B.S.P. Financial Group, better known in Samoa as the Bank South Pacific, is facing possible fines or regulatory action in Papua New Guinea for alleged breaches of the country’s anti-laundering laws.

Because B.S.P. is a partner of the Commonwealth Bank of Australia and the National Australia Bank, those banks have also come under scrutiny for their compliance with anti-money laundering laws, after an investigation into B.S.P. is set to result in sanctions, Australia's premier business newspaper the Australian Financial Review reported. 

Under Australian law any sanctions handed out to B.S.P. would be problematic for C.B.A. and N.A.B., which are required to undertake “regular due diligence assessments” on their “correspondent banks” to ensure they are not facilitating money laundering.

As a correspondent bank, C.B.A .and N.A.B. provide the gateway for B.S.P.’s clients to transfer money in and out of Australia.

The Australian Financial Review has confirmed a money laundering probe into B.S.P. was begun in late 2019 by the Financial Analysis and Supervision Unit (F.A.S.U.), which sits within the P.N.G. central bank. 

Late last year F.A.S.U. issued the bank with a “show cause notice” as to why it should not be sanctioned for breaching P.N.G.’s anti-money laundering legislation, according to sources with knowledge of the matter.

B.S.P. listed on the Australian Securities Exchange (A.S.X.) on May 25 but failed to disclose the money laundering probe. 

The bank, which made a profit of 806 million kina (USD $229.7 million) in 2020, did not raise any money as part of its A.S.X. listing, although it plans to do so in the future.

In documents lodged with the A.S.X., B.S.P. said it faced “elevated corruption risk” as it operated in P.N.G. and despite government efforts to tighten regulation and oversight said “the actual and perceived risk of corruption, bribery and money laundering remains material”.

In a statement to the Financial Review, B.S.P. chief executive Robin Fleming said the bank was under “obligations of confidentiality” and would not comment on “speculation” that it was under investigation.

He said it had “carefully assessed all regulatory matters” when preparing its information memorandum and there was “nothing outside of this risk disclosure that presently impacts B.S.P.’s business operations”.

Despite being listed for three weeks, B.S.P.’s shares are yet to trade on the A.S.X. Based on its primary listing in Port Moresby, the bank has a market capitalisation of about $2 billion.

B.S.P.’s operations span P.N.G., Samoa, Solomon Islands, Tonga, Fiji, Vanuatu, the Cook Islands and Cambodia. 

It also has correspondent banking relationships with Bank of America and Wells Fargo.

B.S.P. is chaired by Kostas Constantinou, one of P.N.G.’s wealthiest business figures, who owns The Airways Hotel in Port Moresby along with a string of other property and construction holdings.