Those living in the Northeast may think New York, New Jersey, and Connecticut have cornered the market in corrupt and misbehaving politicians-think former governors Elliot Spitzer of New York (prostitution), John Rowland of Connecticut (corruption) and Jim McGreevey of New Jersey (gay but married).
But the reality is that politicians everywhere are prone to bribes and other forms of corruption; just this summer Alaska Senator Ted Stevens, the longest-serving Republican in the Senate, was indicted after allegedly accepting major renovations on his home from an oil contractor. And, though the circumstances are vastly different, let's not forget all those "Friends of Angelo" and their sweetheart Countrywide loans.
What's this got to do with bank technology news? Two words: money laundering. When Spitzer was forced to resign last March under the specter of a Federal investigation into his use of prostitutes, much was made of how his shady financial transactions tipped off authorities. At the time, many news stories described Elliot as a politically exposed person, or PEP, someone banks are required to watch more closely than the average customer because of their potential ties to money laundering.
In reality, Spitzer was not a PEP, no domestic politician is. Currently, the FFIEC regulations reserve PEP status for foreign politicians, calling on banks "To take all reasonable steps that they do not knowingly or unwittingly assist in hiding or moving the proceeds of corruption by senior foreign political figures and their associates," by creating risk-based controls to identify and monitor these accounts.
"People were saying erroneously that [Spitzer] was being paid attention to because he was a PEP," says Michael Recce, chief scientist at AML vendor Fortent. "He's not a PEP. There's a mismatch between regulations and what people think regulations are, or what they might want them to be."
Ironically, Spitzer's example may induce the FFIEC to change its definition. Recce says he's hearing nascent discussions about expanding the PEP rules to cover American politicians. "There's an increase in attention being paid to domestic politicians, and generally the definition of PEP," Recce says. "There's just so much public attention on illicit financial dealings of politicians, I wouldn't be surprised if there's an effort to expand the definition of a PEP."
This idea, if promoted by Federal regulators, would not be wholeheartedly embraced by the industry since it would create even more know-your-customer burdens and increase the already out of control number of SARs. More PEPs would definitely mean more peeping. But if it helps keep politicians on the straight and narrow, maybe it's worth the effort.(c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved.http://www.americanbanker.com/btn.html/ http://www.sourcemedia.com/