17 May 2022, 13:42
17 May 2022, 13:42
A Politically Exposed Person (PEP) is defined as an individual entrusted with prominent public functions, including:
It includes regional governments in federalised systems and devolved administrations, including the Scottish Executive and Welsh Assembly, where such bodies have some form of executive decision-making powers. It does not include local government in the UK but it may, where higher risks are assessed, be appropriate to do so in other countries.
The FCA considers that this is only necessary where those holding these offices on behalf of the UK government are at Permanent Secretary/Deputy Permanent Secretary level, or hold the equivalent military rank (eg Vice Admiral, Lieutenant General, Air Marshal or senior).
FCA considers that this only applies to for profit enterprises where the state has ownership of greater than 50% or where information reasonably available points to the state having control over the activities of such enterprises directors, deputy directors and members of the board or equivalent function of an international organisation.
Only includes international public organisations such as the UN and NATO. The Government made clear in their consultation of 15 March 2017 that they do not intend this definition to extend to international sporting federations. The regulations exclude from the definition of a PEP those who are ‘junior or mid- ranking’.
It will normally only be necessary to meet the obligations to undertake customer due diligence. However, a firm should be alive to the potential that middle ranking and more junior officials could act on behalf of a PEP when assessing the overall risks a customer might present; where it assesses there might be a risk, a firm should consider what additional measures it needs to take.
This includes any transaction or business relationship established in a high-risk third country.
Screening for PEP is mandatory. The regulations require firms to have in place appropriate risk-management systems and procedures to determine whether a customer or the beneficial owner of a customer is a PEP (or a family member or a known close associate of a PEP). It has to manage the risks arising from the firm’s relationship with those customers. There are many legitimate reasons for doing so (e.g., a solicitor acting in a property transaction).
In these situations, and in line with FATF guidance, we expect firms to understand as part of their due diligence why a PEP, family member or close associate is using such an arrangement and use that as part of their assessment of risk.
A Politically Expose Person (PEP) list is a database of politically exposed persons and entities built from rigorous investigative and research processes. The list can include personally identifiable information such as date of birth, gender, aliases or nicknames, titles, roles, and nationality and passport number. They also examine relationships and close associates to the PEP, which can include business partners, family members and related companies.
PEP Lists are constantly evolving and updating on a daily basis, which means many organisations need to carry out Ongoing PEP checks to stay up to date.
No. The FCA for example, expects firms to make use of information that is reasonably available to them in identifying PEPs, family members or known close associates.
This could include the following:
People who are ‘known to be close associates’ of a PEP is defined as including:
A PEP’s family or close associates may also benefit from, or be used to facilitate, abuse of public funds by the PEP. It is as a result of this connection that family and known close associates are required to be subject to greater scrutiny.
Where a firm has identified that a customer (or beneficial owner of a customer) does meet the definition of a PEP (or a family member or known close associate of a PEP), a firm must
A firm’s assessment and its decision to apply relevant enhanced due diligence measures need to be clearly documented.
The FCA expects that a firm will not decline or close a business relationship with a person merely because that person meets the definition of a PEP (or of a family member or known close associate of a PEP). A firm may, after collecting appropriate information and completing its assessment, conclude the risks posed by a customer are higher than they can effectively mitigate. Only in such cases will it be appropriate to decline or close that relationship.
Firms should identify when a Politically Exposed Person is a beneficial owner of a customer. It does not require that a legal entity should be treated as a PEP just because a PEP might be a beneficial owner. Once a firm is satisfied that a PEP is a beneficial owner then, in line with the risk-based approach, they should assess the risks posed by the involvement of that PEP and, after making this assessment, firms should apply appropriate measures in accordance with this guidance.
These could range from applying customer due diligence measures in cases where the PEP is just a figurehead for an organisation through to applying EDD measures, according to the risk assessed in line with this guidance where it is apparent the PEP has significant control or the ability to use their own funds in relation to the entity.
How long is a Politically Exposed Person status lasting after the termination of the official activity? If a person who is a PEP is no longer entrusted with a prominent public function, that person should continue to be subject to risk-based enhanced due diligence for a period of at least 12 months after the date they ceased to be entrusted with that public function. Firms may apply measures for a longer period to address risks of money laundering or terrorist financing in relation to that person, but the FCA consider this will only be necessary in the cases of PEPs where a firm has assessed that PEP as posing a higher risk.
The answer is simple: No !
The risk of such corruption will differ between PEPs. We expect firms to take a differentiated approach that considers the risks an individual PEP poses based on an assessment of:
With CheckAML you can perform instant AML Checks on people in terms of PEP status in seconds. Ongoing Monitoring as Part of EDD is supported via CheckAML so are instant Updates on changes.
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