Guidelines on Politically Exposed Persons (PEPs) (Effective)

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Publication of July 2024
Politically Exposed Persons
Politically Exposed Persons (PEPs) are considered, at the international level, as being exposed to "higher risks" of money laundering and its underlying offenses, notably corruption1. This increased risk justifies the application by financial institutions of additional preventive measures in the fight against money laundering and terrorist financing (AML/CFT) in order to best detect any operations related to acts of corruption. European regulation on the fight against money laundering, transposed into French law2, distinguishes a specific category of clients and imposes on banks and life insurance companies the implementation of specific due diligence obligations during their business relationships with PEPs. These obligations involve increased requests for information from the persons concerned regarding their professional, family, financial, and asset situation, without however preventing them from carrying out financial operations, when these correspond to their profile and do not present characteristics different from those of other clients in similar circumstances. Indeed, the qualification of PEP does not in itself entail a generalized suspicion of the operations carried out by the persons concerned. WHO IS A PEP? Natural persons who exercise, or have ceased to exercise for less than one year, an important public function in France, in a foreign country, or within an international organization are considered PEPs. Certain members of their families or persons known to be closely associated with them must be subject to the same due diligence measures.

• The functions concerned
  Article R.561-18 of the Monetary and Financial Code sets out a general list of the functions concerned, which has been clarified by the Order of March 17, 2023, which lists the functions exercised in France that justify the status of PEP.
  Furthermore, the European Commission has published a single list of all the functions concerned in each Member State, at the level of international organizations and institutions and bodies of the Union.
  The table in the annex summarizes all the functions concerned in France and abroad, excluding functions within international bodies.

1 FATF Recommendation 12
2 Articles L.561-10 1°, R.561-18, R.561-20-2 and R.561-20-3 of the Monetary and Financial Code

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Regulation (EU) 2024/1624 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing3, which will enter into application on July 10, 2027, adds to the list of PEPs the heads of regional and local authorities, including municipal groupings and metropolitan regions of at least 50,000 inhabitants as well as any other person exercising important public functions provided for by Member States.

• Close relatives of PEPs subject to the same due diligence measures
  Family members of PEPs:
• The spouse (regardless of the nature of the union);
• Children, as well as their spouses;
• Parents.
  Persons closely associated with PEPs, namely:
• Natural persons who are jointly with the PEP beneficial owners of a legal person, a collective investment scheme, a trust, or a comparable legal arrangement under foreign law;
• Natural persons who are sole beneficial owners of a legal person, a collective investment scheme, a trust, or a comparable legal arrangement under foreign law known to have been established for the benefit of a PEP;
• Any natural person known to have close business ties with the PEP.
  WHAT INFORMATION AND DOCUMENTS MUST FINANCIAL INSTITUTIONS REQUEST FROM THEIR PEP CLIENTELE?
  Credit institutions and financial institutions must take appropriate measures to establish the origin of the wealth and funds4 involved in the business relationship or operation with a client or, where applicable, a beneficial owner having the status of PEP. These elements must be verified based on reliable and independent data, information, and documents, when the risk associated with the relationship with the PEP is particularly high. Thus, in addition to the documents allowing the identification and verification of the identity of a beneficial owner having the status of PEP, financial institutions must request from their PEP clientele the following information and documents:
• Any element of information regarding their professional situation;

3 Included in the "AML6 Package" which corresponds to a set of 4 draft texts presented by the Commission on July 20, 2021, the objective of which is to strengthen the requirements and harmonization of AML/CFT regulation. The AML6 package includes 3 texts concerning AML/CFT regulation: a revised AML/CFT directive, a general directly applicable regulation, and a regulation revising Regulation 2015/847 on fund transfers; and a fourth text establishing a European AML Authority (AMLA). 4 EBA Guidelines on customer due diligence measures, EBA/GL/2021/02, paragraph 4.50 The future European regulation further clarifies the notion of spouse and extends the measures applicable to PEPs to the brothers and sisters of Heads of State, Heads of Government, Ministers, Deputy Ministers, and Secretaries of State or to persons exercising equivalent functions at the Union level or in a third country.

