The nexus of corruption, economic development and money laundering is in the financial system. The current opaque nature of the global financial system attracts proceeds of corruption and launders those proceeds thereby stripping critically needed resources out of developing countries. Moreover, the same financial system fosters the trafficking of drugs, arms and people by creating opportunities to launder revenue from those criminal activities. And tax evasion, in rich and poor countries alike, is facilitated by the ability to hide money in offshore accounts. Without a more transparent financial system, the full potential of work to curtail corruption, limit money laundering and boost economic development and alleviate poverty will not be realized.
Depletion of capital undermines the ability of poor countries to build their economies and become productive and vibrant participants in the world economy. The term ‘politically exposed person’ refers to elected or appointed government officials who are entrusted with a prominent position and persons related to such an individual. By requiring financial institutions to identify all of their customers who are PEP’s whether they are domestic or foreign, and then conduct enhanced due diligence on those deemed to be higher risk, those institutions will play a far more effective role in curtailing corruption and money laundering.