No, we’re not talking about Personal Equity Plans but ‘Politically Exposed Persons’. Below, we look at the definition of a PEP and the upcoming changes which may affect you.
The anti-money laundering regime is being updated and includes the expansion of the definition of a PEP to include those holding a politically exposed position in the UK as well as overseas. The definition also includes family members and close associates too.
What does this change mean for you?
- Make sure all relevant staff understand the new definition of a PEP and review your database to identify any existing clients that know fall into the category
- Ensure these are clearly identified on your database
- Ensure all relevant staff understand the ‘enhanced due diligence’ requirements
- Check that your processes and procedures are up to scratch
Who is a PEP?
2.11 Regulation 35(12)(b) defines a ‘politically exposed person’ as an individual who is entrusted with prominent public function, other than as a middle-ranking or more junior official. It includes, but is not limited to, the following:
- Heads of state, heads of government, ministers and deputy or assistant ministers
- Members of parliament or of similar legislative bodies
- Members of the governing bodies of political parties
- Members of supreme courts, of constitutional courts or of other high-level judicial bodies, the decisions of which are not subject to further appeal, except in exceptional circumstances
- Members of courts of auditors or of the boards of central banks
- Ambassadors, chargés d’affaires and high-ranking officers in the armed forces
- Members of the administrative, management or supervisory bodies of state-owned enterprises
- Directors, deputy directors and members of the board or equivalent function of an international organisation.
Who are the “family” of a PEP?
2.14 Regulation 35(12)(c) defines ‘family members’ of a PEP to include the following, but advises this is not an exclusive list:
- A spouse or partner of that person
- Children of that person and their spouses or partners
- Parents of that person.
Who are people “known to be close associates” of a PEP?
2.16 Regulation 35(12)(d) defines a ‘‘known close associate’ of a PEP to include the following:
- An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relationship with a politically exposed person
- An individual who has sole beneficial ownership of a legal entity or a legal arrangement
- which is known to have been set up for the benefit of a PEP
What does ‘Enhanced Due Diligence’ mean?
You need to:
- Have approval from management for establishing or continuing business relationships with such persons; the higher the risk the higher the level of management approval needed
- Take adequate measures to establish the source of wealth and source of funds that are involved in business relationships or transactions with such persons
- Conduct enhanced, ongoing monitoring of those business relationships, relevant to degree of risk
If you need any support labelling PEPs on your system, please don’t hesitate to contact us.