He renewed it last year while in prison. While it was possible to renew a passport online, Mr Dunne said officials had advised him this morning that the forms had been filled out manually.
"We now know it was not an online application, it was done in the manual form.
"So that obviously means an accomplice was involved because the accomplice would have had to verify his photograph, plus also submit the documents."
Mr Dunne said it was highly unlikely Smith could have submitted hard copy forms himself while on temporary release.
Internal Affairs ran biometric tests on photographs when passports were renewed, but these detected only whether the photo was genuine.
The tests did not match pictures with a criminal database, Mr Dunne said.
The minister also revealed that Smith did not appear to have changed his name by deed poll, but simply assumed it later in life.
Under the Passports Act, a prisoner cannot hold a passport or renew a passport. Smith's new name allowed him to get around this law.
Mr Dunne said information sharing between Internal Affairs and law enforcement would have to be reviewed.
"The biggest concern is that we didn't have the information. Had we known that Phillip John Traynor was actually Phillip John Smith ... then that passport clearly would not have been issued.
"But there were no flags raised in respect of Traynor, because Traynor had a clean record."
He said it would be useful for his department to be provided with all alternative names for criminals.
He also wanted a review of how Smith was able to apply for renewal of his passport while in prison, but said this was an issue for Police and Corrections, not Internal Affairs.
Read more:
• Smith's long history of terrifying and abusive behaviour
• ARCHIVE: When Smith was caught running mail order business from jail
Mr Dunne said he did not believe it was too easy for Smith to gain a passport from prison.
Smith's circumstances were "very specific" because of his name change and the fact that already held a passport in his previous name which he could renew.
Smith flees from Chile to Brazil
New Zealand police confirmed this morning that Smith had travelled from Santiago in Chile to Rio de Janeiro in Brazil.
Police were continuing to liaise with relevant authorities in South America through Interpol as part of their investigation.
Police spokesman Grant Ogilvie confirmed Smith was now known to have taken a connecting flight to Brazil.
Watch:
Smith's escape: Police and Corrections under fire
At a media briefing this morning in Santiago, police confirmed that Smith arrived in Chile but then boarded a flight to Sao Paulo in Brazil then on to Rio De Janeiro, Radio New Zealand reported.
Authorities said they were unsure when he arrived in Brazil.
Chilean authorities said they were working with Brazil to determine which flight Smith was on when he arrived in Rio de Janeiro, 3News reported.
Chilean authorities said it was now up to Brazilian authorities to take over the search for Smith, RNZ reported.
However, they said they were happy to co-operate with New Zealand authorities in trying to locate him.
New Zealand did not have a bilateral extradition treaty with Brazil, a Ministry of Justice spokesman said.
However, under New Zealand law it was possible to seek a person's extradition from another country without an extradition treaty being in place, he said.
He said the process for requesting extradition was set out in the Extradition Act 1999.
Chilean journalist Alejandro Rivera told NZME. News Service the media briefing in Santiago by Chile's Interpol deputy Ricardo Quiroz had drawn a lot of interest from local media.
"It wasn't a massive story, but when New Zealand media said he was in Chile everyone was trying to reach an official report from Interpol," he said.
"Interpol made the statement he was here in Chile on Friday, but he didn't make any immigration process because he was only in transit for Brazil," Rivera said.
"They said they only received information from Wellington Interpol just today [Monday local time], they didn't have any information on other days."
The story of Smith's flight to South America was being reported by all media in Chile, he said.
Smith, who was jailed for life in 1996 with a minimum non-parole period of 13 years, fled on Thursday. He flew to Chile using a passport obtained in his birth name - Phillip Traynor.
He had been temporarily released from Spring Hill Prison in Waikato hours earlier and had permission to stay at a house in Waterview, Auckland. When he did not return to the jail as scheduled on Sunday, a manhunt was started.
Police say Smith may have been planning his escape for years.
His biological father, John Traynor, told the Herald his son had a lengthy criminal history before he was convicted of murdering in Wellington in 1995 the father of a boy he had been molesting.
Police, Corrections and Internal Affairs are investigating Smith's escape, how he obtained the valid passport and who may have helped him.
Smith was declined parole in April, but had been approved for temporary release six times for up to 12 hours as part of his prison release plan. His next parole hearing was to be in April.
The visits were recently increased to 24-hour and eventually 72-hour periods. He fled when on the second of his 72-hour breaks.
Corrections national commissioner Jeremy Lightfoot said a review was under way but it was too soon to say if any Corrections staff would resign or face disciplinary action. Assistant Commissioner Malcolm Burgess said yesterday that police, through Interpol, had notified Chilean authorities.
Mr Lightfoot confirmed Smith's sponsors, with whom he was supposed to stay in Waterview, had been vetted. One was a female relative, but he would not be drawn on the other.
He acknowledged the distress Smith's escape caused the family of his victims, some of whom are now under police protection.
Next story: Father of fugitive Phillip Smith: 'Absolute stupidity to let him out'
