PNG Grey‑Listed: What It Means for Australia — and Why Queensland & FNQ Should Act Now
On 13 February 2026, the Financial Action Task Force (FATF) added Papua New Guinea (PNG) to its list of “Jurisdictions under Increased Monitoring” — the FATF grey list. This follows the February Plenary in Mexico City.
PNG’s grey‑listing matters for Australia — and matters most for Queensland, given our geographic proximity, deep people‑to‑people links, and substantial cross‑border trade. The change will raise risk and compliance expectations across banks and, from 1 July 2026, across newly regulated Tranche 2 sectors (legal, accounting, real estate, and dealers in precious metals/stones), especially in FNQ and the Torres Strait.
Why Queensland should pay attention
Geographic reality: PNG is Australia’s closest neighbour — just ~3.5–4 km separates PNG’s south coast and Australia at the Torres Strait’s narrowest point (around Daru).
Flight/flow reality: Port Moresby–Brisbane is around 2,090–2,105 km with ~3h 05–10m direct flight time, underscoring frequent movement of people and goods.
Economic reality: In 2023–24, Queensland merchandise exports to PNG were ~$1.2 billion, making PNG a critical Pacific partner for our state’s businesses.
What the FATF grey list actually means
Grey‑listing signals a country has strategic AML/CTF deficiencies but has committed to a time‑bound action plan under FATF monitoring. Crucially, FATF does not call for blanket enhanced due diligence (EDD) or de‑risking of entire classes of customers; it urges a risk‑based approach that avoids disrupting legitimate trade, humanitarian flows, and remittances.
PNG authorities have publicly acknowledged the listing and outlined an action plan to address deficiencies — with officials signalling intent to exit monitoring as quickly as possible.
Likely impacts for Queensland & FNQ
1) Banking & trade finance: more friction, slower approvals
Grey‑listing typically leads to tighter correspondent banking oversight and recalibrated country risk by financial institutions. Empirical research suggests grey‑listing can reduce capital inflows by around 7.6% of GDP (at the time of listing), which can translate into costlier, slower cross‑border finance — though GDP impacts themselves are mixed across studies.
What this means in practice: expect more questions, more documents, and longer turnaround on PNG‑linked payments, letters of credit, and trade facilities, even as FATF discourages indiscriminate de‑risking.
2) Tranche 2 reforms: new obligations from 1 July 2026
Australia’s AML/CTF reforms bring lawyers, accountants, real estate professionals, precious metals/stones dealers and TCSPs into scope from 1 July 2026 (with existing reporting entities transitioning by 31 March 2026). AUSTRAC has released reform guidance and timelines.
Implication: PNG‑linked work will likely be rated higher risk in many firm‑level risk assessments, triggering enhanced customer due diligence (ECDD), senior management approvals, and tighter ongoing monitoring, consistent with AUSTRAC’s risk‑based expectations — noting FATF does not mandate EDD solely on the basis of grey‑listing.
3) Cross‑border commercial ties under an active QLD–PNG MoU
Queensland and PNG signed a renewed Memorandum of Understanding on 10 December 2025, covering 14 priority cooperation areas (trade, tourism, education, health, emergency services, disaster resilience, cultural and sporting exchange). This state‑level framework underscores the unique depth of QLD–PNG links that will remain vital — and more compliance‑intensive — during PNG’s FATF action plan period.
4) Sporting diplomacy & public attention
PNG’s planned NRL franchise — the PNG Chiefs, slated to enter in 2028 — reflects deep cultural links and high public visibility for PNG–Australia ties. It’s also part of a broader government‑backed Pacific partnership agenda. This sweetheart deal came with one major condition, that PNG does not allow China to secure a military foothold in the country.
Sector‑by‑sector: what changes on the ground?
Banks and credit unions (current reporting entities)
Immediate actions: Review your country risk ratings, correspondent banking exposure, and trade finance controls for PNG‑linked transactions; document the rationale under your enterprise‑wide risk assessment.
EDD triggers: Apply ECDD where your risk‑based assessment indicates higher ML/TF risk (e.g., complex ownership; cash‑intensive operations; adverse media), and file SMRs when warranted. FATF does not require automatic EDD for grey‑listed countries, but AUSTRAC expects proportionate controls.
