Fairfax Media reported on Thursday that the ASX-listed BSP Financial Group (BFL) had breached Papua New Guinea’s (PNG) prudential standards around directorship tenure limits, with its chairman Sir Kostas Constantinou having served in the position for more than the six consecutive year limit imposed by the central Bank of PNG.
Mr Constantinou was also in breach of prudential standards around board directors, which state that “no person must be appointed as director of an [authorised institution] for more than three consecutive terms or nine years”. He has been a director of the bank since 2009.
In a statement to the market on Friday responding to the allegations, BFL said the bank had sought an exemption to the directorship rules regarding Mr Constantinou’s position.
“BFL affirms that the tenure of its chairman is the subject of an exemption issued by the Bank of PNG in 2019 in relation to prudential standards on governance matters and that the Bank of PNG has consented to Sir Kostas’ chairmanship continuing to February 2023, by which time another director will take over the chairmanship, and as a director until May 2023,” the bank said.
“As noted in BFL’s recently issued information memorandum, this will be Sir Kostas’ final term in office, with Sir Kostas having been most recently re-elected to the BFL board of directors in May 2020 and first elected in 2009.”
BFL group CEO Robin Fleming said succession planning for the chairman’s role had commenced in preparation for Mr Constantinou’s removal at BFL’s 2023 annual general meeting.
“The recent imposition of sanctions in relation to anti-money laundering allegations will not adversely affect that planning as the chairman’s role was not called into question by the Bank of PNG,” Mr Fleming said.
Earlier in July, the Bank of PNG’s Financial Analysis and Supervisions Unit issued severe sanctions against BFL for alleged breaches of AML laws, including a formal warning from the central bank, the requirement to update the bank’s AML policies and a request that it commence a process to remove Mr Fleming as chief executive.
The regulator indicated it had obtained “detailed and compelling evidence” of BFL’s failure to prevent high-value payments of the local currency, PNG kina, to a political official, as well as failing to conduct due diligence on several customers who were previously charged with or alleged to have committed money laundering offences.
Both Commonwealth Bank and NAB extend correspondent banking services to BFL in Australia, facilitating the transfer of money into and out of the country by the bank’s clients, which requires both banks to conduct “appropriate due diligence of the relationship” according to AUSTRAC guidance.
A NAB spokesperson previously told InvestorDaily the bank took its financial crime obligations seriously and cooperated with relevant regulators in Australia and overseas.
