The Despot’s Guide to Wealth Management and Australia’s role as a haven for dirty money

Australia is a haven for dirty money, money stolen from countries like Papua New Guinea, according to research by Professor Jason Sharman which will shortly be published in a new book, The Despot’s Guide to Wealth Management.

The book will explore the moral and legal rule, the United Nations Convention Against Corruption, that prohibits one country from hosting wealth stolen by the leaders of another country. Australia, and almost every other country in the world, has legally committed to the Convention.

Sharman has investigated the extent to which the United States, Britain, Switzerland and Australia are living up to their commitment to prevent foreign corruption funds entering their financial systems, and tracing, seizing and returning these funds where they do sneak in.

In a recent lecture, broadcast on ABC radio and YouTube, Sharman gave some insights into his research findings.

Sharman says that US, Britain and Switzerland are generally sincere in respecting their commitment, although because it is a tough policy problem to solve, overall effectiveness of the rule against hosting the proceeds of foreign corruption is not great.

Australia, however, is in a completely different category. Sharman says the Australian government has consistently chosen a path of inaction and denial that has led the country becoming a haven for dirty money stolen by foreign leaders and their families.

As evidence of Australia’s role as a haven for dirty money, Sharman cites examples involving China and Papua New Guinea and evidence from the OECD.

The Chinese regime has long been plagued with endemic corruption among its leaders

The People’s Bank of China (the Chinese central bank) put together a top secret report about corrupt officials fleeing with state money. The report won an internal prize for the quality of the research, but what good is a prize if no one knows about it? 

Against strict orders, the authors posted the report on the web in 2011, though it was taken down within 24 hours, it was widely copied

The report indicated that in the 15 year period 1993-2008 between 16,000 and 18,000 officials had fled China taking funds to the value of between $100 and $120 billion.

Where did these officials go with their loot?

the report listed the three most population destinations for these officials and their money as being the United States, Canada and Australia. 

Sharman says that in 2013 an OECD Report ranked its 34 member states on how well they met international standards on blocking the inflow of money looted from abroad.

Australia came second worst. The Australian government then tried to have this unflattering comparison cut from the report. It failed. It then tried to suppress the fact that it had tried to suppress the comparison. It failed at that too.

Sharman says Australian agencies are guilty of blaming each other for the lack of action:

“While money laundering of foreign illicit proceeds through real estate is perceived to be a risk for Queensland, Queensland has no money laundering convictions for this activity. The Australian Federal Police indicated that it does not focus on this risk, believing this money laundering activity relates to State level crimes, whereas the Queensland Crime and Corruption Commission stated it does not focus on this risk as it relates to foreign money and is thus a matter for the Australian Federal Police. 

Why hasn’t the Australian government taken action?

Sharman says it is a case of strong laws but a weak will.

Australia has some of the strongest laws for confiscating wealth and prosecuting financial crimes.

In some circumstances the law allows a reversal of proof: you have to prove that you obtained your assets legally, rather than the government having to prove you guilty.

So the real problem is political will.

Australian governments of both the left and the right have consistently taken the attitude that it is politically easier to brazen it out and deny that there is a problem, than to admit that Australia is in fact a haven for dirty money and do something to address this problem.

How do foreign corrupt officials get their money into Australia?

Sharman says a 2012 speech by Sam Koim, head of PNG’s anti-corruption unit provides some answers.

Koim spoke of the activities of corrupt officials from Papua New Guinea in Australia as follows:

They have bought property and other assets, put money in bank accounts and gambled heavily in your casinos and have never been troubled by having their ill-gotten gains taken off them... Be under no illusion, these people have chosen Australia as their preferred place to launder and house the proceeds of their crimes because it is easy. Cairns is only a short flight and property can be bought off the plan without permission. The financial system is stable and, it has been...  extremely easy to get their money into your system.

Sharman says that although Koim came up with the idea of Australia as the Cayman Islands of the South Pacific, he thinks this is very unfair... to the Caymans.

Australia has still never repatriated a single cent of corruption funds to PNG, despite highly public cases like that of Eremas Wartoto who colluded with a government Minister in PNG to steal $30 million of public funds intended for schools.

Finding out that he was about to be charged in PNG with corruption offences, Wartoto fled to Cairns in August 2011 using a car hire company he owned to sponsor him for a visa.

The PNG government requested the Australian government not to issue the visa, considering the pending charges.

The Australian government ignored the request, despite a secret cable from Australia’s high commissioner in Port Moresby to then-foreign minister Bob Carr warning that this decision could be used to “prove that Australia is a haven for the proceeds of crime from PNG”.

Wartoto set up a variety of Australian bank accounts and bought 5 properties in Cairns, two through trusts, the corruption charges against him in PNG proving no obstacle.

The PNG government then asked that Wartoto be returned to PNG to face charges, but the Australian government agreed with Wartoto’s lawyers that he was too sick to travel, suffering ‘fatigue’, even though Australian government records showed him travelling to Fiji, Indonesia and the Solomon Islands at this time.

Two Fairfax journalists broke the story almost two years later on the day then PM Julia Gillard landed in Port Moresby. 

By a miraculous coincidence, Wartoto’s visa was cancelled within the week and he returned to face trial, though his assets in Australia have still not been returned.

In 2014 Sharman says he spoke with an undercover investigator from the NGO Global Witness who came to PNG under the pretence of asking local lawyers how to bring corruption funds into Australia, and secretly videoed the exchange.

In footage later broadcast on SBS, one Australian lawyer and former Crown prosecutor in Port Moresby helpfully explained: ‘You know the days of banging a million bucks into this secret-numbered account in Singapore is over... dribs and drabs are the only way to go’

His partner, a close associate of the current Prime Minister, explained the scheme in more detail.

The Australian-based lawyer provides fictitious or inflated legal bills to a PNG politician who has dirty money he wants to move to Australia.

The money is transferred ostensibly as payment for the inflated or fictitious bill, and avoids suspicion because the law firm is a prestigious Australian firm.

The Australian-based lawyer takes a cut of the money, but most is then kicked back to the PNG politician, perhaps through a shell company or in property.


Sharman says there are now a lot of recent international rules designed to prohibit one country hosting money stolen by the kleptocratic leaders of another country:

“Some governments have taken action, and despite severe challenges of implementation, countries like US, Britain and Switzerland have recorded some important successes.

“But in Australia the Commonwealth government has simply chosen not to honour these international commitments, meaning that Australia is increasingly a haven for dirty money from abroad, as demonstrated by the evidence, facilitating the systematic looting of countries in the region and beyond.

So, to all you despots out there, your rich huddled kleptocrats yearning to bank free, we can only say, welcome to Australia.