Sunday 10/10/2021 – Why ZAMBIA should expand the list of Politically Exposed Persons (PEPs) or now sugar-coated Prominent & Eminent Persons (PEPs). In 2012 and 2013, I, as Area Head of Financial Crime Risk for Southern and Eastern Africa, Country Money Laundering Prevention Officer, Chairperson of the Anti-Bribery and Anti-Corruption Working Group, Chairperson of the Bankers Association of Zambia Fraud Prevention and Security, Member of the World Advisory Board of the Association of Certified Fraud Examiners (CFE) and Africa Organising Committee member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) was privileged to be appointed as a Speaker during the two (2) World International Conferences for both ACAMS and ACFE in Sandton, South Africa (First and 2nd International Conferences by ACAMS and ACFE to be held in Africa). Pioneers.
During my presentations, I covered several important topics pertaining to Financial and Economic Crimes. I particularly and vividly recall the touch topic of PEPs in Africa and how PEPs and their Cronies behave in African Political Systems, how Financial Sector like Banks, Financial Intelligence Units (FIUs), Law Enforcement Agencies (LEAs) should handle them in terms of Enhanced Due Diligence (EDD) and appropriately risk classified as high. In my several articles, I have provided some simpler working definitions for any layman and laywoman to easily follow the topics under discussion.
Money Laundering (ML) is the process by which criminals attempt to conceal or disguise the ownership and origin of the proceeds of criminal activity so that the funds appear to be derived from legal sources. ML process, therefore, does not make the funds legitimate or become clean, it just makes them appear to be legitimate or clean. It still remains dirty money.
Customer Due Diligence (CDD) is a process where Financial Institutions such as Banks, Insurance Companies, Securities, and Brokering firms collect, maintain, periodically review and update information and data about their individual clients, corporate, commercial, and Institutional customers. Customer Due Diligence (CDD) process is a Legal and Regulatory requirement to allow an informed choice to be made whether to onboard a new customer, continue with an existing customer relationship, or provide a new product or service or in the worst-case scenario, deny/reject the service and exit the relationship and close the Client’s Bank account. It is also one of the most powerful and available tools at the banks’ disposal to prevent and deter financial criminals and terrorist financiers from using the banks as conduits to conduct their illegal activities.
So that is what ‘Customer Due Diligence’ (CDD) means – it’s the information the Banks must have to get on their clients before they open accounts for them and the way in which Banks verify that that information is true. It’s worth running through the process at a high level. In essence, at account opening the Banks must first and actually do screen all potential new customers against the ‘Watch list which ALL Banks across Globe maintain. Those Databases and Watch lists contain listing persons and entities who are banned by the UN and various other authorities of which the Banks take note, from receiving financial services. The level of AML risk in the relationship is assessed according to the criteria of the country or geographic risk, customer risk (including business type risk), and product risk. Thereafter, Banks’ requirements are that customers are assigned into either the Standard Due Diligence (SDD) or Enhanced Due Diligence (EDD) categories, with appropriate action on information and verification then taken in accordance with the detailed business (Corporate, Institutional or Retail Customers CDD procedures). Some Banks have Lower Levels of Due Diligence depending on the Customers.
As Regulated Institutions by the Securities and Exchange Commission, FIC, Central Bank of Zambia, Commercial, Retail, Community and Merchant Banks in Zambia are expected to have clearly documented AML, KYC, and CDD Policies and Procedures.
Now, regarding the question pertaining to PEPs. This is a category of high-risk customers which receives particular attention amongst the various international standards and guidelines (FATF 40, BIS, Wolfsburg, EU Third Directive, USA Patriot Act) is that of Politically Exposed Persons (PEP’s) – Prominent & Eminent Persons (PEPs). A PEP is defined by many Financial Institutions and Regulators as “…an individual who is or has, at any time, been entrusted with prominent public functions and an immediate family member, or a known close associate, of such a person.”
From the definition above, you will agree with me that PEP is not equal to Politicians, it extends to those appointed to higher Offices such as Commanders of the various Forces (Levy Prosecuted several of them in Zambia). PEP covers spouses, Children, friends, and business associates of high-ranked Citizens in whose names, a deal or bribe can be bequeathed.
In Zambia, we can add AMAI NINI, Side chicks, girlfriends, baby mamas, Ben 10, sugar Daddies, side dudes, sons and daughters-in-law, ba sebele, aunties, and uncles. Why such figures are considered higher risk from an anti-money laundering perspective? The reasons stem mostly from the high profile which such individuals hold. They tend to attract a great deal of interest from business people, some of whom may have criminal connections or may even be criminals themselves. They often have substantial decision-making powers (or, in democratic states, the prospect of obtaining these powers through the political process) including the power to allocate vast state funds to particular companies through the award of government contracts, tenders and this, therefore, makes them vulnerable to bribery and corruption.
Dr. Chishimba Kambwili once disclosed to the Nation on TV that the money he used to make out of the Mines (before his businesses went down) was enough for him to fly to London, drink tea and come back in the evening – paraphrased. GBM as Defence Minister then during some altercations with Wynter Kabimba told us that he did join Politics to enhance his businesses and make money. The late Old Munkombwe confessed the Politics of the Belly. The list goes on. We hear stories of what might have happened during the MMD and the PF Government. PEPs, In the worst instances, may even themselves be of a criminal disposition whereupon they will be well placed to misappropriate public funds.
Finally, of course, by virtue of their positions, they will likely be in possession of sensitive non-public information which can allow them to benefit in a criminal manner at the expense of others (e.g. insider trading or insider dealing). And because PEP’s are aware of the scrutiny which their activities are likely to be subject to, their use of family members, associates and, in some cases, ostensibly unknown “fronts” and Chola boys and Chola GIRLS some in New Kasama as conduits through which to conduct their transactions and escape scrutiny, is often widespread and, of course, open to abuse, should temptation get the better of them.
Remember Sata exposed K4billion Cash withdrawal at Finance Bank by Private Secretary then and Levy (SC) came to his rescue and claimed that was his money for MMD functions/hmmm funds meant for the party in a personal account at Finance Bank then.FATF Recommendation 6 and other relevant standards state that financial institutions should, in relation to politically exposed persons, and in addition to performing normal due diligence measures must have appropriate risk management systems to determine whether the customer is a politically exposed person.The Bank must Obtain senior management approval for establishing business relationships with such customers, take reasonable measures to establish the source of wealth and source of funds; and Conduct enhanced ongoing monitoring of the business relationship.
By the way, out of curiosity, coming out of the experiences of the MMD and PF Governments, why are UPND Cabinet Ministers not transparently declaring their current personal and Family Assets so that after 2 or 3 years we the people of Zambia can conduct a lifestyle Audit and see those with affinity to dip their fingers in the cookie-jar, government coffers and those with a propensity to go off the rails…off tangent? To be Continued. KEKK888 – CFE, CAMS