anti money laundering - peps
TRANSCRIPT
P O L I T I C A L LY E X P O S E D P E R S O N S
ANTI MONEY LAUNDERING
Presented by:
Besart Qerimi
2011
SESSION OBJECTIVES
• Defining PEP's
• Basic considerations
• Others associated with PEPs
• Sleeper PEP's
• When does one lose status as a PEP?
• PEPs Risks
• Banks and awareness of the problem
• Can we do business with a PEP?
• State-owned enterprises be considered PEPs?
DEFINING POLITICALLY EXPOSED PERSONS
“Politically Exposed Persons”(PEPs) are individuals who are or have been entrusted
with prominent public functions in a foreign country, for example Heads of State or of
government, senior politicians, senior government, judicial or military officials, senior
executives of state owned corporations, important political party officials. Business
relationships with family members or close associates of PEPs involve reputational risks
similar to those with PEPs themselves. The definition is not intended to cover middle
ranking or more junior individuals in the foregoing categories.”
Financial Action Task Force
SHOULD STATE-OWNED ENTERPRISES BE CONSIDERED PEPS?
• State-owned enterprises, including
central banks, should not be considered
PEPs.
• The individuals who manage and run
the state-owned enterprise at senior
levels, however, could qualify as PEP
• All state-owned enterprises are not
necessarily low risk, such entities should
be assessed using appropriate risk
factors.
HOW CAN A PEP OR THEIR “CLOSE FAMILY OR ASSOCIATES” BE IDENTIFIED?
• Making enquiries regarding PEP status
of potential customers during the
account opening process
• Screening potential customers against
a database of such persons. (e.g.
developed internally, provided by an
external service provider-world check,
down jones)
FINANCIAL INSTITUTIONS
• Financial institutions should, in relation to politically exposed persons, should:
• Have appropriate risk management systems to determine whether the
customer is a politically exposed person
• Apply appropriate enhanced procedures and controls
• Obtain senior management approval
• Take reasonable measures to establish the source of wealth and source of funds
• Conduct enhanced ongoing monitoring of the business relationship
• PEPs are a special category of customers, all designated as high risk for money
laundering.
New FATF Recommendation 12
APPLYING A RISK-BASED APPROACH
• It is flexible
• It is effective
• It is proportionate
HOW LONG DOES ONE REMAIN A PEP?
• The Wolfsberg Group provides the
following insight into its interpretation
of the „expiration date‟ on a PEP:
“Rule of thumb“: 1 year after giving up
any political function.
• The latest EU working paper on the
Third Money Laundering Directive
and FATF do not mention any time
limit.
CAN I DO BUSINESS WITH A PEP?
• Of course you can, but with enhanced due diligence and heightened scrutiny.
• UNCAC, Article 52 (entered into force Dec 2005):“to conduct enhanced scrutiny of accounts sought or maintained by or on behalf ofindividuals who are, or have been, entrusted with prominent public functions andtheir family members and close associates.”
No legislation says financial institutions are not allow to open accounts for PEPs
What is the „real‟ reason to carry out effective PEP due diligence?
The answer is simple: REPUTATIONAL DAMAGE
WHY FOCUS ON PEPS?
• Represent a greater money laundering risk because of the possibility that they
will abuse their position and influence to carry out corrupt acts (e.g.,
corruption and bribery, steal assets).
• $1 trillion in bribes each year (World Bank estimate).
• Corrupt PEPs are becoming more effective in hiding their identity through
associates, legal entities, and intermediaries.
• Low numbers of PEP customers are not necessarily indicative of low numbers
of corrupt PEPs.
“Not all PEPs are bad” but all require Enhance Due Diligence
WHY FOCUS ON PEPS?
The FATF consultation paper quoted in point 3 clearly indicates
that a PEP with „something to hide‟ may well choose to
conceal his or her identity by using some form of corporate
structure. This is with the greatest certainty where financial
institutions are most likely to find the skeletons in their closets.
WHAT ARE SOME OF THE CHALLENGES?
• Corruption exploitation
• Inadequate regular reviews of high-risk and PEP customers in order to update
CDD
• Keeping AML policies and procedures up-to-date
• Inadequate EDD on family members or close associates of PEPs
• No corrupt PEP activity in banks or in other sectors
• Few PEP STRs
• Few investigations or prosecutions for grand corruption
• Identifying national and international PEPs
Where is the corrupt money?
HAVE YOU TRULY UNDERSTOOD YOUR PEP REQUIREMENTS, IDENTIFIED YOUR
PEP RISK AND HAVE YOU SET OUT TO IMPLEMENT A PEP POLICY THAT WILL
PROTECT YOUR INSTITUTION, ITS REPUTATION AND INDEED, YOUR JOB?
THANK YOU FOR YOUR ATTENTION