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AUSTRAC PEP guidance updated

Some tidbits from AUSTRAC's web pages (courtesy of the e-news newsletter), which were recently updated. Here's how they define “prominent public functions” (a cornerstone of many PEP definitions):

This term relates to functions which may exist at the Commonwealth, state and territory levels or their foreign equivalents. The meaning of 'prominent' may be determined through the size of the function in relation to the number of affected persons, the budget and its relevant powers and responsibilities.

The 2012 FATF Recommendations provide examples of positions which are covered, such as Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important party officials, or, in relation to international organisations, directors, deputy directors and members of the board or equivalent. The FATF provides further detail in its guidance, Politically Exposed Persons (Recommendations 12 and 22).

Such positions commonly hold specific powers in relation to approving government procurement processes, budgetary spending, development approvals and government subsidies and grants.

And here is their guidance on how local or municipal officials should be treated:

It is noted that although FATF considers that a prominent public function may extend to the municipal or local government level, it is generally considered that this will only apply to persons who have the substantive powers (as noted above) relevant to this level of government.

The definition of 'domestic politically exposed person' in the AML/CTF Rules limits such persons to those who hold a position in an 'Australian government body', which is defined in the AML/CTF Act as extending to the Commonwealth, state or territory levels. This definition does not capture the local government or municipal level.

This is not the case with the definition in the AML/CTF Rules of 'foreign politically exposed persons' who hold positions in a 'government body', which is defined more broadly in the AML/CTF Act to include the 'government of part of a country'.

Although foreign PEPs are characterised as being of high ML/TF risk under Part 4.13 of the AML/CTF Rules, reporting entities may consider foreign officials at the local or municipal level as being PEPs only if they hold the substantive powers as noted above.

Accordingly, domestic customers of reporting entities at the local government or municipal level and who would otherwise be considered PEPs if they were foreign customers, are not required to be treated as PEPs under Part 4.13 of the AML/CTF Rules. However, the normal obligations relating to customer identification in Chapter 4 and ongoing customer due diligence in Chapter 15 will apply to such persons.

The Department of Foreign Affairs and Trade's Heads of Government List provides details on the names and titles of heads of state, heads of government, foreign ministers, trade ministers and in some case, ministers responsible for development assistance.

And on how soon after leaving office someone can stop being considered a PEP:

As described above, a PEP is someone who occupies a prominent public position. Once a person no longer holds that position, they are no longer considered a PEP. However, a reporting entity should continue to apply a risk-based approach to determine whether an existing customer who is no longer a PEP should continue to be treated as a high-risk customer.

Higher risk PEPs are also more likely to continue to pose a ML/TF risk after they cease holding a public position. As such, reporting entities may choose to undertake enhanced customer due diligence (ECDD) for a longer period for a former PEP under the ECDD provisions in Chapter 15 of the AML/CTF Rules.


AUSTRAC e-news December 2015 issue


Categories: Anti-Money Laundering AUSTRAC Updates General Information Guidance Politically Exposed Persons (PEP)


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