Compliance officers who have been following the disclosure of disturbing information in the Bo Xilai scandal in China should consider modifying their procedures regarding high net-worth expat Chinese clients.
My advice:
(1) Take all steps that are necessary to properly identify the Chinese client ; could he be a PEP masquerading as a businessman? Does his account manager describe the client as arrogant, with a strong sense of entitlement, rather than the personality of the typical international businessman, anxious to establish a new commercial relationship ? Client attitude can betray a carefully constructed fictitious persona. You must rule him out as a PEP; otherwise, you have major monitoring ahead of you; with automatic notification to you if account activity exceeds stated objectives, funds come in through an obviously circuitous route, or suspicious activity is observed.
(2) Verify the client's Source of Funds, and occupation/profession, through the most accurate third party sources you can find. Do NOT accept commercial off-the-shelf data on the critical issue of occupation. PEPs can easily establish private commercial identities. Is he or she a possible "princeling," and do you want to turn away that business ?
(3) Meet the client yourself, if possible, and ascertain, with precision, the intended purpose of the account, lines of business claimed by the client, and types of international transactions contemplated. Make sure that the account parameters are not violated six months later; do not drop your guard.
The purpose of these Enhanced Due Diligence queries is to ensure that illicit funds, whether earned through bribes and kickbacks, through incestuous business dealings with government, or financial crime, are not later funneled through accounts at your bank.
Finally; Don't let the children of PEPs snow you. University students, classified low risk by most compliance officers, can be money launderers, too.
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