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Anti Money Laundering - PDF - PDF

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					  Politically Exposed
        Persons

Risks and Case Studies
              David COPE
              Vice President
              Legal & Compliance
              May 2009
                                             Morgan Stanley January 2007




Agenda
• Who and what are PEPs?
• What is their actual risk ?
• Case Study :- AO Man-long;
• Case Study Richard YONG and the National Kidney
  Foundation;
• Dealing with the risk;
• Conclusions and Tips.



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                                                                       Morgan Stanley January 2007




            Politically Exposed Persons (“PEPs”)


• A Definition of PEP
  -A current or former senior political figure that has been entrusted with a
  prominent public role or function (for example, a senior government or military
  official or a member of a ruling royal family); or
  -An immediate family member (i.e., a parent, sibling, child or in-law) of a
  current or former senior political figure; or
  -A close associate of a current or former senior political figure.
  -Once a PEP always a PEP
• Treat like any other High Risk client: Enhanced Due Diligence and Monitoring




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                                                           Morgan Stanley January 2007




Using a Risk Based Approach :- But what actually is it ?


• Majority of Money Laundering / Terrorist Financing
  (“ML/TF”)laws are based on the concept of “Reasonableness”;
• Not all customer / transaction types produce the same level of
  risk of being abused for ML/ TF;
• If you can reasonably risk grade your clients and transactions
  you can protect yourself and the business from ML/TF
  regulatory and criminal prosecution risk.
• Higher Risk Client = Higher degree of due diligence and
  monitoring.


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                     Morgan Stanley January 2007




PEPs :- The Risk……




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                                                          Morgan Stanley January 2007



              What Risks Do PEPs Represent?


  • Misuse their power and influence for personal gain (or for the
    personal gain of family or close associates) either during or
    after their period in office;
  • Use their family or close associates to conceal money that has
    been misappropriated;
  • Use power and influence to gain control of legal entities for
    personal gain


The majority of PEPs do not abuse their position and will not
represent any additional risk solely by virtue of being a PEP

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                                    Morgan Stanley January 2007




Case Study :- AO Man-long



• Who ?
• AO Man-long (歐文龍)
• Secretary for Transport &
  Public Work of Macau SAR
• On December 6, 2006, AO
  was arrested for corruption
• AO is the first arrested
  secretary-level official in the
  history of Macau


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                                   Morgan Stanley January 2007




Case Study :- AO Man-long

• How?
• Nominee Companies set up
  using company formation
  agents attached to law and
  accounting firms. Nominee
  Companies open bank A/Cs
• AO was co-signatory of A/Cs
  in names of relatives in Hong
  Kong
• Substantial “re-investment” of
  corrupt payments back into
  Macau SAR property

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                                                Morgan Stanley January 2007




Case Study :- AO Man-long

 • Charged on 6th June 2007;
 • HKD$770 Million in assets identified
   and subject to restraint in both Hong
   Kong and Macau SARs
 • The assets were equal to 57 times the
   total earnings of AO and his wife in their
   official posts over the past six years
 • Investigators had also found in AO's
   home several bottles of wine dating back
   more than a century
 • Convicted in early 2008 and sentenced to
   28 years imprisonment
 • Macau and Hong Kong SAR continue to
   prosecute both the bribe givers and those
   who assisted AO


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                                              Morgan Stanley January 2007

Case Study :- Singapore National Kidney Foundation
Scandal & Richard YONG.
• Who ?
• Richard Yong:- former
  Singapore National Kidney
  Foundation Chairman
• NKF’s Patron is wife of GOH
  Chok-tong
• YONG subject to high profile
  civil claim in Singapore with
  large judgment debt :- Lots of
  publicity.



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                                         Morgan Stanley January 2007


Case Study :- NKF and Richard Yong
• How ?
• YONG attempted to avoid a civil
  bankruptcy debt by selling property
  in his and wife’s name
• Paid the proceeds to their UBS
  Private Wealth A/C and other banks
  and then transferred the whole to
  HSBC in Hong Kong and then both
  fled here;
• YONG was arrested in Hong Kong,
  extradited to Singapore and then
  pleaded guilty to Singapore Criminal
  Bankruptcy Fraud :- sentence 15
  months imprisonment
• YONG’s wife convicted in HK for
  Money Laundering in 2009 :-
  sentence 22 months imprisonment.

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                                                                Morgan Stanley January 2007


                    PEP Risk Mitigation

• Must identify beneficial owner of all relationships with nominee
  companies;
• Source of Wealth for PEPs ?
• Identify and verify any person who has transaction authority over account
  :- Are they immediate family members or close associates of a PEP ?
• Determine the purpose of the account and the expected volume and
  nature of account activity ;
• Make reasonable efforts to review public source information – reasonable
  accessible public databases (e.g., government databases, major news
  publications, free commercial databases available on the Internet and fee-
  based databases on your PEPs on an ongoing basis:- Document your
  review.

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                                                           Morgan Stanley January 2007




                       Hints and Tips

• One PEP List for all business;
• Define clearly what “senior” means :- remember local
  government positions in Asia are often given out to most
  business leaders:-little real power;
• When doing due diligence on a PEP make sure you enquiries
  are relevant to the current AML risks of the PEP, i.e. actual PEP
  or family member or associate, former or current office holder,
  source of wealth explainable ?
• STRs when required :- NOT as a matter of routine


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                                                Morgan Stanley January 2007

  Ongoing :- Robert and Grace Mugabe Buy US$5 Million
               Property in Hong Kong…..
• “The complex was built by
  Albert Yeung, one of the
  island's most colourful
  tycoons, who has been
  repeatedly accused of having
  links to both organised crime
  and the Chinese Communist
  Party but has never been
  convicted and denies any
  wrongdoing.” :- Daily
  Telegraph 15th February
  2009
• How will respond Hong
  Kong given Mugabe is long
  time “friend of China” ?


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              Morgan Stanley January 2007




Questions ?




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