corruption and possible complicity within institutions meant to uphold the law, undermining PNG’s efforts to combat financial crime.

The Consequences of FATF Grey Listing for PNG

Being placed on the FATF grey list has serious and multi-faceted consequences that will impact PNG’s economy, government, businesses, and everyday citizens. Understanding these ramifications is crucial as the country approaches this critical juncture.

Impact on Business and Investment Climate

1. Increased International Scrutiny and Compliance Costs
   FATF grey-listing subjects a country to intensified monitoring by the global financial community. For commercial banks and other financial institutions in PNG, this means increased due diligence requirements, frequent audits, and stricter reporting obligations to ensure AML/CTF compliance. These regulatory burdens inflate operational costs and slow down financial transactions.

2. Restricted Access to Global Financial Networks
   International banks and correspondent financial institutions become more cautious in processing transactions involving grey-listed countries. This cautious approach often leads to delays, freezes, or outright rejection of cross-border payments and investments. PNG businesses engaged in export-import trade, foreign direct investment, and remittance flows will face bottlenecks, directly affecting liquidity and economic activities.

3. Erosion of Investor Confidence
   Global investors monitor FATF listings closely as indicators of financial and governance risks. A grey-listing signals a heightened risk of corruption and money laundering, deterring foreign direct investment (FDI) and portfolio capital inflows. Reduced investment slows economic growth, job creation, and infrastructure development essential for PNG’s long-term prosperity.

4. Adverse Effects on Small and Medium Enterprises (SMEs)
   SMEs in PNG, already grappling with limited access to finance, will find it even harder to secure loans or open international banking relationships as local banks tighten their risk assessments. This pressure disproportionately affects local entrepreneurs and communities relying on small businesses for livelihoods.

Challenges for Government and Law Enforcement

1. Damaged International Reputation and Diplomacy
   A grey listing undermines PNG’s international standing, affecting diplomatic relations and cooperation with multilateral organizations. It may hamper PNG’s ability to negotiate trade agreements or secure development aid, as partners view grey-listed countries as higher risk.

2. Increased Pressure to Reform AML/CTF Frameworks
   International bodies and FATF will demand urgent reforms supported by rigorous action plans. The government will face pressure to overhaul regulatory agencies, enhance inter-agency collaboration, and strengthen law enforcement capacities. Failure to comply risks escalating to blacklisting—a far more severe sanction with crippling financial isolation.

3. Exposed Governance and Institutional Weaknesses
   The grey listing highlights endemic governance issues, including corruption and weak political will to enforce the law impartially. As Wilson Onea remarked, “We depend on law enforcement agencies to act on the intelligence we provide, and that’s where the current system is breaking down.” Without political leadership prioritizing anti-corruption and justice, reform efforts risk being superficial.

Implications for Ordinary Citizens

1. Economic Slowdown and Job Losses
   Reduced foreign investment and constrained liquidity will translate into slower economic growth and fewer employment opportunities, particularly in mining, logging, fishing, and services sectors. This slowdown may hit vulnerable populations hardest, exacerbating poverty and inequality.

2. Higher Cost of Living and Access to Services
   Increased compliance costs for banks and businesses can trickle down to consumers through more expensive loans, banking fees, and higher prices for imported goods. Additionally, essential public services funded through tax revenues may suffer if revenue collection falters due to tax evasion going unchecked.

3. Diminished Public Trust in Institutions
   When corruption and impunity flourish, citizens lose faith in their government’s ability to provide security and justice. This erosion of trust can fuel social unrest and undermine national cohesion at a time when concerted effort is needed to address structural challenges.

Demystifying Common Myths

Myth 1: FATF Grey Listing Means Immediate Economic Collapse

While grey listing imposes serious challenges, it is not an automatic economic death sentence. Many countries have successfully exited the grey list within a few years by implementing genuine reforms. PNG still has the opportunity to reverse course, provided it addresses enforcement gaps decisively.

Myth 2: FATF Grey Listing is Only About Money Laundering

Grey listing covers a broad set of financial crimes including money laundering, tax evasion, corruption, and terrorism financing. It reflects systemic governance weaknesses that affect the entire financial and regulatory ecosystem.

Myth 3: The Problem Lies Solely with FASU or One Agency

FASU plays a critical intelligence role, but the core problem lies across multiple government agencies’ failure to act on information due to resource constraints, corruption, or lack of political support.

What Needs to Happen Next?

Wilson Onea’s call to action is clear:

“If we start investigating and prosecuting more cases, not just gold smuggling, but money laundering, tax evasion, illegal logging and fishing, we can show real progress. That’s the only way to restore confidence and avoid the serious consequences of grey-listing.”

Without this political will and institutional reform, PNG risks reputational damage and economic isolation on the global stage.

To achieve this, coordinated efforts are required to:

• Strengthen inter-agency cooperation with clear mandates and accountability.

• Enhance the prosecutorial powers and resources available to enforcement agencies.

• Increase transparency in resource extraction sectors and financial transactions.

• Build public trust through visible anti-corruption measures.

• Engage international partners for technical assistance and capacity building.

Being grey-listed by FATF is not just a label but a reflection of deep-rooted institutional weaknesses that have allowed financial crimes to flourish. The consequences will be wide-reaching—from curbing business growth and investor interest, challenging government credibility, to affecting everyday Papua New Guineans through slower economic progress and diminished services.

However, this challenge also brings an unprecedented opportunity for reform and renewal. With decisive political leadership, robust enforcement, and public support, PNG can restore confidence, safeguard its financial system, and set a course for sustainable economic development in an increasingly interconnected global economy.