This includes the Head of State or government, senior executives and financial regulators of foreign countries. International PEPs : an individual that holds a prominent public position or function by an international organisation.
This can include members of the board in an organisation and senior management positions. Close associates : an individual who has close relations with a PEP whether it is socially or professionally. Firms will remain under their existing obligations to identify whether their customers or beneficial owners of their customers are PEPs, and to apply EDD measures. Firms also need to ensure the PEP lists they maintain are up to date. This four-part paper includes a number of practical tools to help guide banks, regulators, and other public authorities and includes:.
Issues such as national cooperation, training and resources, that must be addressed by all stakeholders. Banks may use a Summary of Good Practices in the document to improve the quality and effectiveness of their PEPs measures while regulatory authorities may use them to enhance their review and enforcement processes on PEPs.
Regulatory authorities, financial intelligence units and other public authorities may use them to develop or improve guidance. It also includes anyone who has been entrusted with any prominent public function by an international organization PEPs of international organizations.
Prominent public function includes the role held by a director, deputy director, member of the board and member of the senior management of an international organization, but excludes the role held by middle-ranking or more junior officials;. This includes an immediate family member spouse, child, adopted child, stepchild, sibling or parent of a politically exposed person or a citizen of Singapore that the Politically Exposed Persons may have significant influence over due to the level of exposure to the PEP.
PEPs often have power over government spending and budgets, procurement processes, development approvals and grants. Some examples of PEPs include government ministers or equivalent politicians, senior government executives, high-ranking judges, high-ranking military officers, or board members or executives of an international organization.
Because PEPs hold positions of power and influence they can be a target for corruption and bribery attempts, and ultimately for money laundering or terrorism financing activities. However, you should remember that being a PEP does not automatically mean someone is involved in criminal activities. Austrac points out that in Australia, a person is not considered a PEP once they leave their high-profile position, but they may still be high risk.
Former PEPs can pose a money laundering or terrorism financing risk to your business or organization, especially if they were high-risk PEPs. The U. The FATF recommends that family members and close associates of PEPs should be considered PEPs because of the potential for abuse of the relationship for the purpose of moving the proceeds of crime, facilitating placement and disguise of the proceeds, as well as for terrorist financing purposes.
With regard to foreign PEPs, it says banks should exercise reasonable judgment in designing and implementing policies, procedures, and processes regarding foreign PEPs as a part of their anti-money laundering AML program. This could include obtaining risk-based due diligence information on PEPs, such as countries of residence of the accountholder and beneficial owner and the level of corruption and money laundering risk associated with those countries, source of wealth and funds, and information on immediate family members and close associates.
The statement points out the term PEP is commonly used to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates. The statement recognizes that PEP relationships present varying levels of money-laundering risk, which depends on facts and circumstances specific to the customer relationship. For example, PEPs with a limited transaction volume, a low dollar deposit account with the bank, known legitimate sources of funds, or access only to products or services that are subject to specific terms and payment schedules could reasonably be characterized as having lower customer risk profiles.
The statement clarifies that, while banks must adopt appropriate risk-based procedures for conducting customer due diligence CDD , the CDD rule does not create a regulatory requirement, and there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered PEPs.
You can read the full statement here. The red flags noted below may help financial institutions identify suspected schemes that corrupt foreign PEPs and their facilitators may use. In applying the red flags, financial institutions are advised that no single transactional red flag necessarily indicates suspicious activity. Government Officials. Political Party Officials. Senior Executives. Relatives and Close Associates. The 4 Quadrants of Risk. What This Means for Businesses.
Take part in our free PEPs quiz to test your knowledge. PEPs in Canada Read more. Unexplained Wealth Orders Read more. Read more.
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