The Financial Intelligence Centre (FIC) recently issued Public Compliance Communication (PCC) 51 which provides guidance on measures relating to Domestic Prominent Influential Persons (DPIPs), Foreign Prominent Influential Persons (FPPOs), their immediate family members and known close associates. The draft version of the PCC was made available for consultation to relevant stakeholders during March 2021. All comments have since been considered and incorporated into the final version PCC 51 where appropriate.
PCC 51 provides clarity on the money laundering risks posed and the client due diligence (CDD) considerations to be applied to a business relationship with a client who is a DPIP or a FPPO, or where the client is an immediate family member or known close associate of a DPIP or FPPO. The PCC also aims to provide guidance on the scenario where a client or other persons no longer holds a position of a DPIP or FPPO, and to assist accountable institutions with potential indicators that may aid in the mitigation and determination of the potential money laundering risks these clients pose. Moreover, it provides guidance on further indicators of heightened money laundering risks and de-risking, as well as lists of additional data bases which could be consulted in the determination of DPIPs and FPPOs.
All FPPOs pose an inherent high money laundering risk. Accordingly, the business relationship with an FPPO must always be considered as a high risk from a money laundering perspective. However, the level of risk for DPIPs must be assessed as not all DPIPs pose an inherent high money laundering risk. Accountable institutions are required to determine whether their prospective client, existing client, beneficial owner of the client, and the person acting on behalf of the client holds a position of a DPIP or FPPO or is an immediate family member and/or known close associate of such.
The FIC Act does not specify methods of how to determine whether a client or other persons are a DPIP or FPPO however there are various controls that can be used when determining same. This can include requesting this information directly from the client or other persons, scrutinising client information through screening against relevant open data sources or against commercial databases, or conducting independent research. The FIC alerts accountable institutions that information provided by the client and other persons indicating their DPIP or FPPO status, may be misrepresented. Accountable institutions are therefore strongly urged to further scrutinise the client information in their determination of DPIPs and FPPOs.
Accountable institutions must apply appropriate CDD and enhanced due diligence (EDD) measures to FPPOs and high risk DPIPs, their family members and close known associates as set out in sections 21F, 21G and 21H of the FIC Act, dealing with customer due diligence for these types of persons. Where a client is a known close associate or a family member of a DPIP or FPPO, although they do not hold the position themselves, they should be treated as such for the purposes of risk determination.
Where a client is an FPPO or a DPIP that poses a high money laundering risk, there are additional measures that must be applied. In such instances, accountable institutions must:
- Establish and verify the client information
- Understand and obtain information on the business relationship, and
- Undertake obligations set in sections 21F and sections 21G of the FIC Act, which include:
- Obtain senior management approval
- Establish the source of wealth and funds of the client, and
- Conduct enhanced ongoing monitoring
It is important to note that although there is a heightened risk of money laundering associated with DPIPs and FPPOs, it does not necessarily mean that all these persons are linked to or engaged in illicit activities.
In terms of the PCC, it is not considered effective nor adequate risk management to merely de-risk a client due to the fact that the client is a DPIP or FPPO. The FIC is of the view that where an accountable institution de-risks a client based only upon the fact that the client is a DPIP or FPPO, without taking any other money laundering risk factors into account, then that accountable institution has not complied with its obligation to follow a risk-based approach. Accountable institutions should therefore be able to demonstrate why the money laundering risk is high or severe and provide reasons as to why it does not have the appetite to onboard a DPIP presenting a high risk or an FPPO.
It is recommended that accountable institutions review their Risk Management and Compliance Programme (RMCP) to ensure that it has adequate documented processes by which it mitigates these risks in line with PCC 51.