I have been working in Guernsey this week, and talking (amongst other things) about the proposed changes coming down the line towards us in the Fourth Money Laundering Directive . (And before anyone says anything, no, Guernsey is not a member of the EU, so no, it is not bound by EU Directives, but yes, it does tend to abide by them.) As you all know, one of the almost entirely uncontentious proposed changes is the extension of the definition of PEPs to include domestic ones as well as foreigners. But one issue on which both the FATF – the source of this proposed change – and the draft MLD4 remain silent is the length of time for which one remains a PEP. This is significant this week (patience: I will get to the point) because in the UK, my home jurisdiction, you are de-pepped (what? it’s a word) after being out of power for a year, while in Guernsey (and some other places) you remain a PEP forever. That’s right: forever. And because the PEP definition includes grandchildren, strictly speaking they should be considered PEPs forever too.
Here we find ourselves on the horn of an AML dilemma. You all know how I feel about it: money laundering is a misnomer, because it does not work. Filthy money is never cleaned – it just (the criminals hope) has enough done to it to make it look clean. (It’s a bit like using Febreze instead of curtains. Other fabric freshener sprays are available.) So, in theory, money stolen or accepted in bribes by a corrupt PEP remains dirty forever – even when bequeathed to his heirs – so perhaps it makes sense to consider PEPs and the next two generations to be high risk (and subject to enhanced due diligence) forever. On the other hand, what with improving medical care and subsequent increased longevity, the pool of PEPs in the forever jurisdictions just keeps growing – and the danger here is that the concept of the PEP will become downgraded if people think that it is an impractical nonsense and just a paper-gathering exercise to placate the regulator.
As I say, both the FATF and MLD4 define PEPs, but neither sets a time limit. So what do you think? One year? Forever? Ten years? Or something else, rather than a time limit – for instance, until it can be shown that they have no further political influence (although they might have pinched the money when they did…)?