Issues with politically exposed persons (PEP)
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.