Globally, regulators are cracking down on money laundering to prevent and identify corruption, stop funding terrorists, and generally just control the flow of money from illegal activity. One way this is done is by enacting laws and regulations that force financial institutions to scrutinize clients or potential clients who are “politically exposed persons.” Each country has its own definition of “politically exposed persons.” In some countries, it is very expansive and the definition seems to include half the nation, and in other countries it is not so broad. Plus, countries keep changing the definition of who is a “politically exposed person.” Businesses need to know when a client or a potential client is a politically exposed person and these definitional changes make it tough.

Accordingly, despite the fact that money and sports go together like peanut butter and jelly, Switzerland just took a big step to try and identify ill gotten gain in sport by refining its definition of “politically exposed persons,” presumably in response to the incessant allegations about bribery in the sports world. The Swiss parliament voted 128 to 62 in December to expand its definition of “politically exposed persons” to include sports officials. Switzerland is home to the International Olympic Committee, FIFA (the crew that brings you the World Cop) and UEFA (sort of the NFL of for soccer in Europe). So, given all the allegations about these organizations engaging in bribery, it’s no wonder the Swiss decided to label these sports officials “politically exposed persons.” As a result, Swiss financial institutions will need to dissect the financial comings and goings of these sports officials to see if the transactions indicate a bribery risk.

Financial institutions are supposed to have procedures in place, based on sound risk analysis, to make sure they are not unknowingly assisting corrupt “politically exposed persons” in transferring or hiding any ill-gotten funds. To do this financial institutions need a risk-based approach to determining when a “politically exposed person” is up to no good. So financial institutions should consider a client or potential client’s duties and responsibilities, their influence in political or governmental affairs, their access to public funds, the amount of the financial transactions, and countries the person is associated with. If, after considering these factors, the financial institution decides to take on the “politically exposed person” as a client, the financial institution must continue monitoring the “politically exposed person’s” account to identify any transactions that suggest proceeds of corrupt activities are involved.

Considering the allegations against FIFA around bribery, it seems that Swiss financial institutions have a new “high-risk” group of clients to monitor – the sports officials, their families, and close associates. Time will tell what Swiss financial institutions will discover about this new the sporty new group of “politically exposed persons.” Will there in fact be loot from bribes that sports officials try to deposit – then trouble for the financial institutions or not?

A Haiku Sums It Up

Swiss: “stop sport bribing”

Tracking bribe loot may stop it.

Banks – track sport bribes now.

 

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