Papua New Guinea has been placed on the Financial Action Task Force (FATF)’s grey list for the second time in 10 years. This time, however, the country cannot simply pass new legislation to resolve the issue. It will have to demonstrate that its reforms work in practice. 

The FATF’s decision marks the end of Papua New Guinea’s decade-long descent into a crisis of financial governance, and was far from unexpected. It reflects the country’s inadequate approach to combating money laundering, entrenched corruption, and institutional weaknesses that have repeatedly been identified in domestic and global assessments.  

Since independence in 1975, Papua New Guinea has maintained regular elections and constitutional transfers of power, but this stability has coexisted with persistent governance challenges. Key sectors generate significant revenue while also creating opportunities for illicit financial flows. These conditions have enabled criminal markets to become embedded within its formal economy. The actors involved are similarly interconnected: political elites who exercise control over state resources, ordinary Papua New Guineans engaged in informal and survival economies, and foreign commercial actors operating in weakly regulated environments.  

A 2017 National Risk Assessment identified logging, public corruption, fisheries and tax evasion as ‘major’ money laundering threats, and estimated the associated annual proceeds to be between US$560 million and US$1.4 billion. Since 2018, annual reports from Papua New Guinea’s financial intelligence unit have consistently highlighted a disparity between the number of official suspicious transaction reports and successful money laundering prosecutions. In 2024, the Asia/Pacific Group on Money Laundering emphasized the country’s ineffective use of financial intelligence, its failure to monitor vulnerable sectors adequately, and its lacklustre approach to asset confiscation.  

These shortcomings were further highlighted by the 2025 Global Organized Crime Index, in which Papua New Guinea received a score of 3.50 out of 10 for its ‘anti-money laundering’ measures – approaching the ‘extremely ineffective’ threshold. The country’s overall resilience score was even worse, at 3.21, the lowest in Oceania.  

The Index gave Papua New Guinea a criminality score of 5.78, higher than any other country in the region, placing it 65th out of 193 countries. This finding has risen consistently since the first iteration of the Index in 2021, and the latest edition found financial crimes, particularly, to be pervasive, driven by ‘corruption, misappropriation of public funds and fraud schemes’. 

Papua New Guinea was previously grey listed in 2014, and delisted in 2016, after putting the necessary legislation and institutions in place. The situation today is very different. Under the FATF’s effectiveness framework, the country must now show measurable results, rather than merely meeting technical requirements.  

The FATF has set out a seven-point action plan to help Papua New Guinea graduate from the grey list. However, the country faces an uphill battle. As regional and global assessments have revealed, it is a jurisdiction where criminal exposure is high, institutional defences are weak and illicit financial flows can flourish. 

Where the money is – and the risks 

In 2014, Papua New Guinea surpassed Malaysia to become the world’s largest exporter of tropical wood, producing 3.8 million cubic metres of exports. Its exclusive economic zone, the largest in the Pacific at 2.4 million square kilometres, supports fisheries exports worth between US$250 and US$400 million each year. Gold exports are even more significant, with revenues reaching approximately US$3 billion in 2025. 

These high-risk sectors also generate large sums of illicit revenue. In 2023, Papua New Guinea’s Internal Revenue Commission seized over US$32 million from a logging company for unpaid taxes. Illegal, unreported and unregulated fishing is estimated to cost the country as much as US$30 million each year. A Special Parliamentary Committee’s inquiries indicate that approximately US$34 million is lost annually to smuggling in the alluvial mining sector. In February 2026, US$3 million worth of confiscated gold reportedly went missing at Jacksons International Airport in the capital, Port Moresby. 

The Index indicates how deeply embedded these illicit markets have become. Papua New Guinea’s flora crimes score of 8.50 out of 10, driven mainly by illegal logging, places it on a par with much larger economies such as China (which also scores 8.50 for flora crimes). Non-renewable resources crimes, centred around gold mining, score 7.0 out of 10, while fauna crimes received the largest increase in score since 2023, rising by 1.50 to reach 6.50. Corrupt state-embedded actors, the most influential criminal actor type in the country, are heavily involved in these criminal markets. However, the Index also notes the ‘growing presence of foreign actors engaged in illicit financial activities within the country’. 

Corruption at the core 

Papua New Guinea’s National Risk Assessment identified public corruption as a major facilitator of money laundering, particularly in relation to procurement, subnational spending and governance of the extractives sector. The Asia/Pacific Group on Money Laundering’s evaluation, meanwhile, found that the number of convictions relating to money laundering was ‘too low to dissuade potential criminals’.  

A 2025 study by the Development Policy Centre, an Australia-based think tank, revealed that investigations and prosecutions involving political figures suspected of corruption had declined since 2008. In addition, despite Papua New Guinea’s financial intelligence unit referring over 5 000 money laundering cases to the police and generating thousands of suspicious transaction reports, fewer than five successful prosecutions have occurred in the past two decades. Most of these were self-laundering cases rather than complex corruption prosecutions. Asset confiscation remains minimal. 

Together with the significant role played by state-embedded actors within the criminal landscape, corruption contributed heavily to Papua New Guinea’s low resilience score in the Index. Indeed, the Index noted that corruption is deeply entrenched in the country’s state institutions, and that the police force is considered the ‘most corrupt public agency’. 

Regulation without enforcement  

The National Risk Assessment highlighted shortcomings in the regulatory monitoring of Papua New Guinea’s banks, money transfer services, foreign exchange dealers and designated non-financial businesses and professions. The Asia/Pacific Group’s evaluation noted that that regulators were not paying sufficient attention to high-risk institutions, and that financial intelligence was lacking in money laundering investigations.

The Index reinforces these findings. In terms of its resilience to combating financial crimes and corruption, Papua New Guinea’s ‘economic regulatory capacity’ score stands at just 3.0, ‘anti-money laundering’ efforts trail close behind, and the ‘government transparency and accountability’ indicator sits at 2.0, among the weakest in the region.  

The Index emphasizes that while Papua New Guinea has adequate legal frameworks in place to combat corruption, enforcement remains weak. Its anti-corruption institutions ‘lack the necessary resources and funding to operate effectively’, government transparency is limited, and the absence of an access-to-information law restricts public oversight. Furthermore, internal conflicts within oversight authorities have raised concerns about their capacity to combat corruption effectively.  

Reform or repeat?  

Against a backdrop of rising criminality, illicit activity within the resource sector, entrenched corruption, low resilience to organized crime and weak asset recovery, Papua New Guinea’s path off the grey list will be considerably more challenging than it was a decade ago.

Yet the setback could create the political momentum needed to push through stagnant reforms, such as the unexplained wealth provisions that empower authorities to confiscate assets deemed disproportionate to a person’s known lawful income. Although this legal amendment was announced in 2022, it has not yet been enacted.  

Crucially, however, the effectiveness of any enforcement regime ultimately hinges on the independence, adequate funding and technical capability of the agencies responsible for implementing it. Without sustained institutional autonomy and specialized investigative skills, even well-designed legal reforms risk remaining symbolic. 

This analysis is part of the GI-TOC’s series of articles delving into the results of the Global Organized Crime Index. The series explores the Index’s findings and their effects on policymaking, anti-organized crime measures and analyses from a thematic or regional perspective.