Senior Foreign Political Figure

Ardmore Securities is asked to open a correspondent account for a foreign financial institution. Diligence establishes that the institution has no physical presence in any country and is not an affiliate of any regulated financial group subject to consolidated supervision. Under the USA PATRIOT Act, Ardmore must:

1. A.Open the account if the foreign institution certifies that none of its customers are senior foreign political figures.Wrong. Senior foreign political figures trigger separate enhanced due diligence obligations. No certification about them permits a shell bank correspondent account.
2. B.Open the account subject to enhanced due diligence and more frequent transaction monitoring.Wrong. Enhanced due diligence applies to permitted foreign correspondent and private banking relationships. It cannot legitimise a shell bank correspondent account.
3. C.Decline the account, because a U.S. institution may not establish or maintain a correspondent account for a foreign shell bank, and must take steps to prevent its correspondent accounts from serving one indirectly.Correct. The shell bank correspondent prohibition is absolute, and it extends to indirect access through other correspondents.
4. D.Open the account and file a suspicious activity report contemporaneously with the opening.Wrong. Filing a report does not cure a prohibited relationship. The account may not be opened at all.

Why: An institution with no physical presence anywhere and no affiliation with a supervised group is a SHELL BANK. U.S. financial institutions are flatly prohibited from establishing or maintaining a correspondent account for a foreign shell bank, and they must also take reasonable steps to ensure their existing correspondent accounts are not being used to provide services to one indirectly - which is why firms obtain certifications from foreign correspondents about shell bank access. This is a prohibition, not a risk to be managed with heightened monitoring.

Wrenfield Securities is asked to open a substantial account for Estefania, the adult daughter of a former finance minister of a foreign country, to be funded by wire from an overseas bank. Estefania holds no office herself. Regarding the enhanced scrutiny applied to senior foreign political figures:

1. A.Enhanced due diligence applies, because the category reaches immediate family members and close associates as well as the official; the firm must take reasonable steps to determine the source of her funds and wealth and monitor for proceeds of foreign corruptionCorrect. Family members and close associates are expressly within the enhanced scrutiny framework, and former officials remain covered.
2. B.Enhanced scrutiny would apply only if the account exceeded one million dollarsThere is no dollar threshold. The status of the accountholder is what triggers the enhanced procedures.
3. C.No enhanced scrutiny applies, since her father no longer holds officeFormer senior officials remain within the category; leaving office does not remove the risk.
4. D.No enhanced scrutiny applies, since only accounts held by the political figure himself are coveredThe definition covers immediate family and close associates precisely because assets are frequently held through them.

Why: The category is deliberately broad. A senior foreign political figure includes current and former senior officials of a foreign government, and the enhanced scrutiny extends to their immediate family members and close associates. Estefania account therefore requires enhanced due diligence: reasonable steps to determine the source of the funds and of her wealth, and monitoring designed to detect and report proceeds of foreign corruption.

Ravensmere Securities is asked to open a substantial account for a former cabinet minister of a foreign government, to be funded by wire from an overseas bank. Under the anti-money-laundering rules applying to accounts for senior foreign political figures, the firm must:

1. A.refuse the account, since accounts for foreign government officials are prohibited.No such prohibition exists. That treatment is reserved for foreign shell banks.
2. B.apply enhanced due diligence, establishing the source of the funds and the customer wealth and monitoring the account on an ongoing basis.Correct. The status triggers heightened inquiry and continuing scrutiny.
3. C.open the account and file a currency transaction report on the incoming wire.Currency transaction reports concern cash, not wires, and filing a form is not a substitute for due diligence.
4. D.open the account under the ordinary identification procedures, since he no longer holds office.Former officials remain within the definition; leaving office does not reset the risk.

Why: Senior foreign political figures, their immediate family and close associates are treated as higher risk because such accounts have historically been used to move the proceeds of foreign corruption. The firm must apply enhanced due diligence: establishing the source of the funds and the customer wealth, understanding the purpose of the account, and conducting ongoing scrutiny of the activity for consistency with what it was told. The status does not bar the account; it raises the standard of inquiry and monitoring.