draining development.pdf - Khazar University

400 Draining Development?Member countries have generally not adopted the identification andapplication of enhanced scrutiny of financial transactions linked to PoliticallyExposed Persons as required by the narrow approach [foreign PEPsonly] in the FATF prescriptions or the broad [national, as well as foreignPEPs] prescriptions of the UNCAC. Only [Tanzania] requires reportinginstitutions to conduct enhanced due diligence of transactions conductedwith PEPs. It also requires that such institutions consider the fact that aPEP is based in a country with no AML measures as a red flag. Unfortunatelythere are no explicit penalties for non-compliance. (Goredema andMadzima 2009, 60)One might counter that so few countries have no AML measures thatthis is too generous a baseline. Indirect indicators might be the numberof SARs aimed at suspected public officials and activities connected withthem and submitted by financial and other regulated institutions withindeveloping countries and the number of developing-country FIUs investigatingthese SARs or requesting assistance from financial centers overseas.The legal secrecy that (appropriately) surrounds SARs in mostjurisdictions makes it difficult for the authorities to demonstrate theirimpact to skeptical outsiders or, alternatively, for skeptical outsiders todemonstrate that nothing significant is happening. After all, the FIUscannot, in most circumstances, prosecute PEPs or even regulated personsfor failing to implement AML; so, they can argue that it is unfair toblame them or the AML system (narrowly construed) for failures. Thisraises the question of how one might evaluate the efficiency or effectivenessof AML. In politically sensitive cases, anonymization would beimpossible without neutering the value of case studies, but, in principle,there could be some global quantification of flows of requests withoutrisking the identification of the people or institutions submitting SARs.The Development and Processing of Anti–MoneyLaundering SuspicionsUnder the money laundering recommendations of the FATF, financialInstitutions and other regulated bodies must do the following:• Identify customers (and beneficial owners, if these are different).• Establish and maintain up-to-date customer profiles. 28