guideline on anti-money laundering and the combating of terrorist ...

Guideline on Anti-Money Laundering and the Combating of Terrorist Financingc) Understand the intended use of the account, including the anticipatedtransaction volume, products and services used, and geographic locationsinvolved in the relationship; andd) Obtain the identity of the beneficial owners of the client funds where it is notsatisfied that the intermediary has in place due diligence proceduresequivalent to the standard of this Guideline.12.3.2. (vii.) Politically Exposed PersonsRegulation 20 of the FOR defines a “politically exposed person” or PEP as one who is orwas entrusted with important public functions in a foreign country and includes examplesof who are PEPs.Business relationships with individuals holding important public positions and with theimmediate family members 21 of PEPs or companies in which the PEP is the beneficialowner may expose financial institutions to significant reputational and/or legal risk. Therisk occurs when such persons abuse their public powers for either their own personalbenefit and/or the benefit of others through illegal activities such as the receipt of bribesor fraud.Important public positions mentioned above include heads of state, heads ofgovernment, senior officials in the executive, legislative, administrative, military or judicialbranches of government (whether elected or not), senior officials of major politicalparties, and senior executives of government-owned corporations. Immediate relativesto such persons such as parents, siblings, the spouse, and children should also besubjected to enhanced due diligence. In addition, a close associate includes anyindividual who is widely and publicly known to maintain an unusually close relationshipwith a PEP, and includes a person who is in a position to conduct substantial domesticand international financial transactions on behalf of the PEP.Provision of financial services to corrupt PEPs exposes financial institutions toreputational risk and costly information requests and seizure orders from lawenforcement or judicial authorities. In addition, public confidence in the ethical standardsof a whole financial system can be undermined. As such, a financial institution shouldconduct enhanced due diligence where it has determined that an applicant for businessis a PEP.Financial institutions should also consider extending the application of enhanced duediligence procedures to domestic PEPs and are encouraged to be vigilant in relation to21 Refer to the FOR, Regulation 20(1)(e)Page 28 of 75