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Politically exposed persons (PEPs) have been identified as high risk customers for banks and financial institutions for money laundering activities. Because of the risk profile of these customers, the Financial Action Task Force (FATF) acting in the areas of prevention of money laundering and terrorism financing activities have instructed banks and financial institutions to carry out enhanced due diligence (EDD) for these customers. Enhanced due diligence involves digging deep into a person’s history and relationships to verify the identity of persons carrying higher risks. The objective of EDD measures in the context of PEPs are that they are identified at the time of account opening and banks and financial institutions carry out an ongoing check for transactions performed by these clients so that they are able to launder money across world.
Politically Exposed Persons (PEPs)
Means individuals who are, or have been, entrusted with prominent public functions in Bahrain or a foreign country, such as Heads of State or government, senior politicians, senior government, judicial or military officials including Ambassadors, senior executives (Executive Directors, CEO and Executive Management) of state owned corporations or important political party officials. The definition is not intended to cover middle-ranking or more junior officials in the foregoing categories. Bahraini PEPs would include all Ministers, all MPs, and all Ministry officials with the rank of Undersecretary or above.
Business relationships with family members or close associates of PEPs involve reputational risks similar to PEPs themselves.
· Family members – would include spouse, father, mother, son(s) or daughter(s), and brother(s) or sister(s) - these accounts will be classified as High Risk – related to PEP.
· Associates - would include, but not limited to, if a PEP is an authorized signatory or representative (Power of Attorney holder to operate an account) for an account (corporate or individual) or a major shareholder (20% or above) of a corporate account; other situations would be judgmental based on individual circumstances, e.g. where the bank knows that the PEP is ultimately the beneficial owner - these accounts will be classified as High Risk – related to PEP”.
ENHANCED DUE DILIGENCE MEASURES:
Enhanced customer due diligence must be performed on those customers identified as having a higher risk profile, and additional inquiries made, or information obtained in respect of those customers.
In addition to the normal/standard CDD measures as applicable to the customer type, the additional information required as part of the EDD might include documents (either in hard copy or electronic format) relating to the following:
§ Evidence of a person's permanent address through the use of a credit reference agency search, or through independent verification by home visit;
§ A personal reference (e.g. by an existing customer of the Bank);
§ Reference check from another financial institution(s) regarding the customer;
§ Documentation outlining the customer’s source of wealth;
§ Documentation outlining the customer’s source of income; and
§ Independent verification of employment, or public position held.
Approvals:
AGM/Senior Manager should approve entering into/continuing relationship with High Risk customers.
Following factors should be considered for approval and documented:
Ø Reasons for opening the account
Ø Utility of the account to the bank (since it will require enhanced monitoring).
The Relationship Manager should perform enhanced due diligence on customers identified as having a “higher risk profile” after initial assessment.
Enhanced due diligence must be performed on any and all such customers identified as having a higher risk profile and their account should be subject to on-going monitoring by the Relationship Manager.
Monitoring and Reviews:
The High Risk Customers will be subject to an annual review by the relationship Manager to ensure that all documentary requirements are current and account activity is normal and in line with the anticipated activity.
+ Update KYC at least once a year and source of wealth and origination of funds.
The definition of PEP is any person who has been given an important public assignment and any person who may be associated or related to the same.
While onboarding such clients, we need to obtain approval from the senior management. Furthermore such clients should be subject to enhanced due diligence. Their transactions and account activitity should be monitored. Supporting documents should be obtained where ever neccessary and approvals from senior management should be obtained for all transactions.
(PEP)
Politically exposed personis a term describing someone who has been entrusted with a prominent public function, or a relative or known associate of that person. PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.
Process:
Enhanced due diligence must be performed on any and all such customers identified as having a higher risk profile and their account should be subject to on-going monitoring by the Relationship Manager.
PEP - Politically exposed persons
In a KYC/CDD documentations they are categorized as high Risk personals, in that case in order to safe guard bank's position we have to maintain proper TDD transaction Due Diligence.
