Politically exposed persons, who are treated as high-risk customers under anti-money laundering and counter-terrorism financing law, may continue to pose a high risk even after they cease holding a public position.
The anti-money laundering and counter-terrorism financing regulator Austrac has issued a draft guidance note spelling out its definition of a politically exposed person, with a focus on the treatment of people who no longer hold prominent positions.
Austrac is holding consultations on the guidance note over the next couple of weeks.
A PEP is an individual with a prominent public role in a government body or international organisation. Immediate family members and close associates of the PEP are also PEPs.
PEPs have the opportunity to use their position for the purpose of committing money laundering and terrorist financing offences. Because of this risk additional AML/CTF due diligence and monitoring rules apply to them.
The guide lists many of the types of people who can be counted as PEPs – from prime ministers and foreign heads of state all the way down to heads of stated-owned enterprises.
The AML/CTF law says that once a person no longer holds a prominent public position they are no longer considered a PEP. However, the guidance note says that a bank or other reporting entity should continue to apply a risk-based approach to determine whether a customer who is no longer a PEP should continue to be treated as a high-risk customer.
“Higher risk PEPs are more likely to continue to pose ML/TF risk after they cease holding a public position,” according to the guide
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