Monday, November 28, 2011


There was a bit of a flap earlier this year when it was revealed that the child of a very senior Chinese government official was studying at an Ivy League university in the United States under an assumed name. In the compliance world, we call that an alias, and it creates a number of potential problems when deciding whether to classify a wire transfer, or other payment, as a reportable suspicious transaction.

Yes, we know that the privileged children of PEPs often attend university in the UK and the US, but what is disturbing is the fact that a number of them are studying under aliases. Why, do you ask, is this a common occurrence ? Since some of the countries where their fathers are senior government officials, general officers, or the managing directors of government-owned companies are dictatorships, or have abysmal human rights records, the schools' management fear, correctly, that they will be targeted for protests, ostracised, identified, or otherwise made uncomfortable for their fathers' sins.

Since PEPs in a number of countries illegally control lucrative private businesses, and might even enjoy a monopoly in a particular industry, at the expense of abused and underpaid workers, or even slave or convict labour, their wealth becomes a compliance issue. They may also be collecting bribes and kickbacks, in violation of the Foreign Corrupt Practices Act or the UK Anti-Bribery Act.

Thus, should the PEPs child receive a substantial amount of money, ostensibly for his or her schooling, but in reality to launder and invest locally, performing due diligence on the student as a bank client becomes problematic when you have a passport carrying an assumed name, not linked to the PEP parent. It is also a compliance issue for a university that accepts payments from a parent whose published annual earnings are less than the cost of tuition and fees.

What we are concerned with, of course, is the receipt, by a foreign student at your local university or college, of a substantial amount of money, which is far more than is necessary for an education.  Factor in these issues, when deciding whether to file a SAR, or take other action:

(1) The amount received. Is it substantial ?
(2) The account history. have there been prior payments ?
(3) The home country of the student. Is it known for corruption ?
(4) The jurisdiction where the funds originated. An offshore financial centre perhaps ?
(5) The student's other known account relationships. Does he have accounts at other local banks ?
(6) The declared home address of the student in their own country. Is it in a known neighborhood where senior officials reside ? Is it merely an accommodation address ?

After looking at these potential red flags, you will be in a better position to make an informed decision.  

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