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FINANCIAL ACTION TASK FORCE, The Financial Action Task Force FATF is an independent inter governmental body that develops and. promotes policies to protect the global financial system against money laundering terrorist financing. and the financing of proliferation of weapons of mass destruction The FATF Recommendations are. recognised as the global anti money laundering AML and counter terrorist financing CFT standard. For more information about the FATF please visit the website. www fatf gafi org,2013 FATF OECD All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission for all or part of this publication should be made to. the FATF Secretariat 2 rue Andr Pascal 75775 Paris Cedex 16 France. fax 33 1 44 30 61 37 or e mail contact fatf gafi org. FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22. ACRONYMS 2,I INTRODUCTION 3,II DEFINITIONS 4, III THE RELATIONSHIP BETWEEN RECOMMENDATIONS 10 CUSTOMER DUE DILIGENCE. AND RECOMMENDATION 12 AND THE SPECIFIC REQUIREMENTS FOR PEPS 5. A Foreign PEPs 7,B Domestic and International organisation PEPs 8.
C Identification of Beneficial Owners 9,Beneficiaries of life insurance policies 10. IV SCOPE OF RECOMMENDATION 12 10,A Prominent public function 10. B Time limits of PEP status 12,C Family members and close associates 12. V GUIDANCE ON THE USE OF SOURCES OF INFORMATION FOR THE DETERMINATION OF PEPS. THEIR FAMILY MEMBERS CLOSE ASSOCIATES 13, A Ensuring client CDD information is up to date 14. B Employees 14,C Internet and media searches 14,D Commercial databases 15.
E Government issued PEP lists 16, F In house databases and information sharing within financial groups or countries 17. G Asset disclosure systems 17,H Customer self declarations 18. I Information sharing by competent authorities 18, VI MEASURES APPLICABLE TO THE DIFFERENT TYPES OF PEPS 19. A Foreign PEPs and high risk business relationships with domestic international organisation. Obtain senior management approval 19, Establish the source of wealth and source of funds 20. Conduct enhanced ongoing monitoring of the business relationship 22. B Domestic international organisation PEPs when not higher risk 23. C Life insurance policies with higher risks 23,VII SUPERVISION 23.
Internal controls Recommendation 18 25,VIII OTHER ISSUES 25. A Immunity from prosecution and conviction 25,B Consistency with anti discrimination laws 25. C Sharing of best practices between business associations 26. ANNEX 1 PEPS RED FLAGS INDICATORS 27,ANNEX 2 SOURCES OF CASE INFORMATION 33. FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22. AML CFT Anti Money Laundering Countering the Financing of Terrorism. CDD Customer Due Diligence, DNFBPs Designated Non Financial Business or Professions.
FIU Financial Intelligence Unit,ML Money Laundering. PEP Politically Exposed Person,STR Suspicious Transaction Report. TF Terrorist Financing, UNCAC United Nations Convention against Corruption. FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22. I INTRODUCTION, 1 A politically exposed person PEP is defined by the Financial Action Task Force FATF as an.
individual who is or has been entrusted with a prominent public function Due to their position and. influence it is recognised that many PEPs are in positions that potentially can be abused for the. purpose of committing money laundering ML offences and related predicate offences including. corruption and bribery as well as conducting activity related to terrorist financing TF This has. been confirmed by analysis and case studies The potential risks associated with PEPs justify the. application of additional anti money laundering counter terrorist financing AML CFT. preventive measures with respect to business relationships with PEPs To address these risks FATF. Recommendations 12 and 22 require countries to ensure that financial institutions and designated. non financial businesses and professions DNFBPs implement measures to prevent the misuse of. the financial system and non financial businesses and professions by PEPs and to detect such. potential abuse if and when it occurs, 2 These requirements are preventive not criminal in nature and should not be interpreted as. stigmatising PEPs as such being involved in criminal activity Refusing a business relationship with a. PEP simply based on the determination that the client is a PEP is contrary to the letter and spirit of. Recommendation 12, 3 The FATF first issued mandatory requirements covering foreign PEPs their family members. and close associates1 in June 2003 2 In February 2012 the FATF expanded the mandatory. requirements to domestic PEPs and PEPs of international organisations in line with Article 52 of the. United Nations Convention against Corruption UNCAC 3 Article 52 of the UNCAC defines PEPs as. individuals who are or have been entrusted with prominent public functions and their family. members and close associates and includes both domestic and foreign PEPs The main aim of the. obligations in Article 52 of UNCAC is to fight corruption which the FATF endorses However it is. important to note that the aim of the 2012 FATF requirements extends more broadly to the fight. against ML and its predicate offences designated categories of offences including corruption and. 4 Consistent with this objective Recommendation 12 requires countries to implement. measures requiring financial institutions to have appropriate risk management systems in place to. determine whether customers or beneficial owners are foreign PEPs or related or connected to a. foreign PEP and if so to take additional measures beyond performing normal customer due. diligence CDD as defined in Recommendation 10 to determine if and when they are doing. business with them, 5 For domestic PEPs and international organisation PEPs financial institutions must take. reasonable measures to determine whether a customer or beneficial owner is a. 1 See the 2003 FATF 40 Recommendations Recommendation 6 for financial institutions and. Recommendation 12 for DNFBPs, 2 The 2003 FATF Recommendations encouraged countries to extend the requirements to domestic. 3 The UNCAC is also referred to as the M rida Convention after the Mexican city where the high level. signing Conference was held The UNCAC was adopted by the United Nations General Assembly in. October 2003 and subsequently entered into force in December 2005. FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22.
