FATF Guidance: Politically Exposed Persons (PEP)

A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent function. Many PEPs hold positions that can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery. Because of the risks associated with PEPs, the FATF Recommendations require the application of additional AML/CFT measures to business relationships with PEPs. These requirements are preventive (not criminal) in nature, and should not be interpreted as meaning that all PEPs are involved in criminal activity.

The FATF has developed guidance which will assist in the effective implementation of these additional measures for foreign, domestic and international organisation PEPs, their family members and close associates, as set out in Recommendations 12 and 22.

Key to the effective implementation of Recommendation 12 is the effective implementation of customer due diligence requirements: for financial institutions to know who their customers are. External sources of information for determining PEPs exist, such as commercial and other databases, and the paper provides some guidance on the use of these, and other, external sources of information. However, these databases are not sufficient to comply with the PEPs requirements, nor does FATF require the use of such databases.

The annex to the guidance sets out a collection of red flags and indicators for suspicion that can be used to assist in the detection of misuse of the financial systems by PEPs during a customer relationship. Examples of such red flags are the use of corporate vehicles to obscure ownership by PEPs, information being provided by the PEP being inconsistent with other publicly available information (such as asset declarations and published official salaries), or doing business with PEPs that are connected to higher risk countries (such as those for which FATF issues public statements) or high risk industries or sectors.  FATF GUIDANCE TO PEP’s

PEP1

Corzine Charged: Is the Tide Turning

In the last week of October 2011, with virtually no other sources of immediate cash to turn to, the firm Jon Corzine headed repeatedly and unlawfully used customer funds for firm needs, ultimately leaving it nearly $1 billion short of customer funds. In that last week, Corzine is alleged to have been aware of the firm’s true low cash balance, even as he directed the firm to continue paying large obligations without inquiring how the firm could come up with the money to do so. Corzine is charged for the firm’s violations as an MF Global “control person” who, among other things, did not act in good faith and is also charged with violating his legal obligations to diligently supervise.  Corzine Charged

Jon Corzine Charged

Australian Customs Agents Arrested for Assisting in Money Laundering

Broad changes to the way Australia’s customs system operates will be made after a corruption probe led to the arrests of 20 people and the seizure of drugs, cash and assets.

Operation Heritage was an investigation by the Australian Commission for Law Enforcement Integrity into alleged corrupt conduct amongst officers of the Australian Customs and Border Protection Service (ACBPS) at Sydney International Airport.

The report detailing corruption in the Customs and Border Protection service has revealed a group of officers used inside knowledge to bypass airport surveillance systems. The customs officials used a network of contacts and their inside knowledge to thwart the airport’s surveillance systems.

Andreas Frank reports on Frank-cs.org.  Arrest of Australian Customs

Australian Customs Problems