Tag: Politically Exposed Person

London solicitor linked to Panama Papers fined £45,000 with further £40,000 costs

lawyer-fined-for-failing-to-identify-panama-paper-clients-pep-status (1)

A law firm partner is facing an £85,000 bill for failing to excercise adequate due diligence to check the background of his clients, following a disciplinary hearing centering around the huge data leak from former Panamanian law firm Mossack Fonseca.

London solicitor, Khalid Mohammed Sharif, partner at the Westminster private client company Child & Child, has been fined £45,000 by the Solicitors Disciplinary Tribunal (SDT). Costs of £40,000 were also imposed.

According to the SDT findings, Sharif’s failings led to a “large amount of money being laundered” and his “culpability was high”. However, the tribunal noted that he co-operated with the investigation and had voluntarily reported himself to the Solicitors Regulation Authority.

The tribunal representative also said that Sharif “failed to take any or any adequate steps to ascertain from publicly available information” and that the fine was an “appropriate and proportionate sanction in all the circumstances.”

Under the current rules and legislation concerning money laundering, (regulation 14 of The Money Laundering Regulations 2007) any person connected with senior political officials should be considered as a politically exposed person (PEP) and simple due diligence should have ensured that this protocol was followed.

Sharif claimed that the two women had no political connections. But, according to the published outcome, Sharif admitted that he failed to take adequate steps to check this, when even an internet search may have identified them as PEPs.

The solicitor, admitted to the roll of solictors in 2005, also admitted to not undertaking enhanced customer due diligence even though he had not met the clients. Sharif was the company’s money laundering reporting officer (MLRO).

The judgement said: “The respondent was wholly culpable for his misconduct. Further, he was the MLRO at the firm. This should have heightened his sense of his obligations, and his awareness of the risks.”

Sharif’s clients were not identified in the ruling but have been reported to be two daughters of the president of Azerbaijan. The women Leyla and Arzu Aliyeva – the daughters of President Ilham Aliyev – set up a secret offshore company to help manage their multimillion-pound property portfolio in Britain. The firm, Exaltation Limited, was based in the tax haven of the British Virgin Islands. The properties were worth nearly £60m.  

Although contracts were exchanged in 2015, the deal failed. Again, when completing the source of funds for the reported £14 million worth of deposits, the PEP status was still not recognised by the lawyer.

It has been alleged that the clients were also the owners of a British Virgin Islands company that was set up by Mossack Fonseca, the law firm from which sensitive information was stolen during the Panama Paper data breach. The list of failures to ascertain the PEP credentials of the clients has culminated in the conclusive verdict from the Tribunal.

However, while the Tribunal viewed the potential of money laundering through property to be extremely serious, the SDT also conceded that the misconduct “was not so serious that the protection of the public and the protection of the reputation of the profession required him to be removed from practice.”

Details of the offshore company emerged in April 2016 following the Panama Papers leak. Child & Child had instructed Mossack Fonseca to incorporate the company.

The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm and corporate service provider (Mossack Fonseca.) The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.

Reporters found that some of the Mossack Fonseca shell corporations were used for illegal purposes, including fraud, money laundering, tax evasion, and evading international sanctions.

The documents reveal the myriad ways in which the wealthy – including some public officials – can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians exposed, as well as their families and close associates from around the world known to have been using offshore tax havens.  The leaked files identified 61 family members and associates of prime ministers, presidents and kings, and members of their families, including Margaret Thatcher’s son, Mark Thatcher.

In a 2013 letter, unearthed by the Financial Times to the then president of the European Council, Herman Van Rompuy, from the then Prime Minister of the UK David Cameron said that offshore trusts should not automatically be subject to the same transparency requirements as shell companies. Cameron’s personal involvement in the EU-wide debate emerged as he continued to face questions about his family’s connections to Blairmore Holdings Inc, the offshore trust set up by his late father, the existence of which was revealed in leaked papers from the database of  Mossack Fonseca. 

While no standard official definition exists, the International Monetary Fund describes an offshore financial centre, or tax haven, as a jurisdiction whose banking infrastructure primarily provides services to people or businesses who do not live there, requires little or no disclosure of information when doing business, and offers low taxes.

