Written By John Horan, Maze Investigations and Compliance Training LTD.
The sentence below was reported by Brendan Carlin the political reporter for the Mail on Sunday as a quote from Charles Walker MP.
“…up to 150,000 people – those with any family link to all national and local politicians, civil servants, Army officers, City workers, financiers and diplomats – could have their money seized”
The quote is part of a larger article into the banks’ approach to the impending 4th Directive or 4MD which will bring domestic PEPs into the AML regime. A long overdue development. After all it is hubris to imagine only “nasty Jonny foreigner” is capable of misusing a position of power.
So it appears the banks are pre-empting the introduction into UK law by starting the process early, so far so good, or is it?
It is clear some UK PEPs have been approached by their bank and they and their relatives (PEPs by definition) are being questioned to establish source of wealth in respect of their accounts. That the approach is formulaic and heavy handed is obvious by the attendant howls of outrage of those questioned and the subliminal text of “we suspect you of money laundering hence the questions”.
So the banks are back to ticking boxes, I so hate this approach to fighting AML, it is not just lazy but ineffective not to say counterproductive, alienating clients and creating bad publicity. Are the banks unable to recognise a few simple facts? PEPs are not all similar: one size does not fit all. PEPs are not inherently bad, having a PEP client can add kudos to the bank. PEPs come in shades of grey (maybe not 50, but certainly not far off). Eliciting information without offending is a skill which can be taught.
So it is fair to say the banks are trying to do the right thing but with all the finesse and skill of a bull in a china shop. Has no one thought of training the staff asking the questions? Or indeed the compliance officers sending out the instructions?
Turning to that hysterical (as in hysterically funny) quote.
Are you as amazed as I am? Where did this nonsense come from? The quote is no doubt accurately reported so where did Mr Walker get his information from? There are a number of possible explanations, one is Mr Walker has put 1 and 1 together and got 11. It makes good headlines but is neither accurate nor believable. Another is he doesn’t get much air time and needs the publicity, a third possibility is a man down the pub told him, I have always liked that one, it is so often the explanation. Also where did up to 150,000 come from? When did a City worker become a PEP or a financier? Money seized by whom and under what legislation? The mind boggles.
Finally the FATF sets out clearly and concisely the issue of PEPs
- FATF Recommendations 12 and 22 require countries to ensure that financial institutions and designated non-financial businesses and professions (DNFBPs) implement measures to prevent the misuse of the financial system and non-financial businesses and professions by PEPs, and to detect such potential abuse if and when it occurs.
- These requirements are preventive (not criminal) in nature, and should not be interpreted as stigmatising PEPs as such being involved in criminal activity. Refusing a business relationship with a PEP simply based on the determination that the client is a PEP is contrary to the letter and spirit of Recommendation 12. (source FATF)