SR 20-21: Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

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SR 20-21: Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551

DIVISION OF SUPERVISION AND REGULATION

SR 20-21

August 21, 2020

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK

SUBJECT:

Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

Applicability: This guidance applies to all financial institutions supervised by the Federal Reserve that are subject to the Bank Secrecy Act.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the Agencies) are issuing this joint statement to address due diligence questions raised by banks related to Bank Secrecy Act/anti-money laundering (BSA/AML) regulatory requirements for customers whom banks may consider to be politically exposed persons (PEPs). 1 The Agencies do not interpret the term "politically exposed persons" to include U.S. public officials. BSA/AML regulations do not define PEPs, but the term is commonly used in the financial industry to refer generally to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates. By virtue of this public position or relationship, these individuals may present a higher risk that their funds may be the proceeds of corruption or other illicit activity.

The statement is intended to clarify that, consistent with a risk-based approach, the level and type of customer due diligence should be commensurate with the risks presented by the PEP relationship. The statement further clarifies that the Customer Due Diligence rule does not create a regulatory requirement, and there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered PEPs. Finally, it clarifies that the rule does not create such a regulatory requirement or supervisory expectation for U.S. federal, state, or local public officials. The joint statement does not alter existing BSA/AML legal or regulatory requirements, nor does it establish new supervisory expectations.

Reserve Banks are asked to distribute this letter to the supervised institutions in their districts and to appropriate supervisory staff. Questions regarding this letter may be sent via the Board’s public website. 2

signed by Michael S. Gibson Director Division of Supervision and Regulation

Supersedes:

SR 01-3, "Guidance on Enhanced Scrutiny for Transactions That May Involve the Proceeds of Foreign Official Corruption"

Attachments:

Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

Notes:

See August 21, 2020, Board press release at: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200821a.htm . Return to text.

See, http://www.federalreserve.gov/apps/contactus/feedback.aspx . Return to text.

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Last Update: August 21, 2020