convergence

Shelley
In countries with less strict regulations over financial transactions, particularly in the
developing world, profits from crime may be placed directly into investments in restaurants,
hotels, and other commercial properties.
Politically Exposed Persons (PEPS) represent a unique case and set of money-laundering
patterns. According to the Wolfsberg Principles addressing money laundering, which were
adopted by 11 global banks, PEPS are described as
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persons who perform important public functions for a state. The definition used by
regulators or in guidance is usually very general and leaves room for interpretation. For
example the Swiss Federal Banking Commission in its guidelines on money laundering
uses the term “person occupying an important public function,” the U.S. interagency
guidance uses “senior foreign political figure” and the BIS paper Customer due diligence
for banks says “potentates.”
The term should be understood to include persons whose current or former position
can attract publicity beyond the borders of the country concerned and whose financial
circumstances may be the subject of additional public interest. In specific cases, local
factors in the country concerned, such as the political and social environment, should
be considered when deciding whether a person falls within the definition. 14
A review of examples by the author as well as some of the analyses done by Global
Witness 15 suggest that MLRE involving Politically Exposed Persons more frequently flows
through banks than funds derived directly from criminal activity. Banks may be hesitant to
reject the accounts of some Politically Exposed Persons when the political leaders of Western
powers interact with those same political leaders. 16
The Multiple Consequences of MLRE
Money laundering into real estate differs from other forms of laundering activity. Especially
in the residential real estate market, such activity can be a sign of “having made it.” This contrasts
with other types of laundering which have a more utilitarian function—simply hiding
capital. Therefore, this form of laundering has at least a dual purpose—cleaning the money
and enjoying the proceeds of crime and corruption. But as will be discussed, it can serve other
purposes by providing a base on which to mount operations, thereby compounding the harms
of the initial criminal activity.
Criminals show their success by buying valuable real estate—beautiful estates and villas
as well as elegant and/or popular bars and nightclubs. 17 Criminological research as well as
popular songs in the criminal culture, especially among Latin American crime groups, shows
that visible signs of wealth serve as important tools for recruiting members into the criminal
enterprise. Not surprisingly, this is especially true of impressionable youth. Real estate is one
of these signs of success. Money laundering into ostentatious homes is a dramatic force for
destabilization as it shows that leaders can enjoy the fruits of corruption. Popular anger and
revulsion at the wealth and opulent homes of corrupt figures including political leaders can be