Tax havens are one of the key engines of the rise in global inequality. Oxfam blamed tax havens in its 2016 annual report on income inequality for much of the widening gap between rich and poor. “Tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share,” said Raymond C. Offenheiser, president of Oxfam America, “depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality.”

It’s widely known that the world’s super-wealthy have taken advantage of lax tax rules to siphon off at trillions of pounds, from their home countries’ economies and hoard it abroad – and the offshore drain involves a sum larger than the entire American economy. The sheer scale of hidden assets held by the mega-rich also strongly suggests that standard measures of inequality, which tend to rely on surveys of household income or wealth in individual countries, radically underestimate the true level of inequality – the gap between rich and poor.

It also strongly suggests that the Conservatives are radically overestimating the value of their hero ‘wealth generators’ and their contribution to the UK economy, along with their strange neoliberal theory of ‘trickle down’. Then again, perhaps these are justification narratives to prop up the immoral financial habits of a wealthy and powerful elite.  

Mossack and Fonseca were detained February 8, 2017 on money-laundering chargesIn March 2018, Mossack Fonseca announced that it would cease operations at the end of March due to “irreversible damage” to their image as a direct result of the Panama Papers.

 


My work is unfunded and I don’t make any money from it. This is a pay as you like site. If you wish you can support me by making a one-off donation or a monthly contribution. This will help me continue to research and write independent, insightful and informative articles, and to continue to provide support others who are affected by the welfare ‘reforms’DonatenowButton

Paypal claim I am a ‘politically exposed person’ and have restricted my account

I logged into my paypal account and had the following message, completely out of the blue:

paypal limitation

I clicked on the PEP questions and got this:

politically exposed

I answered no because I don’t hold a position of political office, or ‘public trust’ and I’m not ‘associated’ with or related to someone in the public trust or polical office.  

I am, however, a member of a political party, like many other citizens. I have also been known to meet with MPs to raise and discuss issues with them. That does not make me a ‘politically exposed person.’

I briefly researched what a ‘politically exposed person’ is: “In financial regulation, “politically exposed person” (PEP) is a term describing someone who has been entrusted with a prominent public function. A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.”

And: “While there is no global definition of a PEP, most countries have based their definition on the 2003 Financial Action Task Force on Money Laundering (FATF) standard, as for example the Swiss financial market regulator in 2011, which quoted it as “the international standard.” 

The FATF’s latest definition of politically exposed persons (PEP), revised from 2003, is as follows

  • Foreign PEPs: individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of state or Heads of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials.
  • Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials. (Not all countries subscribe to the concept of domestic PEPs with respect to regulatory requirements/application of due diligence. For example, US law, specifically Section 312 of the USA Patriot Act and its implementing regulations provide for enhanced due diligence for SFPFs (Senior Foreign Political Figure) only, defined as: “a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a ‘foreign’ government…a senior official of a major ‘foreign’ political party; and a senior executive of a ‘foreign’ government-owned commercial enterprise.)
  • Persons who are or have been entrusted with a prominent function by a state owned enterprise or an international organisation refers to members of senior management, i.e. directors, deputy directors and members of the board or equivalent functions.

Requirements for a PEP apply to family members or close associates, any individual publicly known, or known by the financial institution to be a close personal or professional associate.

None of these criteria apply to me.

As of January 2015 the UK’s PEP definition is identical to the 2003 FATF definition, i.e. without the 2012 update to include domestic PEPs; It is found in the Money Laundering Regulations 2007 Section 14(5)[9] A politically exposed person is considered any individual who fits any of the criteria listed below:

  • A foreign person who has held any time in the preceding year a prominent public function outside the United Kingdom, in a state or international institution
  • Members of courts of auditors or of the boards of central banks
  • Ambassadors, chargés d’affaires and high-ranking officers in the armed forces
  • Members of the administrative, management or supervisory bodies of state-owned enterprises
  • Heads of state, heads of government, ministers and deputy or assistant ministers
  • Members of parliaments
  • Members of supreme courts, constitutional courts or of other high-level judicial bodies

The definition explicitly excludes middle-ranking or more junior officials.