Lawyers & conveyancers (Tranche 2 from 1 July 2026)
When obligations bite: When you assist or act for clients in transactions captured by the new designated services (e.g., company formation, trust services, real property transactions, management of client funds).
PNG‑linked matters: Expect heightened KYC/ECDD, verification of beneficial ownership, source of funds/wealth, senior management approval for higher‑risk relationships, and ongoing monitoring calibrated to risk.
Accountants & TCSPs (Tranche 2 from 1 July 2026)
Corporate structuring for PNG clients or UBOs: Treat as higher inherent risk in many scenarios; apply ECDD, document enhanced source‑of‑funds work, and consider adverse media and sanctions screening.
Real estate professionals (Tranche 2 from 1 July 2026)
PNG buyers/investors: Expect to apply ECDD where your risk assessment deems it appropriate — especially for non‑resident buyers, off‑the‑plan transactions, third‑party payers, and complex structures. Collect and verify UBOs, beneficial ownership chains, and source of funds/wealth. FATF’s stance remains risk‑based, not automatic EDD.
Key reminder: AUSTRAC’s reform pages and regulatory expectations emphasise outcomes‑focused, risk‑based controls — not box‑ticking. Start building your reform implementation plan now (policies, systems, training, and records).
For Queensland businesses trading with PNG
Expect more documentation on counterparties, beneficial ownership, and trade documentation (commercial invoices, BLs/AWBs, inspection/packing certs).
Allow longer lead times for payments and LCs, as banks perform additional checks.
Work with your bank early on KBAs (Know‑Your‑Business Activities) and transaction narratives to reduce friction — especially in FNQ supply chains moving via the Torres Strait. (FATF guidance cautions against disrupting legitimate flows; your clarity helps banks keep things moving.)
What to do this month (practical checklist)
For current reporting entities (banks, ADIs, remitters, casinos, etc.)
Update country risk: Re‑rate PNG in your jurisdictional risk matrix; document rationale; adjust screening lists/alerts.
Tighten ECDD playbooks: Define clear EDD triggers (ownership opacity, PEPs, non‑resident high‑value transactions, cash‑intensive sectors).
Enhance trade finance due diligence on PNG flows (dual‑use risk, unusual routing, third‑party payments).
For Tranche 2 firms (from 1 July 2026)
Gap‑assess your program against AUSTRAC’s reform guidance; set an implementation plan & training schedule.
Design risk‑based onboarding for PNG‑linked clients (EDD steps, SMR triggers, senior approvals).
Build records & BO controls (e.g., UBO registers/screenshots, SoF/SoW evidence, ongoing monitoring cadence).
Frequently asked questions
Is PNG on the “blacklist”?
No. PNG is on the FATF grey list (increased monitoring). That is not the blacklist (a call for countermeasures). FATF does not call for automatic EDD or de‑risking for grey‑listed countries; controls should be risk‑based.
Will grey‑listing crash PNG’s economy?
Impacts vary. The strongest evidence shows capital inflows fall by ~7.6% of GDP around grey‑listing events; GDP growth effects are mixed and context‑dependent. Businesses should plan for more compliance friction rather than assume a collapse.
We have long‑standing PNG clients. Do we have to exit them?
No. FATF discourages indiscriminate de‑risking. Apply a risk‑based approach: refresh KYC, enhance due diligence if warranted, and monitor.
Context & ties that bind
Australia administered PNG until independence in 1975; the two countries retain significant economic, political, security and cultural ties. Today, Queensland’s export, workforce mobility, and sporting links (including PNG’s planned NRL Chiefs franchise in 2028) keep the relationship both close and visible — and therefore subject to higher compliance scrutiny while PNG progresses its FATF action plan.
How AML Advisers can help
Rapid PNG exposure review (RBA refresh, policy updates, ECDD templates, red‑flag catalogues)
Tranche 2 implementation (fit‑for‑purpose AML/CTF programs, training, file‑ready procedures) ahead of 1 July 2026 go‑live
Trade finance enablement (evidence packs and narratives to keep your transactions moving)
👉 Book a Tranche 2 Readiness Session with AML Advisers today and see how we can assist you with your prep!
