The Financial Intelligence Centre (FIC) recently published Draft Public Compliance Communication 113 (draft PCC 113) which provides guidance on measures relating to Foreign Prominent Public Officials (FPPOs), Domestic Prominent Influential Persons (DPIPs), their family members and known close associates.
The FIC has identified inconsistencies in Accountable Institutions’ understanding of when and how they determine if a client is a DPIP or FPPO and the implication of when a family member or close known associate of a client is a DPIP or FPPO, or where a legal entity as a client has a beneficial owner or an appointed person with authority that holds the position of DPIP or FPPO. Guidance has been sought from various industries regarding what scenarios could pose a higher money laundering risk when assessing a DPIP in the determination of whether this DPIP would be considered high risk or not. Draft PCC 113 provides several such examples for consideration.
The draft PCC provides clarity regarding the requirement to determine whether a client, the client’s beneficial owner and/or authorised representative hold a position of a DPIP or FPPO or whether they are a known close associate or family member. Further, it also provides guidance on the risk mitigating controls an Accountable Institution may follow for former high-risk DPIPs and FPPOs, further indicators of heightened money laundering risks, and lists of additional data bases which could be consulted in determination of DPIPs and FPPOs.
Accountable Institutions must determine if their clients, including their beneficial owners and authorised representatives, hold a position of domestic prominent influential persons or foreign prominent public official. In terms of the draft PCC, clients that are family members and/or known close associates of DPIPs or FPPOs, although not themselves DPIPs or FPPOs, must be onboarded as though they are. Once determined, the money laundering risk associated with these clients must be assessed. FPPOs inherently pose a high money laundering risk. However, DPIPs are not automatically considered as presenting a high money laundering risk and must be fully assessed to determine the risk that a business relationship with the DPIP poses.
Appropriate customer due diligence (CDD), enhanced due diligence (EDD) and measures as set out in section 21F, 21G and 21H of the FIC Act, must be applied to high risk DPIPs and FPPOs, their family members and close known associates. Where the Accountable Institution determines that the DPIP and/or their family members, or known close associates pose a high money laundering risk the Accountable Institution would be required to apply EDD in addition, to complying with the requirements as set out in sections 21F, 21G, and 21H of the FIC Act. The obligations as set out in these sections of the FIC Act, should be distinguished from EDD. In terms of sections 21F, 21G and 21H of the FIC Act, the Accountable Institution must:
- obtain senior management approval,
- establish the source of wealth and funds of the client,
- conduct enhanced ongoing monitoring
Interested parties are invited to submit comments on the draft guidance via the online comments submission link before close of business on 26 March 2021.