Politically Exposed Persons: A Guide on Preventive Measures for the Banking Sector (Stolen Asset Recovery (Star) Initiative)

126 Pages·2010·0.83 MB·English

In recent years, revelations of grand corruption and the plunder of state assets have led to greater
scrutiny of f nancial relationships with politicaly exposed persons (PEPs)—senior government Politically Exposed Persons
of cials and their family members and close associates. Notwithstanding the ef orts by many
f nancial institutions and regulatory authorities to prevent corupt PEPs from entering and using PREVENTIVE MEASURES FOR THE BANKING SECTOR
the f nancial system to launder the proceeds of corruption, there has been an overall failure in the
ef ective implementation of international standards on PEPs.
Theodore S. Greenberg
Implementation of an ef ective PEP regime is a critical component in the prevention and detection Larissa Gray
of transfers of proceeds of crime and, therefore, ultimately in the process of recovering them.
Politically Exposed Persons: Preventive Measures for the Banking Sector is designed to help banks Delphine Schantz
and regulatory authorities address the risks posed by PEPs and prevent corrupt PEPs from using Carolin Gardner Michael Latham
domestic and international f nancial systems to launder the proceeds of corruption. The book
provides recommendations and good practices aimed at improving compliance with international
standards and increasing supervisory ef ectiveness. It is an important tool for individuals,
governments, f nancial and private sector companies, and international organizations involved in
developing and implementing standards aimed at f ghting corruption and money laundering, and
trying to recover stolen assets and the proceeds of corruption.
StAR—the Stolen Asset Recovery Initiative—is a partnership between the World Bank Group
and the United Nations Of ce on Drugs and Crime that supports international ef orts to end safe
havens for corrupt funds. StAR is working with both developing countries and f nancial centers to
prevent laundering of the proceeds of corruption and to facilitate the more systematic and timely
return of stolen assets.
978-0-8213-8249-3
SKU 18249
Politically Exposed Persons Greenberg, Gray, Schantz, Gardner, Latham
Politically Exposed Persons
Stolen Asset Recovery (StAR) Initiative
Politically Exposed Persons
Preventive Measures
for the Banking Sector
Theodore S. Greenberg
Larissa Gray
Delphine Schantz
Carolin Gardner
Michael Latham
Washington, D.C.
© 2010 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
E-mail:
Contents
Acknowledgments ...................................................................................................... ix
Abbreviations .............................................................................................................. xi
Executive Summary and Principal Recommendations ......................................xiii
Part 1 Introduction and General Observations ...................................................... 1
1. Introduction ...............................................................................................................3
Low Compliance with International Standards ...........................................7
Objective ........................................................................................................9
Methodology ..................................................................................................9
How to Use This Paper ................................................................................10
2. General Observations and Challenges ...............................................................13
Low Level of Compliance with International Standards ...........................13
Link between PEPs and Anti-Money Laundering Policies
and Procedures .............................................................................................13
Banks Generally Indicate Doing More Than FATF, Legislation, or
Regulation Requires .....................................................................................15
Why Focus on PEPs? ...................................................................................16
Part 2 Implementation of International Standards on PEPs by Banks
and Regulatory Authorities .......................................................................... 21
3. Applying a Risk-Based Approach .......................................................................23
4. Who Is a PEP? ..........................................................................................................25
Domestic versus Foreign PEPs ....................................................................26
Family Members and Close Associates .......................................................28
Other Categories ..........................................................................................29
5. How Long Is a PEP Considered a PEP? ..............................................................31
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Contents
6. Identifi cation of PEPs: Who to Check and When to Check ...........................33
Who to Check? .............................................................................................33
When to Check? ...........................................................................................34
7. Identifi cation of PEPs: How to Check ................................................................35
Would a National or International List of PEPs Be Easier? ......................35
Identifi cation of the Benefi cial Owner: Will the True Owner
Please Stand Up? ..........................................................................................35
Identifi cation Tools ......................................................................................40
8. Identifi cation of PEPs: Commercial and In-House Databases ......................45
9. Identifying and Verifying Source of Wealth and Source of Funds ...............47
10. PEP Approval by Senior Management ..............................................................51
11. Enhanced Ongoing Monitoring ...........................................................................53
Transaction Monitoring ..............................................................................53
Awareness of PEP Customers: Maintaining Access to a List of
PEP Customers ............................................................................................54
Keeping the Customer Profi le Updated ......................................................55
Periodic Review Process ..............................................................................55
Part 3 Role of Regulatory Authorities and the Financial
Intelligence Unit ............................................................................................ 57
12. Regulatory Authorities .........................................................................................59
Regulation of Bank PEPs Controls .............................................................59
Need for Additional Guidance from the Regulatory Authority ................60
Sanctions ......................................................................................................61
13. Suspicious Transaction Reporting and Financial Intelligence Units .........63
FIU Guidance to Reporting Institutions ....................................................64
Gathering Information ...............................................................................64
Part 4 National Cooperation, Training, and Resources ...................................... 67
14. National Cooperation: Agencies and the Industry ..........................................69
15. Training and Resources .......................................................................................71
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Contents
Appendixes ........................................................................................................................ 73
A: Summary of Recommendations—Quick Reference Sheet .............................73
B: Summary of Good Practices—Quick Reference Sheet ..................................77
C: Comparison of the PEP Defi nitions and Enhanced Due Diligence
Requirements ...............................................................................................................79
D: United Nations Convention against Corruption (UNCAC) and
Interpretative Notes ....................................................................................................85
E: Financial Action Task Force on Money Laundering (FATF)—
Recommendations, Interpretative Notes, and Methodology ..............................87
F: Directives of the European Parliament and of the Council .............................89
G: Field Mission Survey—Questions for Banks, Regulators, and
Financial Intelligence Units ......................................................................................93
Index ................................................................................................................................... 99
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