Senior post holders could face increased Pep checks

The guidance is set out in the Guernsey Financial Services Commission’s latest handbook on countering financial crime and terrorist financing. It details requirements on financial services providers around so-called politically exposed persons, which may include enhanced customer due diligence checks based on a risk assessment.

Peps are people with prominent public functions, such as heads of state or government, or senior politicians or government officials.

They can also include top executives of state-owned companies and senior members of the judiciary and military. The classification includes foreign, domestic and international Peps.

‘These requirements on domestic Peps have been brought into the legislation and rules and guidance in the handbook as a result of change to the International Standards on Combating Money Laundering and Terrorist Financing issued by the Financial Action Task Force, which have been extended to capture domestic as well foreign Peps,’ said a GFSC spokesman.

‘These new measures apply where the individual holds a prominent public function. The commission has issued guidance containing a list of posts which it considers sufficiently senior to categorise the holder as a domestic Pep to help firms apply these new measures proportionally.’

In the section covering Peps, the GFSC handbook states: ‘Due to their position and influence, Peps may have the potential to abuse their positions for the purpose of committing ML [money laundering] and related predicate offences, including bribery and corruption, as well as conducting activity related to FT [financing of terrorism].

‘Where a Pep also has connections to countries or business sectors where corruption is widespread, the risk is further increased.’

It goes on to say: ‘Pep status itself does not incriminate individuals or their associates and connected entities. However, it will mean that a customer or beneficial owner who is a foreign Pep is subject to ECDD measures and that a domestic Pep or international organisation Pep may, on the basis of risk, be subject to ECDD measures.

‘There is no “one-size fits all” approach to applying ECDD measures for Peps. The nature of the measures applied will be commensurate with the type of Pep, the specific risks that are identified and the nature of the Pep’s position and ability to influence.’

Where a firm identifies that a customer or beneficial owner is a domestic Pep or international organisation Pep, it must gather ‘sufficient information to understand the particular characteristics of the public function’ that the Pep has been entrusted with and factor this information into the relationship risk assessment.

‘Where, having conducted a relationship risk assessment, the firm concludes that the business relationship or occasional transaction involving a domestic Pep or international organisation Pep is high risk, the firm must apply ECDD measures,’ adds the handbook.

The document has been issued in final form after the approval of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Ordinance, 2018 by the States of Guernsey in December 2018.

The revisions to the rules and guidance in the handbook, together with the revised legislation, bring the Bailiwick’s framework for combating money laundering and terrorist financing into line with international standards issued in 2012 by the Financial Action Task Force, as well as addressing recommendations made by Moneyval following its mutual evaluation of Guernsey, the report of which was issued in January 2016.