It is well known that corrupt politically exposed persons can conceal their illicit assets in money laundering circuits.  My recent comments regarding politically exposed persons are included at MoneyLaundering.com’s August 9th article:

International Groups Say Corrupt PEPs Can Often Loot With Impunity*

August 9, 2011
By Colby Adams and Brian Monroe

Three intergovernmental groups are questioning the effectiveness of anti-money laundering controls meant to curb abuses of corrupt political figures who steal from their countries.

The World Bank and United Nations said in a joint June 21 report that at least 74 of 124 jurisdictions examined have not complied with anti-money laundering (AML) recommendations to quash kleptocracy by political figures. The record indicates that financial institutions and the agencies that regulate them may be “deficient” in enforcing the controls, the report said.

In a separate report published July 29, the Paris-based Financial Action Task Force (FATF) warned banks and other companies that government officials, also known as politically exposed persons (PEPs), can exploit the “natural advantages” of their positions to launder ill-gotten funds through institutions, and then stymie investigations into the crimes.

The three organizations recommended requiring financial institutions to review their PEP accounts annually, sharing suspicious activity reports on the accounts of foreign politically-tied figures with their home country and eliminating the distinction between foreign and domestic PEPs.

“More specific guidance may be needed because there are specific challenges related to the persistent problem of PEPs that we don’t see with drug trafficking and organized crime,” said Vincent Schmoll, principal administrator with the FATF secretariat, in an interview. FATF plans to publish guidance in the next six months on how to identify such funds, he said.

Looting by the former Nigerian dictator Sani Abacha, who siphoned assets out of his country into banks in Switzerland, the United States and the United Kingdom, illustrates how difficult it can be to stop powerful figures from abusing their positions, said Schmoll.

“Even if all the receiving countries of Abacha’s funds had all their PEP laws up to par, and were able to identify the beneficial owners, his control of the country meant that there was no way for Swiss, U.K. and U.S. banks to return the money to his victims,” said Schmoll.

In cases when corrupt foreign officials exercise direct power over a bank, “the hardest part of money laundering, introducing the funds into the financial system, is already done,” said Fred Abrams, a New York-based attorney specializing in asset recovery. Pavlo Lazarenko of Ukraine and Zine El Abidene Ben Ali of Tunisia both used such means to launder funds they stole from state coffers, he said.Continue Reading MoneyLaundering.com Article About Looting With Impunity