FinCEN Warns Financial Institutions to Guard Against Corrupt Venezuelan Money: Key Consideration for Financial Institutions

By Joseph Chisolm

Financial institutions should have effective Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) and Office of Foreign Assets Control (“OFAC”) policies and procedures to manage the risks associated with senior political figures, otherwise known as “politically exposed persons (PEPs).” Under the Federal Financial Institutions Examination Council’s BSA/AML Examination Manual (“FFIEC Manual”), PEPs include:

  • Any corporation, business, or other entity that has been formed by, or for the benefit of a PEP.
  • The PEP’s “immediate family’ which includes parents, siblings, spouse, children, and in-laws.
  • The PEP’s “close associates” defined as individuals widely and publicly known to maintain an unusually close relationship with the PEP, and includes persons in the position to conduct substantial domestic and international financial transactions on behalf of the PEP.

The Know Your Customer (“KYC”)/Enhanced Due Diligence (“EDD”) and sanction screening processes are the key opportunities to conduct risk-based due diligence on PEPs, and financial institutions should have adequate processes in place to monitor PEPs for potential suspicious activity.  Due diligence should include, but not be limited to:

  • Identifying the accountholder and beneficial owner, including the nominal and beneficial owners of companies, trusts, partnerships, private investment companies, or other legal entities that are accountholders.
  • Seeking information directly from the account holder and beneficial owner regarding possible PEP status.
  • Identifying the accountholder’s and beneficial owner’s country/ies of residence and the level of risk for corruption and money laundering associated with these jurisdictions.
  • Obtaining information regarding employment, including industry and sector and the level of risk for corruption associated with the industries and sectors.
  • Checking references, as appropriate, to determine whether the account holder and beneficial owner is or has been a PEP.
  • Identifying the accountholder’s and beneficial owner’s source of wealth and funds.
  • Obtaining information on immediate family members or close associates either having transaction authority over the account or benefiting from transactions conducted through the account.
  • Determining the purpose of the account and the expected volume and nature of account activity.
  • Making a reasonable effort to review public sources of information. These sources will vary depending upon each situation; however, banks should check the accountholder and any beneficial owners of legal entities against reasonably accessible public sources of information (e.g., government databases, major news publications, commercial databases and other databases available on the Internet, as appropriate).[1]

Mazars USA can help financial institutions comply with BSA/AML requirements.

[1] Source: Federal Financial Institutions Examination Council’s Bank Secrecy Act/Anti-Money Laundering Examination Manual (2014)