domestic international organisation PEP and then assess the risk of the business relationship For. higher risk business relationships with domestic PEPs and international organisation PEPs financial. institutions should take additional measures consistent with those applicable to foreign PEPs. 6 Recommendation 12 applies to financial institutions and Recommendation 22 requires. countries to apply these requirements to DNFBPs, 7 Effective implementation of the PEPs requirements has proven to be challenging for. competent authorities financial institutions and DNFBPs worldwide This is evident from the results. of the assessments of compliance with the 2003 FATF 40 Recommendations undertaken by the. FATF FATF style regional bodies International Monetary Fund and World Bank 4 Implementation. challenges have also been identified through publicly available supervisory reports and regulatory. actions and high profile cases of former government leaders and their relatives who appeared to. have significant assets available abroad which were inconsistent with their official or licit income. 8 It is also important to note that the effective implementation of Recommendations 10 12. and 22 have to be part of a full and effective implementation of the FATF Recommendations as a. whole See the Reference Guide and Information Note on the Use of the FATF Recommendations to. Support the Fight Against Corruption, 9 This guidance paper is non binding and should be read in conjunction with FATF. Recommendations 12 and 22 and their Interpretive Notes It is a guidance tool that is based on the. experiences of countries international organisations the private sector and non governmental. organisations and which may assist competent authorities and financial institutions and DNFBPs to. effectively implement those Recommendations,II DEFINITIONS. 10 For the purpose of this guidance paper the definitions set out in the Glossary to the FATF. Recommendations apply 5 The FATF Glossary definition of politically exposed person is meant to. have the same meaning as the term persons with prominent public functions as used in UNCAC. Article 52, 11 In particular the following definitions which do not cover middle ranking or more junior. individuals apply to this guidance paper, Foreign PEPs individuals who are or have been entrusted with prominent.
public functions by a foreign country for example Heads of State or of. government senior politicians senior government judicial or military. officials senior executives of state owned corporations important political. party officials, 4 All FATF Mutual Evaluations are published on the website of the FATF www fatf gafi org which also. holds links to the websites of the FATF style regional bodies the IMF and World Bank See the. assessment of Recommendations 6 and 12 of the 2003 FATF 40 Recommendations in each of these. 5 See in particular the Glossary definitions of beneficial owner competent authorities country. criminal activity financial institutions designated non financial businesses and professions. international organisations politically exposed person reasonable measures risk satisfied should and. supervisors,FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22. Domestic PEPs individuals who are or have been entrusted domestically. with prominent public functions for example Heads of State or of. government senior politicians senior government judicial or military. officials senior executives of state owned corporations important political. party officials, International organisation PEPs persons who are or have been entrusted. with a prominent function by an international organisation refers to. members of senior management or individuals who have been entrusted. with equivalent functions i e directors deputy directors and members of. the board or equivalent functions, Family members are individuals who are related to a PEP either directly. consanguinity or through marriage or similar civil forms of. partnership, Close associates are individuals who are closely connected to a PEP either.
socially or professionally, 12 The difference between a foreign PEP and a domestic PEP is the country which has entrusted. the individual with the prominent public function Pursuant to the definition of PEPs other factors. such as country of domicile or nationality are not relevant in determining the type of PEP but may. be relevant in determining the level of risk of a specific domestic PEP as foreign PEPs are always. high risk It should also be noted that a domestic PEP is subject to the foreign PEPs requirements if. that individual is also a foreign PEP through another prominent public function in another country. 13 Throughout the remainder of this guidance paper references to Recommendation 12 should. be interpreted to mean both Recommendations 12 and 22 as the PEPs requirements are applicable. to both financial institutions and DNFBPs, III THE RELATIONSHIP BETWEEN RECOMMENDATIONS 10 CUSTOMER DUE. DILIGENCE AND RECOMMENDATION 12 AND THE SPECIFIC REQUIREMENTS FOR. 14 Recommendations 10 and 12 are both part of the overall set of customer due diligence CDD. requirements The ability to determine if customers or beneficial owners are PEPs fully depends. upon the effective implementation of CDD measures including the identification verification and. ongoing due diligence requirements as set out in Recommendation 10 for financial institutions. and Recommendation 22 for DNFBPs as well as the effective application of a risk based approach. Recommendation 1 CDD measures are the indispensable starting point as they must be applied to. any type of customer, 15 Recommendation 10 does not require CDD measures to be applied to customers who conduct. occasional transactions below the applicable thresholds in the circumstances which are described. in Recommendations 10 and 16 wire transfers Consequently financial institutions and DNFBPs. are not expected to determine whether such customers are PEPs or to apply in such cases the. enhanced measures required by Recommendation 12 However if the financial institution or DNFBP. FATF GUIDANCE, POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22. was provided with information which clearly indicates a PEP status of the occasional customer it. would obviously have to apply the requirements of Recommendation 12. 16 The relationship between Recommendations 10 and 12 and the resulting requirements for. determining if clients are foreign or domestic international organisation PEPs can be summarised. in three steps Although these steps are sequenced to determine if a new customer is a PEP at the. on boarding or customer intake stage it is understood that the three steps can take place at the. same time The three steps are further explained in the following table. POLITICALLY EXPOSED PERSONS RECOMMENDATIONS 12 AND 22 2013 3 I INTRODUCTION 1 A politically exposed person PEP is defined by the Financial Action Task Force FATF as an individual who is or has been entrusted with a prominent public function Due to their position and

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