Whitepaper spotlights Asian politically exposed persons
A NEW whitepaper report exploring due diligence requirements for Politically Exposed Persons (PEPs) in China, Hong Kong, Malaysia and Singapore has found that the urgency of PEP identification is accelerating and evolving throughout the region.
The LexisNexis Risk Solutions report supports the push for the application of a risk-based approach for all PEPs – foreign or domestic. It found that the significant numbers of entries on PEP lists, including PEPs, their relatives and associates, have created difficulties in effective PEP screening.
PEPs are generally regarded as posing potential elevated risk in business and financial dealings. In Asia, numerous high-profile cases of alleged corruption involving PEPs have surfaced in recent years.
US Commercial Markets and Global Market Development, LexisNexis Risk Solutions senior vice-president Thomas C. Brown says in a statement: “The need for financial transparency has never been greater. Proper handling of potential risks posed by PEPs requires a holistic customer risk assessment process that focuses on effectively assessing risk using a variety of factors. Only then can businesses and financial institutions apply the proper controls to identify activities of concern and mitigate reputational, legal and regulatory risks.”
Customer due diligence in Asia has gained recent prominence, with a growing set of regulations that have come into force. International anti-money laundering (AML) standards recommended by the Financial Action Task Force have provided a framework for member jurisdictions, among them China, Hong Kong, Malaysia and Singapore, to lay out requirements for the prevention of money laundering and terrorist financing. Each jurisdiction is distinct: China: The volume of investigation into corruption and the subse- quent media coverage is particularly high in China compared to the other countries. Government-led anti-corruption campaigns have resulted in a number of high-profile and senior-ranking officials being prosecuted for corruption and bribery offences. However, enforcement figures suggest that prosecutions involving public servants are significantly lower.
Hong Kong: Convictions in the territory under the main anti-bribery and corruption legislation, the Prevention of Bribery Ordinance, are relatively low compared to other jurisdictions. However, there has been a 23% increase, from 93 to 114, in the last two years.
Malaysia: Under the Malaysian Corruption Act (2009), the Malaysian Anti-Corruption Commission is responsible for investigating and enforcing corruption offences. The number of prosecutions remains modest as the reported number of offenders among public officials has only been 118 in the last two years.
Singapore: Cases resulting in convictions in Singapore are somewhat behind other regional jurisdictions. Fewer than 40 people in the public sector were prosecuted under the Prevention of Corruption Act and the Corruption and Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, in 2013 and 2014 combined.
Michael J. Shaw, vice-president, Global Market Development, LexisNexis Risk Solutions, says the research in the report supports assumptions that PEPs may pose higher risks for potential involvement in bribery and corruption with regional enforcement on the rise:
Although enforcement figures seem to be rather low outside of China, the local and international media are increasingly reporting about investigations into corrupt practices in the region.
The severity of punishments that can be administered to companies that have broken anti-corruption or AML regulations is more prominently spotlighted, as evidenced by the recent BSI Bank case in Singapore.
Crackdown on corruption is occurring at the political level, within state-owned enterprises, through stringent anti-corruption strategies and within public forums.
Brown says all four jurisdictions have tightened their AML laws, making anti-corruption a central element of new legislation.
“International corporations and banks doing business in Asia are expected to maintain best practice compliance programmes. The key starting point is to ensure the use of effective PEP screening databases and due diligence tools to manage efficiently the risks and to develop appropriate risk mitigation measures by undertaking enhanced due diligence as necessary.”