Apparently there are business screening tools available to “Screen your prospective clients against extensive global PEP lists.”  

There are a number of companies advertising for regulatory, financial and reputational risk screening.

‘Due diligence to uncover PEPs can be time consuming and requires the checking of names, dates of birth, national identification numbers and photos of clients against a reputable database of known PEPs, which usually contains over one million profiles.’

I should add at this point that I have this week had sudden inexplicable finance related problems. One is with a catalogue I have credit with (I needed a new cooker at the time, and other household items, which I have bought on credit) who have suddenly doubled the annual interest rate on my account, and justified this by claiming a ‘risk’ had come to light. They wouldn’t tell me what the ‘new risk’ was. I don’t have any other credit accounts, luckily, and have used the catalogue only when I have needed to replace essential household items for my family.

It’s probably unrelated, but I’m also suddenly battling with the council regarding an underpayment. They did reimburse me the amount last month thatthey had been deducting by mistake from my housing benefit over the last year. But now the council have this week retrospectively claimed that some of that money was Discretionary Housing Payment (DHP), and want more than half of the money they reimbursed me back.

The DHP, which I didn’t actually claim from the dates they say, was only awarded on the date I received the notification for the decision to reimbuse me the amount I was underpaid, and mysteriously backdated over a year. They are now claiming they paid that money at the time my rent was reduced for the reason the council claimed was behind the mistaken deductions. The deductions happened because the council decided without telling me that my son no longer lived at home. He was at university, but returned home out of term times. Legally that means he still lives at home. As it happens, he had eft university anyway and returned home permanently, for much of the period concerned.

The Council are now claiming – a month after this was sorted out and I was paid for the period of underpayment concerned that they had awarded DHP at the time, because they understood my son had left home. The period they claim they paid me for was last year. A notification for that didn’t arrive until I got a letter telling me the council had made a mistake and were going to reimburse me. The DHP notification letter was among the documents of how my benefit had been worked out. The letter thanked me for making a claim – that I never made for that period –  which I thought was odd at the time.

It’s bureaucratic bullshit that reminds me of the Thatcher era, when the DHSS kept ‘losing’ my ‘file’ and not paying me my unemployment benefit at a time when I was a lone parent with a baby, fleeing domestic violence, staying in a women’s aid refuge  – and a political activist. At that time, I had some major and inexplicable problems accessing any support that other people take for granted.

I do have to wonder how I could possibly even remotely be considered to be a ‘politically exposed person,’  given the definition. I have very little money. I don’t get a huge amount of donations on my site. The current balance on my Paypal site is £3.46.

This week I have had a few more donations than average because of an appeal for support to replace my laptop, which is broken, but that could not reasonably be considered a trigger for the current restriction on my account or of any suspicion of ‘corruption’.

The most I have ever had on my paypal balance is £100, minus the money that Paypal deduct. I often don’t check my balance for a week at a time or longer, because on average, I generally do not have very much on my balance.

I don’t get paid for the work I do. I would love to make a living from research and writing, but have been unable to so far. That won’t stop me from continuing doing what I do, though, providing I can stay connected to the internet, of course. 

People donate sometimes. Those donations of course are entirely voluntary, and they support me in researching and writing independent articles, as well as providing help for people who desperately need support. I support people with their PIP and ESA assessments, reviews and appeals. I also support people who contact me because they are profoundly distressed by of the consequences of government austerity policies. 

If simply being a person who cares very much about injustice, human rights, inequality and increasing poverty, and about how our society is organised makes me a ‘politically exposed person’, well, so be it.

 

Update

I contacted Paypal today and went through some security checks with them. I asked why I had been suspected of being a ‘politically exposed person’ and they replied that the company is obliged to carry out monitoring and checks. I asked them why they had decided they needed to carry out monitoring and checks on me, specifically, and they said they ‘could not say why’.

My account restrictions have now been lifted.


 

My work is unfunded and I don’t make any money from it. This is a pay as you like site. If you wish you can support me by making a one-off donation or a monthly contribution. This will help me continue to research and write independent, insightful and informative articles, and to continue to support others.

Until the issues on my account with Paypal have been resolved, I won’t be using their donation button. But you can contact me directly if you want to make a donation.