draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 401• Monitor transactions to determine if they match customer profiles.• If they do not match, examine the transactions to determine if thesemight represent the proceeds of crimes, including by examining thesources of funds.• If they do appear to represent the proceeds of crimes, report the transactionsto the FIU.These institutions must apply enhanced due diligence in the case ofhigher-risk customers (of which PEPs are a required category) andreduced due diligence in the case of lower-risk customers. However, thisis not self-implementing; there is much discretion, for example, on howfar compliance officers must go to ascertain the identity of beneficialowners. 29 The FATF preventive measures do not describe with any precisionat what point in the risk continuum financial institutions shouldidentify transactions as suspicious (a term that, analytically, should beredefined as suspected) and report them; nor is it clear whether financialinstitutions should report to the FIU those people they decline to acceptas customers so as to alert the FIUs. Discussions with compliance officersindicate that they do sometimes turn away PEPs altogether or, if thePEPs have accounts, bar them from particular activities that are viewedas inconsistent with their official roles and incomes. However, manyPEPs have access to numerous banks, and barring them from makingparticular transactions may not be effective overall. 30 PEPs also havelocal accounts in developing countries, though a developing countrymay not require institutions to apply enhanced due diligence to nationalPEPs, at least formally. Little is publicly known about the perceptions ofrisk among compliance officers and regulators in developing countries.One of the few clear-cut cases where a SAR has been used by adeveloping-country FIU to prosecute grand corruption locally occurredin Namibia, which took action against local elites for massive allegedcorruption involving the airport security technology firm run by a sonof Chinese leader Hu Jintao (see box 12.1). 31Although he was not a PEP, another example of success by an AMLsystem in a developing country is the case of Kobi Alexander, wanted byU.S. authorities since 1996 for alleged securities fraud. A Namibian bankreport arising from a large transfer into Alexander’s recent Namibianaccount may have triggered his arrest.