What are financial sanctions?
Sanctions are used world-wide as a measure to impose restrictions on activities that relate to particular countries, goods and services, or persons and entities. Financial sanctions involve a complete or partial interruption of economic relations.
Under sections 14 and 15 of PNG’s United Nations Financial Sanctions Act 2015, sanctions are prohibitions on:
- dealing with assets belonging to or owned, held or controlled (directly or indirectly) by a designated person or entity (‘asset freezes’) and,
- making assets or financial services available directly or indirectly to, or for the benefit of, a designated person or entity
Why have financial sanctions?
There are many reasons why countries should seek to implement targeted financial sanctions. Effective financial sanctions can:
- Freeze assets to ensure they cannot be used by designated persons (e.g. identified terrorists and/or terrorist organisations)
- Deter those who finance terrorism or the development of nuclear weapons
- Expose money trails that lead to the identification of previously unknown terrorist cells and financiers
- Dismantle networks by encouraging designated persons or entities to disassociate themselves with terrorists or the development of nuclear weapons
- Suffocate terrorist activity/ nuclear development by terminating cash flow by shutting down the pipelines used to move funds and other assets
- Force developers of nuclear weapons or terrorists to use more costly and higher risk means of financing their activities, which makes them more susceptible to detection and disruption
In addition, freezing actions are a starting point for further intelligence and investigative work to identify networks and funding channels associated with terrorist groups.
Why is a financial sanctions regime important for PNG?
PNG has an international obligation under the Charter of the United Nations and United Nations Security Council Resolutions, as well as compliance with Financial Action Task Force recommendations, to implement financial sanctions measures domestically.
The nature of transnational crimes such as terrorism and terrorist financing is that they have no boundaries. Criminals are looking for gaps across jurisdictions to find safe havens for illicit assets. It is important for PNG, and other countries in the region, to ensure that its laws are robust and comprehensive, to close any potential gaps that criminals can exploit.
What is the Sanctions Secretariat?
PNG’s Sanctions Secretariat is established within the Department of Prime Minister and National Executive Council under s.25 of the United Nations Financial Sanctions Act 2015 and is the secretariat to the National Security Advisory Committee. The key functions of PNG’s Sanctions Secretariat is to provide support to the Committee and the Prime Minister in exercising designation powers, maintaining an up-to-date Consolidated List of designated persons and entities and issuing public guidance to promote and assist compliance with PNG’s financial sanctions legislation.
The Sanctions Secretariat has an integral role in the effective implementation of a successful financial sanctions regime in PNG, other functions include:
- Receives proposed designations from agencies within PNG and from foreign agencies (and prepares internal recommendations to designate)
- Notifies financial institutions and DNFBPs (and others) of designations through FASU
- Prepares guidelines and forms etc. and conducts awareness raising
- Receives enquiries from the public and private sector about authorizations to deal with frozen assets or designated entities
What is my role?
Financial Institutions, designated non-financial businesses and professions (DNFBP’s), the private sector, and the not-for-profit sector have a key role in an effective financial sanctions regime in PNG. Some functions include:
- Key role in tracing/following assets
- Effective know your customer (KYC) practices
- Effective customer due diligence (CDD) protocols including Beneficial Owner information
- Robust asset freezing procedures in place
- Processes for guarding against false positives in identification of designated persons/entities
- Effective communication channels with and reporting to FASU and the Sanctions Secretariat
Notification of designations and Prohibition on dealings
The Prime Minister through the Sanctions Secretariat and FASU will notify financial institutions and DNFBP’s of a designation, redesignation, revocation and expiry. The notifications will also be published in the National Gazette.
On receipt of a designation / redesignation notification financial institutions and DNFBP’s are to:
- Immediately cease dealing with an asset and cease to make available financial services where:
o the asset is held directly or indirectly, wholly or jointly by or on behalf of or at the direction of a designated person or entity;
o the asset or financial service is made available directly or indirectly, wholly or jointly to a designated person or entity or a person or entity owned or controlled or acting on behalf of a designated person or entity; or
o the asset or financial service is for the benefit of a designated person or entity.
Deal when used in relation to an asset includes the transfer, conversion, disposition, movement or use of the asset. There are penalties including fines, imprisonment or both for dealing with assets without authorisation.
Reporting obligations
Under section 40 of the Anti-Money Laundering and Counter Terrorist Financing Act 2015, a financial institution must report to FASU any assets which it holds of a designated person or entity. The report must be made as soon as is reasonably practicable or within 10 working days from the date notification of a designation is received.
Failure to make a report is an offence punishable by fines, imprisonment or both.
Do you need further information?
For further information please contact:
Financial Analysis and Supervision Unit (FASU)
Bank of Papua New Guinea
Address: P.O. Box 121 Port Moresby 121, National Capital District, Papua New Guinea
Telephone: (675) 327 7200
Fax: (675) 321 1617/321 4151
Email: fasu@bankpng.gov.pg
The consolidated UN Sanctions list can be found on the UN webpage: https://www.un.org/sc/suborg/sites/www.un.org.sc.suborg/files/consolidated.pdf