Politically Exposed Persons: Preventive Measures for the Banking Sector
2. […] In order to facilitate implementation of the measures provided for in paragraph 1 of this article, each State Party, in accordance with its domestic law and inspired by relevant initiatives of regional, interregional and multilateral organizations against money laundering, shall: (a) Issue advisories regarding the types of natural or legal person to whose accounts banks within its jurisdiction will be expected to apply enhanced scrutiny, the types of accounts and transactions to which to pay particular attention and appropriate account-opening, maintenance and recordkeeping measures to take concerning such accounts; and (b) Where appropriate, notify banks within its jurisdiction, at the request of another State Party or on its own initiative, of the identity of particular natural or legal persons to whose accounts such institutions will be expected to apply enhanced scrutiny, in addition to those whom the banks may otherwise identify. Recommendation 6 of the FATF 40 Recommendations: Banks should, in relation to politically exposed persons, in addition to performing normal due diligence measures: a) Have appropriate risk management systems to determine whether the customer is a politically exposed person. b) Obtain senior management approval for establishing business relationships with such customers. c) Take reasonable measures to establish the source of wealth and source of funds. d) Conduct enhanced ongoing monitoring of the business relationship. FATF “Glossary of Definitions used in the Methodology” defines PEPs as “individuals who are or have been entrusted with prominent public functions in 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. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior individuals in the foregoing categories.”
In March 2009, the Group of 20 (G20) countries called for enforcement of these standards on PEPs as a means to deter corruption and detect and deter the flow of proceeds of corruption in its “Working Group on Reinforcing International Cooperation and Promoting Integrity in Financial Markets.”17 In September 2009, the G20 Heads of 17. G20 Working Group on Reinforcing International Cooperation and Promoting Integrity in Financial Markets (WG2), “Final Report,” March 27, 2009, para. 41.
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