FINANCIAL MONITORING MEASURES FOR POLITICALLY EXPOSED PERSONS
Abstract
The significant amount of authority vested in certain categories of public officials requires that entities of the national financial monitoring system apply adequate control measures aimed at reducing the risks of money laundering resulting from corruption. The article examines global recommendations on cooperation with politically exposed persons. Similar approaches have been identified in many jurisdictions regarding the conditions for implementing enhanced due diligence measures, which include obtaining permission from the manager to establish or continue business relations with a politically exposed person and identifying sources of funds and sources of wealth. Unification is also observed in the requirements regarding the sources of information that must be used by a reporting institution in the field of financial monitoring to identify a client with the status of a politically exposed person. In all analyzed jurisdictions, a high level of risk concerning legalization (laundering) of proceeds from crime, financing of terrorism and financing of proliferation of weapons of mass destruction must be established only in relation to foreign politically exposed persons. For domestic politically exposed persons and heads of international organizations, the reporting institution in the field of financial monitoring may set any level of risk, based on the results of customer due diligence measures. The difference between Ukraine and other countries in organizing business relations with politically exposed persons is highlighted, which consists in the need to report a financial transaction to the financial intelligence unit and obtain permission from the head of the institution when exceeding the legally established monetary threshold without taking into account the level of risk. Another feature of the Ukrainian financial monitoring system is the combination of the perpetual status of a politically exposed person with the possibility of not implementing enhanced due diligence measures regarding such a person one year after the person ceases to perform prominent public functions.
References
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Politically exposed persons and heads of international organizations guidance on June 1, 2021. Available at: https://fintrac-canafe.canada.ca/guidance-directives/client-clientele/pep/pep-eng
Proceeds of Crime (Money Laundering) and Terrorist Financing Act on June 29, 2000. Available at: https://laws.justice.gc.ca/eng/acts/P-24.501/FullText.html
The FATF Recommendations. Available at: https://www.fatf-gafi.org/content/fatf-gafi/en/publications/Fatfrecommendations/Fatf-recommendations.html
Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32015L0849
Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32018L0843
Law No: 5549 On Prevention Of Laundering Proceeds Of Crime of 11 October, 2006. Available at: https://masak.hmb.gov.tr/law-no-5549-on-prevention-of-laundering-proceeds-of-crime/
MASAK GENERAL COMMUNIQUE No 21. Available at: https://ms.hmb.gov.tr/uploads/sites/2/2023/04/Ek5-Com21.pdf
Federal Act on Combating Money Laundering and Terrorist Financing. Available at: https://www.fedlex.admin.ch/eli/cc/1998/892_892_892/en
Ordinance on Combating Money Laundering and Terrorist Financing. Available at: https://www.fedlex.admin.ch/eli/cc/2015/791/en
