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Dennis O Connor s PEP presentation on PEPS th Folie Country Risk

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					                An Update on PEPS


30 April 2007                       Denis O'Connor
mlros.com
    Hillary Benn – Secretary of State for International Development
    (26 October 2006 – House of Commons)




    “Good governance is about ensuring the rule of law….Bad governance can
    be caused or made worse by the actions of rich countries and their
    companies. For every bribe taken – there has to be a bribe giver; for every
    stolen dollar that is spirited out of a developing country, there has to be a
    bank account somewhere for it to go into.”




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    Hillary Benn – Secretary of State for International Development
    (9 December 2006 – International Anti-Corruption Day)




    “Tackling corruption wherever we find it – whether here or abroad – is
    essential to send a strong message to those choose to extort, corrupt and
    deceive that it will not be tolerated.

    Together we can make progress and I welcome the efforts of the anti-
    corruption movement for raising awareness of the issue. But awareness is
    one thing; action is another. And it is down to all of us to do something, not
    just on one day, but every day.”




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    Serious Fraud Office
    (14 December 2006 – Press Release)


    “The Director of the Serious Fraud office has decided to discontinue the
    investigation into the affairs of BAE Systems PLC as far as they relate to
    the Al Yamamah defence contract with the government of Saudi Arabia.

    This decision has been taken following representations that have been
    made both to the Attorney General and the Director of the SFO concerning
    the need to safeguard national and international security.

    It has been necessary to balance the need to maintain the rule of law
    against the wider public interest.

    No weight has been given to commercial interests or to the national
    economic interest.”




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JMLSG Guidance – January 2006



 „Natural persons who are or have been entrusted with prominent
 public functions and immediate family members, or persons known to
 be close associates, of such persons.“ (3MLD)
 Non UK
 Head of State or Government
 Senior politicians, government / judicial / military officials
 Senior executives of publicly owned enterprises
 Important political party officials




5
JMLSG Guidance – January 2006

     Risk based approach
       Procedures for identifying PEPs
       Appropriate senior management approval – take on &
       ongoing
      Reasonable measures to establish source of wealth & funds
      Enhanced ongoing monitoring




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JMLSG Guidance - January 2006

    PEPs linked to:-


     Retail banking
     Credit cards
     Wealth management
     Financial advisers
     Investment fund products
     Discretionary & advisory investment management
     Correspondent banking




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Draft 2007 Money Laundering Regulations

     As per JMLSG Guidance
     Person who is current PEP or within last 12 months
     Resident outside the UK
     Prominent public function by
        Any state except the UK
        The European Community
        An international body
     Immediate family member or known close associate
     Schedule 2 (4): definitions




8
FSA Thematic Review – 2006: Areas for Improvement


     Senior management approval – plan for Directive compliance
     Training on PEPs – consider specific training for relevant staff
     Maintain a list of PEP accounts
     Formalise ongoing PEP checks
     PEP databases - not all staff & depts aware of limitations
     Reputational risk ≠ financial crime risk
     Internal Audit review of PEP systems & controls




9
 FSA Thematic Review – 2006: Good Practice


      Regular committee meetings:- transactions, new clients, SARs
      Take on: CEO led committee, standard forms & checklists
      MLRO Report: specific mention of PEP systems & controls
      No automatic de-classification of PEPs
      Remuneration policy




10
 Practical Issues

      Is your client a relevant office holder?
      What are the office holder’s official responsibilities?
      What salary accrues to the office holder?
      What authority does the office holder have?
      What access is there to significant public assets & funds?
      Turnover of office holders
      Is he/she high, medium or low ranking official?
      Common names / naming conventions
      Unique identifiers (e.g. date of birth)




11
 Practical Issues

      Existing clients – do they have any PEP links?
      Ongoing checks on PEP status
      What level of senior management approval is required?
      Identifying beneficial owners
      Identifying relatives
      Curriculum Vitae
      Access to reliable independent information
      Limited intelligence on scale of PEP corruption via UK firms
      Costs – time / labour / systems (RIA – £20 million)




12
 Practical Issues

      Establishing country risk
      Transparency International’s Corruption Perception Index
      World Bank’s Governance Indicators & Reports
      UN / EU / US sanctions lists
      Ex NCCT?
      FATF / IMF country reports
      International Narcotics Strategy Control Report (State Dept)




13
 Public Sector Initiatives on PEPs & Corruption

  SOCA coordinating & supporting law enforcement agencies
  HM Treasury developed an early warning system for PEP risk
  City & Met Police teams
     - Proceeds of Crime Unit (12 officers) – UK focus on foreign PEPs
     - Overseas Anti-Corruption Unit (10 officers) - UK persons &
       foreign bribery
     - £35mn of Nigerian assets restrained




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                Denis O’Connor
                 Deputy MLRO
           Commerzbank AG London
              Tel: 0207-469-3154
              Fax: 0207-653-7416
     Email: denis.oconnor@commerzbank.com




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