Posts Tagged ‘Hosni Mubarak’

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Weekly word: PEP

September 14, 2011

Admittedly, it’s been a lot longer than a week since our last effort at defining terms related to the money jihad.

This latest addition to the glossary will be “politically exposed person” (PEP):

PEPs are individuals who are or have been entrusted with prominent public functions in a foreign country, such as heads of state or government; senior politicians and party officials; senior executive, judicial, or military officials; and senior executives of state-owned corporations.*

PEPs normally include family members of government officials, but do not normally include low or mid-level government officials.

Being able to identify and screen PEPs can help prevent the transfer of ill-gotten funds from, for example, corrupt politicians to banks overseas.  But that is easier said than done.

In August, MoneyLaundering.com reported:

Three intergovernmental groups are questioning the effectiveness of anti-money laundering controls meant to curb abuses of corrupt political figures who steal from their countries.

The World Bank and United Nations said in a joint June 21 report that at least 74 of 124 jurisdictions examined have not complied with anti-money laundering (AML) recommendations to quash kleptocracy by political figures. The record indicates that financial institutions and the agencies that regulate them may be “deficient” in enforcing the controls, the report said.

In a separate report published July 29, the Paris-based Financial Action Task Force (FATF) warned banks and other companies that government officials, also known as politically exposed persons (PEPs), can exploit the “natural advantages” of their positions to launder ill-gotten funds through institutions, and then stymie investigations into the crimes.

The three organizations recommended requiring financial institutions to review their PEP accounts annually, sharing suspicious activity reports on the accounts of foreign politically-tied figures with their home country and eliminating the distinction between foreign and domestic PEPs.

The questionable effectiveness of PEP screening sheds further doubt on the world’s approach to preventing money laundering and terrorist financing.

The PEP concept is particularly relevant during the Arab Spring, where rulers like Muamar “Daffy” Qaddafi, Bashar “Butcher” al-Assad, Hosni Mubarak, and other leading thugs are being accused of holding secret bank accounts of wealth stolen from their people.

* World Bank, Combating money laundering and the financing of terrorism:
a comprehensive training guide, Volume 3, Part 1 (Washington D.C.:  World Bank Publications, 2009).