draining development.pdf - Khazar University

398 Draining Development?conceptualized as a poor-to-rich country process of capital flight, thepublic and professional debate has focused exclusively on the launderinglinks between rich and poor countries, the bribes paid by companiesbased in the former to leaders in the latter, and the return of the bribemoney to financial institutions or as investments in rich countries. Inthis process, laundering that is largely internal to the poor world hasbeen neglected. Indeed, this is implicit in the way that most poor (andrich) countries define PEPs: most include only foreign, not domestic,public officials, and few include subnational politicians, the military, thepolice, and so on, though the rent-seeking capacities of these may begreat (see Chaikin and Sharman 2009, for a critical review of such legaldifferences). According to the current FATF definition, PEPs are individualswho are or have been entrusted with prominent public functionsin a foreign country, for example, heads of state or of government, seniorpoliticians, senior government, judicial, or military officials, senior executivesof state-owned corporations, or important political party officials.Business relationships with family members or close associates of PEPsinvolve reputational risks similar to those with PEPs. The definition isnot intended to cover middle-ranking or more junior individuals in theforegoing categories. Thus, although poor countries are expected, almostrequired, to have AML legislation and FIUs, their financial institutionsand other regulated bodies are not expected to pay extra due diligence totheir own de facto and de jure political leadership, who are precisely thepeople most likely to be corrupt. 24Whatever the legal requirements may be, international financial institutionsgenerally use commercially compiled global lists such as World-Check or LexisNexis, and these include relatives and associates of PEPs. 25Many FIUs, at least in jurisdictions that can afford the commercialfees, also use these. However, such lists do not include companies ofwhich PEPs are undisclosed beneficial owners, nor do many countriesassist by publishing lists of all government officeholders on the Internetor even in print. This has not been an internal priority for countries,nor—at least until the FATF began to focus recently upon beneficialownership—has it been the subject of significant pressure from theFATF or the International Monetary Fund–World Bank monitoring process.Neither developed nor developing countries currently collate listsof PEP holdings in their countries (and major international banks claim