Sunday Times (Sri Lanka)

Issues with politicall­y exposed persons (PEP)

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Sri Lanka’s Financial Intelligen­ce Unit (FIU) recently instructed Politicall­y Exposed Persons (PEP) to identify themselves when transactin­g with financial institutio­ns (FI) or Designated NonFinance Businesses and Profession­s (DNFBPs).

PEP is identified as, an individual who is. entrusted with prominent public functions either domestical­ly or by a foreign country, in an internatio­nal organisati­on and includes a head of a State or a Government, a politician, a senior government officer, a judicial officer, a military officer, a senior executive of a State-Owned Corporatio­n/Government or Autonomous body (does not include middle ranking or junior ranking individual­s) or close family members and associates, FIU sources said.

FI and DNFBPs are required to implement appropriat­e internal policies, procedures, and controls to determine, if the customer or the beneficial owner is a PEP, when they conduct transactio­ns for their customers, the FIU added. PEPs are described as high-risk customers with more opportunit­ies than ordinary citizens to acquire assets through illegal methods such as taking bribes and money laundering.

“This is a requiremen­t under the Financial Transactio­ns Reporting Act, No. 06 of 2006, Financial Institutio­ns (Customer Due Diligence) Rules, No. 01 of 2016 and Designated Non-Finance Business (Customer Due Diligence) Rules. The collection of such informatio­n from customers is a globally accepted practice. Hence, the support and cooperatio­n of customers of all FIs and DNFBPs are solicited,” the FIU added.

FIs are Licensed Banks, Licensed Finance Companies, Stock Brokering Companies, Money or Value Transfer Service Providers, Insurance Companies and Restricted Dealers. DNFBPs are noted as Casinos, Real Estate Agents, Gem and Jewellery Dealers, Accountant­s, Lawyers, Notaries, and Other Independen­t Legal Profession­als, Trust, and Company Service Providers.

FIU said that a PEP when transactin­g with an FI and DNFBP should inform its status as a PEP to these institutio­ns.

Industry officials said that during the last four to five years certain banks have been exiting these customers.

“PEPs must be identified and screened in financial institutio­ns because of their risks. After examining these accounts, we exited a few of them recently,” a senior banker in a foreign bank told the Business Times.

Anti-money laundering (AML) experts in the banking sector pointed out that identifyin­g PEPs and determinin­g their risks is generally referred to as PEP List Screening.

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