Egypt’s top prosecutor requested the freezing of the foreign assets of ousted president Hosni Mubarak and his family. I expect that is one step in trying to figure out how much of Mubarak’s fortune was derived from corruption. I’ve read reports that his assets could be worth $3 billion and upwards of $70 billion.
That highlights a messier part of the investor due diligence process. Everyone is aware of the blocked-persons list from FinCEN. Those are the bad guys that you are prohibited from doing business with.
Mubarak falls into the category of “politically exposed person.” Those are senior foreign political figures. They have not necessarily done something wrong, but should be subject to a higher level of scrutiny.
31 CFR 103.179
“In the case of a private banking account for which a senior foreign political figure is a nominal or beneficial owner, the due diligence program required by paragraph (a) of this section shall include enhanced scrutiny of such account that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption.”
That is the US standard. The standard will differ from country to country. Switzerland enacted a new law giving officials the ability to freeze accounts belonging to any former leader suspected of corruption.
If you are taking money from foreign leaders you need to be careful and figure out where the money is coming from. If it’s cash from bribes you need to refuse it. The hard part is figuring out where the money came from. The leader could be independently wealthy. They could own successful business. They could be siphoning billions of dollars of foreign aid or skimming from an oil for food program.
If Mubarak showed up with wheelbarrows full of cash, theoretically, these accounts should already have been frozen when the money came in. But I suppose that’s a question of the winners making the rules. Bankers didn’t want to take steps while he was in power. Now that the money is sitting in their vaults, they are happy to freeze it. Especially now that Mubarak doesn’t control a half million soldiers.
Just as a reminder, FinCEN send out an advisory that: “Financial institutions should be aware of the possible impact that events in Egypt may have on patterns of financial activity when assessing risks related to particular customers and transactions.”
Image of Muhammad Hosni Mubarak, President of Egypt addressing the Opening Plenary session of the World Economic Forum on the Middle East 2008 held in Sharm El Sheikh, Egypt is by the World Economic Forum