REPORT SUMMARY
Revelations of the plundering of state assets by Politically Exposed Persons—senior government officials, their family members and close associates, have led to greater scrutiny of their financial dealings. Yet implementation of international standards on PEPs are still lacking. This report is designed to help banks and regulatory authorities address the risk posed by PEPs and prevent the corrupt from using the financial system to launder the proceeds of corruption. It provides recommendations and good practices for complying with international standards and increasing supervisory effectiveness.
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Part 1. Introduction and General Observations
PEPs are a special category of customer, all designated as high risk for money laundering. While most do not engage in corrupt activities, a single corrupt PEP’s behavior can have a disproportionate impact on a country and sometimes an entire region. An effective PEP regime is critical to the prevention of grand corruption, as it makes laundering the proceeds more difficult; assists in detecting transfers of the proceeds; provides an audit trail; and ultimately facilitates the process of recovering the proceeds. This part describes the objectives and methodology of the report; and advises on its optimal uses. It also describes trends in public and financial sector compliance with international standards, legislation and regulation on PEPs.
Part 2. Implementation of International Standards on PEPs by Banks and Regulatory Authorities
International standards now provide useful guidance regarding the treatment of PEPs. FATF (the Financial Action Task Force on Money Laundering) has outlined a risk-based approach for countries, regulatory authorities, and the financial system, which involves focusing resources where the greatest risks lie. This part lists the advantages to this approach. It also provides recommendations for: defining PEPs; determining how long PEPs should maintain this status; identifying and verifying sources of wealth and funds; obtaining bank senior management approval for establishing a business relationship with a PEP; and conducting ongoing monitoring of PEP customers. It also calls for an aligned FATF / UNCAC (United Nations Convention against Corruption) definition of PEPs.
Part 3. Role of Regulatory Authorities and the Financial Intelligence Unit
Regulatory authorities provide guidance to banks and assess and enforce compliance with PEP standards, while financial intelligence units contribute to the production of suspicious transaction reports on PEPs. Both types of authorities require adequate resources and training and sufficient independence from political interference. They also benefit from mutual cooperation. This part provides recommendations and examples of good practice in these areas.
Part 4. National Cooperation, Training, and Resources
The success of any PEPs policy requires the commitment and ongoing collaboration of all actors involved—legislators, regulators, law enforcement agencies, and the private sector. This part describes the importance of political will, cooperation, and the provision of adequate training and resources for an effective AML strategy and PEPs regime. It provides recommendations and examples of good practice.
- Chapters
- Part 1.
Introduction and General Observations - Part 2.
Implementation of International Standards on PEPs by Banks and Regulatory Authorities- Chapter 3. Applying a Risk-Based Approach
- Chapter 4. Who Is a PEP?
- Chapter 5. How Long Is a PEP Considered a PEP?
- Chapter 6. Identifi cation of PEPs: Who to Check and When to Check
- Chapter 7. Identifi cation of PEPs: How to Check
- Chapter 8. Identifi cation of PEPs: Commercial and In-House Databases
- Chapter 9. Identifying and Verifying Source of Wealth and Source of Funds
- Chapter 10. PEP Approval by Senior Management
- Chapter 11. Enhanced Ongoing Monitoring
- Part 3.
Role of Regulatory Authorities and the Financial Intelligence Unit - Part 4.
National Cooperation, Training, and Resources
