The term politically exposed persons (PEPs) originated in the Swiss banking community and has been relevant within this sphere for several decades due to the high profile of many Swiss banking clients. Although there is no generally accepted definition of the term, varying attempts have been made to define PEPs in the context of the risk it poses to investment and the business community at large. The FATF defines PEPs as “individuals who are or have been entrusted with prominent public functions in a foreign country, for example, heads of state or of government, senior politicians, senior government, judicial or military officials, a senior executive of state-owned corporations, important political party officials. Business relationship with family members or close associate of PEPs involves reputational risk similar to those with PEPs themselves.
For Nigeria, the case of the late former governor of Bayelsa State, Diepreye Solomon Peter Alamieyeseigha, who with approximately 18 financial vehicles and other legal entities pleaded guilty to six counts of corruption in July 2007 and was convicted of six counts of fraud and false declaration of assets brought to the fore the inherent exposure to domestic PEPs risk. In Nigeria, PEPs are untouchable and highly esteemed by financial institutions because government institutions and PEPs are the preferred clients of financial institutions operating in Nigeria. The financial institutions are the major beneficiaries of corruption as they use this dirty money to boost liquidity and create an artificial balance sheet. Sadly, successful enforcement of AML requires the cooperation of financial institutions. Whilst in another part of the world financial institutions are skeptical about dealing with PEPs, in Nigeria, knowing PEPs is a meal ticket and guarantees you a promotion within the financial institution.
The definition is not intended to cover middle ranking or more junior individuals in the foregoing categories. Basel Committee on Banking Supervision defines PEPs as “Individuals who are or have been entrusted with prominent public functions, including heads of state or government, senior politicians, senior government, judicial or military officials, senior executives of publicly owned corporations and important political party official.” the Basel Committee’s definitions vary from FATF in the sense that it does not include family members or close associates but covers middle-ranking or more junior individuals and excludes provision for PEPs in a foreign country. The UK JMLSC’s definition differs from FATF’s definition by placing restrictions on time and the use of the phrase “prominent public function” which is obviously vague and capable of diverse interpretations. The implication of the unclear definition of PEPs by FATF has resulted in the exclusion of family members beyond immediate family, junior and middle-ranking PEPs, close associates, and domestic PEPs thereby overlooking the inherent risk exposure of institutions who may be dealing with these individuals.
The process for the prosecution of PEPs would depend on the specific offense for which they were charged with. The process for prosecution would be as statutorily provided for however there are numerous challenges to the prosecution of PEPs.
CHALLENGES OF PROSECUTION OF PEPs in AFRICA: NIGERIA AND KENYA
Prosecutorial discretion in the criminal justice system and the anti-money laundering regime encounters challenges. One of which is the delegation of discretionary powers, solely to the Attorney General of the Federation by the constitution. These powers include the discontinuance of cases at will, plea bargaining and charging. The application of prosecutorial discretion rightfully or wrongfully plays a key role in the prosecution of politically exposed persons and the anti-money laundering regime. The rule of law is central to the rightful application of prosecutorial discretion.
Money laundering and corruption particularly by politically exposed persons [PEPS] can be attributed as one of the reasons for the slow pace of development in the country.
The problem of corruption by PEPS and the unsuccessful prosecution of PEPS, has undermined international recommendations of the FATF, that have been integrated in the AML regime in Nigeria. This is because there is a difference between having existing laws and the enforcement of these existing laws. The mere integration of international recommendations by the Nigerian state does not amount to enforcement of these recommendations.
It would be difficult for the FATF to ensure that Nigeria enforces the prosecution of PEP, despite having integrated FATF policies and international recommendations into her AML regime. For the successful regulation of this typology in the Nigerian AML regime, it must come from within. There must be a genuine commitment by regulatory authorities and the prosecutorial agencies to enforce these international recommendations, by consistently and successfully prosecuting PEP. Integration of international recommendations is not enough for an effective AML regime.
Some of the challenges affecting the prosecution of politically exposed persons include
- Immunity clause.
- conflicting instructions from the government depending on who is on their good side and who is not
- those in power taking advantage of the crime-fighting agencies as a tool to exact vengeance;
- judicial corruption
- non-conviction-based forfeiture
- Exercise of Presidential pardon to those who have been successfully convicted as in the recent state pardon granted to former Governors Joshua Dariye and Jolly Nyame by President Muhammadu Buhari.
- The failure of Nigerian banks to abide by the Money Laundering (Prohibition) Act that impels financial institutions and designated non-financial institutions to report to the EFCC transactions, lodgments or transfer of funds in excess of 5 million within 7 days which is already punishable by law.
- Failure to sanction banks for negligence to fulfill the reporting obligation?
- And even if reported, failure to commence or conclude investigation based on this report?
These elements have made whatever progress made to be considered microscopic in comparison to the damage it continues to inflict.
Despite the numerous agencies in place to combat corruption and money laundering by politically exposed persons which include EFCC and ICPC, their activities have become redundant with PEPs being almost untouched. More emphasis is now placed on freezing, seizing, and repatriating the assets of corrupt PEPs. But while this move is in many ways welcome, it is still the case that essentially none of the most infamous PEPs have ended up behind bars. Even when governments go after their illicit assets, the governments seeking asset recovery often find themselves put to an uncomfortable choice: either to accept the return of only a part (sometimes a small part) of the looted wealth in a settlement, or to continue to pursue their attempts, often in vain, to seize and repatriate all (or at least most) of the stolen assets.
Most PEPs know this, and usually take advantage of the slowness of the asset recovery process (as well as their ability to use their ill-gotten wealth to hire top-notch legal talent to wage a protracted legal battle), to the point where the governments are willing to allow the PEP to secure a favorable settlement. Nothing illustrates this better than the attempts to recover the assets of former Nigerian President Sani Abacha and of former Kenyan President Daniel Arap Moi. Abacha’s family’s lawyers stiff resistance to asset recovery efforts eventually led to a settlement whereby the Abacha family returned $1 billion–but got to keep $300 million. In the latter case, the Kenyan authorities insisted on recovering the full amount–and have ended up with nothing. The Kenyan experience has served as a cautionary tale, inducing governments to accept settlements. This result frustrates the foundational principle of penology that a criminal who gets caught should end up worse off than he would have been if he did not commit the crime. A corrupt official who knows that the worst that can happen is that he might have to give back half or two-thirds of the money he stole is unlikely to be deterred.