draining development.pdf - Khazar University

374 Draining Development?to be any cases in which internal AML reporting within developingcountries has led to major cases against in-favor politically exposed persons(PEPs). However, suspicious activity reports (SARs) can be usefulagainst out-of-favor PEPs and in helping to accumulate informationabout assets held in the actual or beneficial ownership of in-favor andout-of-favor PEPs. If no recording systems are in place, financial investigatorsin the aftermath of criminal cases would face greater difficulty inidentifying assets.Unless the national financial intelligence unit (FIU) is believed to beboth discreet and independent of the government, potential whistleblowersmight be afraid of exposure as sources of information. If suspicionsare communicated to the FIU, what could the FIU plausibly dowith the report? This highlights the importance of the relationshipbetween FIUs and effectively independent investigation and prosecutorialbodies, which may be needed if AML regimes in developing countriesare to have a significant impact on domestic grand corruption. Local andforeign investigations running in parallel might produce benefits; so, too,might better domestic coordination with anticorruption bodies. Achievingthis level of competence and independence is a major task.IntroductionAML is a major element in the standard list of interventions with apparentpotential to reduce the flow of illicit funds both into and out ofdeveloping countries and into developed ones, usually for the purpose ofstoring wealth or for expenditure on conspicuous consumption. It is thefirst such intervention that has been put into place on an almost universalbasis. This chapter represents an assessment of what is known aboutthe effects of AML regimes within developing countries in dealing withinternal money laundering and kleptocratic wealth.The international AML system is over 20 years old, but, prior to 2001,it was primarily focused on the countries of the Organisation for EconomicCo-operation and Development (OECD) and on financial havens(OECD or not) in which funds from drugs and fraud were laundered.Since 2001, it has been implemented in most countries, partly with theaim of protecting the West from the export of terrorism, but also to dealwith grand corruption and organized crime, often arising from crimes