PEPs

The sacked British banker and Ghanaian king’s hard cash

Incidences of bank workers violating anti-money laundering (AML) laws occur worldwide, and the United Kingdom is no exception.

Take the recent reports that a top banking official at Ghana International Bank’s London office was sacked for a flagrant violation of the UK AML law.

According to the Telegraph and other media reports, the executive collected £200,000 and US$200,000 in cash from an influential Ghanaian king, and deposited the cash into the King’s account at the bank’s branch.

He then transferred US$200,000 to an account at Standard Bank in Jersey.

The transactions triggered suspicion, which were reported to the National Crime Agency (NCA) as a money laundering suspicious activity.

The transactions triggered suspicion, which were reported to the National Crime Agency (NCA) as a money laundering suspicious activity.

Being a dual citizen of the UK and Ghana, the executive’s defence was that he chose not to comply with UK AML law because he did not want to offend the sovereign of his country.

When it comes to the definition of politically exposed persons (PEPs), the law is very clear.

For example, the Criminal Finances Act 2017 defines a PEP as a person who is:

(a) an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State;
(b) a family member of a person within paragraph (a);
(c) known to be a close associate of a person within that paragraph;
(d) otherwise connected with a person within that paragraph.

Similarly, Money Laundering Regulations (MLR) 2017 refers to PEP as an individual who is entrusted with prominent public functions, other than as a middle-ranking or more junior official.

In this regard, it is clear that the Ghanaian King is a PEP, by virtue of him being a King in Ghana to whom his people entrust their affairs.

Also, by virtue of his position in the bank, the top banker must have known that the King falls within the legal definition of PEPs.
Hence, the top banker ought to have carried out due diligence with a view to establishing the provenance of the money.

Failure to carry out due diligence contravenes the provisions of the MLR 2017. The fact that the King is known to the top banker does not exempt the banker from enforcing the AML law.

The defence alluded by the top executive that he could not carry out AML checks just because he dares not offend the sovereign of his nation cannot be a defence to charges of money laundering under the Proceeds of Crime Act 2002 or for violation of MLR 2017.

Under the Money Laundering Regulations 2007, firms can apply simplified customer due diligence to customers and products that fall into one of the listed categories.

Falling into one of the listed categories presupposes that the customer or product presents a low risk factor.

MLR 2017

However, this has changed as the MLR 2017 now requires firms to assess the level of risks business relationship or transaction presents before deciding the level of due diligence to apply.

Where a client is a PEP, as it is in the case of the Ghanaian King, such clients and their transactions present a high-risk factor. Consequently, a firm must apply an enhanced due diligence.

In this case the bank’s senior executive ought to have carried out enhanced due diligence to determine the provenance of the cash he deposited into the King’s account.

Moreover, where a relevant person proposes to have, or to continue, a business relationship with a PEP, or a family member or known associate of a PEP, additional measures need to be taken, which include obtaining approval from senior management in order to continue the business relationship; and taking adequate measures to establish the provenance of the funds involved in the proposed transactions.

In this case, the bank’s senior executive who carried out the transaction on behalf of the King is the second most senior executive in the bank, from whom approval ought to be sought.

This case also goes to show how human nature can play a vital role in determine AML compliance.

It is quite unfortunate that a senior executives could descend so low to facilitate an AML violation even when the UK’s senior management regime is in place, which rests the responsibility of instituting AML compliance culture in an organisation on the shoulders of the senior executives.

Dr Sirajo Yakubu is a researcher and consultant in the areas of Economic Crime, and International and Commercial Law (World Trade Specialist).