Sunday, February 23, 2014


Learning whether your prospective client is a Politically Exposed Person, or PEP, a senior* government, NGO, military, or non-profit executive, with access to government accounts, or who might be the recipient of bribes, kickbacks, or other illicit payments, due to his office, used to be fairly simple: you accessed one or more of the popular commercial-of-the-shelf databases of high-risk individuals, and you looked for his profile**. If he was in there, you knew that, if you accepted his businesses, you must monitor account activity, lest he move dirty money through your bank, subjecting you to possible willful blindness charges, or reputation damage, due to negative media coverage. You may have declined his business entirely.

Things have now changed, due to the increasing sensitivity, of businessmen engaged in sordid activities, to being designated as a PEP, due to the consequences of being profiled as such, in the databases that the compliance industry relies upon. These dodgy individuals, who fear being denied access to accounts at the world's largest banks, have resorted to the usual actions of a scoundrel, who is concerned that his illicit cash flow could be turned off: retain an attorney, for the purposes of cleaning up, or even removing, their profile, which they deem an impediment.

Their counsel contacts the database firm, and asserts one or more of these positions:

(1) The information on their client is outdated, and therefore no longer correct.
(2) The information is inaccurate.
(3) The database is incorrectly linking their client to wrongful activity, or declared PEP status. He is not a PEP.
(4) Any charges alleged against their client are purely political in nature, and there is no factual basis for them.
(5) Their client was charged in a corrupt legal system, where business rivals or political opponents can have criminal charges filed through bribery.
(6) Their client was cleared, or the case will never be set for trial.

Sometimes, the advocacy is teamed with threats of impending litigation, and since database providers want to support the news, and not be the news, in many instances, the database firms cave in, and either amend the profile, or delete it entirely. This is done in a very quiet way, without any notice to the subscribers, and any subsequent search of the individual's name will not reflect the original information. You may regard this is winning through intimidation, and you are correct in that opinion.

The deletion of a Profile allows the individual to then seek to open accounts on a global basis, and conceal his or her PEP status; they usually profess to be private businessmen, with no links to any government. Therefore, especially when the prospective client is from a high-risk jurisdiction, do not dismiss him as a PEP, just because he is not in your high-risk database; he may have adroitly removed that entry. Check alternative resources, especially media native to his country, which may reflect his true PEP status. Watch yourself on this.
* There are also intermediate-level government staff, such as attorneys, senior secretaries and advisers, who may have access to government funds, due to the fact that they work for a senior PEP who delegates much of his work to them. You may encounter one when your PEP client's financial business  is regularly handled by a subordinate; treat this individual as a PEP, even though they are not technically qualified as such.
** I have written a number of articles on this blog, about the reputation restoration companies, who flood the Internet with positive information about their client, so that negative articles are pushed to the end of any search query. Non-financial firms, who routinely use Google exclusively, to conduct due diligence on clients, should avoid that method entirely, lest they conclude that a client is low risk,, when the opposite is actually true.

1 comment:

  1. And our AML/CTF jobs just get harder and harder - with little to no accountability from the database providers now as well? Thank you for the update.


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