Ltackling money laundering and the financing of terrorismterrorismcirculation of capital of fraudulent origin (criminal activities, tax evasion), corruption and attempted corruption for the money laundering, ...lational and supranational regulatory authoritiesand their emanations such as Tracfin, impose on financial institutions and companies more than a duty of vigilance in their procedures for identifying their customers, their suppliers and third-party counterparties. And this, before entering into a relationship with them. According to FATF Recommendation 12 (Financial Action Task Force), lPolitically Exposed Persons (PEP) sare populations considered to be at "higher risk money laundering or terrorist financing, or even corruption. In their quest for greater vigilance vigilance, levolving regulations targeting PEP add organizations time, organization and cost constraints..
PEPwhat are we talking about?
A SPECIFIC CATEGORY OF CUSTOMER
The Politically Exposed Persons are natural persons exercising or having ceased toer for less than one year political, jurisdictional or administrative functions on behalf of France, a foreign state or a public international organization. Their close relations or families are also concerned, whatever their marital status. marital status. The transposition into French law of European regulations on the fight against money laundering and the financing of terrorismArticles L.561-10-1er, L.561-10-2°, R.561-18, R.561-20-2 and R.561-20-3 of the French Monetary and Financial Code, requires companies vulnerable to the risks of AML-CFT to implement vigilance obligations both both specific and reinforced even before initiating business relationships with these PEP.
POLYMORPHIC FUNCTIONS
Politically exposed persons are natural persons, very often of high social standing, who exercise or have exercised :
- Executive political functions: heads of state, government, ministers or members of a government or the European Commission
- Legislative political offices: members of a parliamentary assembly, deputies and senators, members of the European Parliament, leaders of political parties within the meaning of article 88-227 of March 11, 1988.
- Jurisdictional or judicial functions: magistrates of the Cour de cassation, the Conseil d'Etat and the Conseil Constitutionnel and their foreign equivalents, supreme and/or constitutional courts, whose decisions are not, save in exceptional circumstances, subject to appeal.
- Administrative functions: managers or members of the management body of a central bank,
- Diplomats (ambassadors or chargés d'affaires),
- General or senior officers in command of an army,
- Members of a management, administrative or supervisory body of a public company operating at national level,
- Directors, deputy directors and members of the executive committee of an international organization
AN EXTENDED CIRCLE
Relatives & Close Associates or Beneficial Owners PEP are :
- Spouses, notorious cohabitants or PACS partners, whatever the nature of the alliance or matrimonial regime
- Children and their spouses, whatever the nature of the alliance or matrimonial regime, including a PACS or a partnership contract registered under foreign law.
- First-degree relatives or ascendants
This also applies to natural persons who have an economic or financial relationship with or are closely associated with PEP and their close relations within the framework of a legal entity, a company or a legal structure (trust, collective investment, etc.) or a comparable legal arrangement under foreign law (article R.561-18).
INCREASED RISK
Companies can also classify as high riskIn accordance with article R.561-20-2, companies may also classify as high risk persons who, although they do not meet the definition of PEP strictly and restrictively defined in article L.561-10-1°, exercise a political, jurisdictional or administrative activity not referred to here, or because they have a family relationship not referred to here, but are exposed to a risk deemed comparable to that of a PEP. In such cases, the company may be required to reinforce its due diligence measures with regard to these persons, on the basis of article L.561-10-1°.
Nota bene. The company must cease these vigilance measures when the PEP cease to be vigilant. It may, however, continue to apply these enhanced measures, within the meaning of article L.561-10-1°, if it considers that the person still presents a high risk, based on its internal risk classification.
What the law says : visit obligations PEP
INCREASED VIGILANCE
Visit PEP must provide accurate information qon their professional, financial, asset and family situation. They can declare themselves and their relatives spontaneously. Lompanies are authorized to financial transactions standard with PEP when these correspond to their profiles and do not differ in characteristics from other customers in similar circumstances., oncesuspicion has been lifted. Nevertheless ellhe must maintain a heightened obligation of vigilance towards these PEP and their families, and the transactions they carry out.
COMPREHENSIVE INFORMATION
Article L.561-1°-1° of the Monetary and Financial Code requires the companies concerned to ask PEP to provide them with any information or documents:
- Their professional or family situation, or the nature of their relationship with PEP (e.g. PEP is the beneficiary of a life insurance policy, or is the beneficial owner of a legal structure).
- Evidence of the origin of the funds paid into their accounts or contracts (pay slips, salary slips, balances, tax notices, rental contracts, proof of tax declaration of donation, contracts for the sale of shares or rights, etc.).
- Evidence of their real estate and/or movable assets (statements of savings products, investments, property deeds, deeds of notoriety in the case of inheritance, shares in civil or commercial companies, etc.).
WHY?
It is as much a question of ensuring that these PEP do not abuse their position, their influence or the means at their disposal:
- To carry out money laundering or terrorist financing operations themselves or with the help of third parties or intermediaries (their close relations, shell companies, off-shore accounts or holders of non-financial professions, various nominees) on their own behalf or on behalf of third parties,
- That the third-party beneficiaries of these transactions are not in fact acting or receiving benefits on behalf of PEP.
What the law says : the obligations of financial institutions and companies
GREATER RESPONSIBILITY
Companies can ask PEP to fill in a rigorous identification questionnaire, requiring PEP customers to report themselves or their Beneficial Owners customers. This written contractual commitment by customers can contribute to their identification and knowledge process. However, as it is based on good faith, it is not sufficient to relieve companies of their obligation of constant vigilance, the correct implementation of which is their sole responsibility.
Questionnaires and measures, detailed in the AMF (Autorité des Marchés Financiers) Position-Recommendation DOC -2019-16 and Article R.561-20-2 of the Monetary and Financial Code, are designed to detect any customer who becomes PEP during the course of a business relationship, and to monitor the connections between these PEP, their families and the people with whom they may be in close contact. A vast undertaking!
AND AUTHORIZED PERSONS
International and national regulations specifynt that the decision to establish or maintain relations with PEP or their their beneficiariess beneficiariess can only be made by a member of the executive management body or a person authorized for this purpose by that body. this body, only by means of a formal procedure, which must include that such authorization must be obtained. It may also include the opinion of the compliance function prior to the decision of the executive bodyand may only be taken if the level of information on the customer and risk profile is sufficient. The executive body is kept regularly informed of business relationships established or in progress with PEP.
Thepport of Reg Techand augmented intelligence in the processing of suspicions
COMPLEXITY AND CORPORATE RESPONSIBILITIES
The heightened vigilance obligations of companies with regard to PEP and their close relations may result in the criminal liability of the company and its managers.
They add complexity because this data collection and increased vigilance throughout relationships with PEP and RCAs (Relatives and Close Associates) is time-consuming, complex and even inaccessible for most ME and SMES, who are challenged every day to maintain their agility.
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