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• Any element of information regarding their family situation or the nature of the link with a PEP (for example, if the PEP is the beneficiary of a life insurance contract or if the PEP is the beneficial owner of a legal structure);
• Any information or document capable of justifying the origin of the funds paid into the account or contract (pay slips, tax notices, rental contracts, proof of tax declaration of donation, contracts for the transfer of shares or rights, etc.);
• Any information or document capable of estimating real estate and/or movable wealth (statements of savings products/financial investments, property deeds, deeds of notoriety in the context of an inheritance, shares of civil or commercial companies, etc.).
  The aforementioned information must be sufficiently precise to know the origin of the wealth and funds. For example, if the institution uses amount brackets to estimate wealth, ranges such as "from 0 to 500,000€" or "greater than 1M €" are not sufficiently fine and give no indication of its composition. The information and documents thus collected can only be communicated to authorities and services authorized by law, notably Tracfin5 in the context of the reporting obligations of financial institutions6. For more information on the specific due diligence obligations for PEPs, please refer to the ACPR guidelines on PEPs, which are public and available on its website. The future European regulation extends all specific measures for PEPs to any transaction or activity conducted for the account or for the benefit of a PEP, a member of their family, or a person known to be closely associated with them, and not just to business relationships, and strengthens the measures applicable to persons who cease to be PEPs. It also provides that the newly created European Anti-Money Laundering Authority (AMLA) will issue, no later than July 10, 2027, guidelines regarding (i) the criteria for identifying persons known to be closely associated with a PEP and (ii) the assessment of the risk level associated with a particular category of PEP, their close relatives, or persons known to be closely associated with them, including when the person no longer holds the function that led to their PEP status. The draft regulation recalls in a recital that refusing to enter into a business relationship with a person solely on the grounds that they are a PEP, a close relative of a PEP, or closely associated with a PEP is contrary to the letter and spirit of the regulation7.

5 National Financial Intelligence Unit
6 See in this regard the joint guidelines of the ACPR and Tracfin on reporting and information obligations 7 Recital 98 of Regulation 2024/1624

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ANNEX
R. 561-18 OF THE CMF (Foreign PEPs) ORDER OF MARCH 17, 2023 (French PEPs) Political Functions Head of State President of the Republic Head of Government Prime Minister Members of a national government or of the European Commission Members of the Government Member of a national parliamentary assembly or of the European Parliament Presidents of the Senate and the National Assembly Deputies and Senators Member of the governing body of a party or political group subject to the provisions of Law No. 88-227 of March 11, 1988 or of a foreign party or political group The presidents and, where applicable, the members of the executive bodies of political parties or groups8 or persons who, regardless of their title, exercise equivalent functions Judicial Functions Member of a supreme court, a constitutional court, or another jurisdiction whose decisions are not, except in exceptional circumstances, subject to appeal President and members of the Constitutional Council Members of the Council of State9 Members of the Court of Cassation10 Member of a Court of Audit Magistrates of the Court of Audit11 Other Politically Exposed Functions Director or member of the governing body of a central bank Members of the General Council of the Bank of France12 Ambassador or Chargé d'affaires Ambassadors or Chargés d'affaires13 General officer or senior officer commanding an army Chief of Staff14 and the chiefs of the Army, Navy, and Air Force15 Secretary General of the Constitutional Council16 Member of an administrative, management, or supervisory body of a public company Persons who, within the companies, public establishments, and other legal entities mentioned in points 1° to 3° of III of Article 11 of the aforementioned Law of October 11, 2013, as well as persons who, within the companies, public establishments, and other legal entities mentioned in point 5° of III of Article 11 of the aforementioned Law of October 11, 2013, whose annual turnover, for the last financial year closed before the date of appointment of the persons concerned, exceeds 50 million euros, exercise the functions of General Manager, Delegated General Manager, Sole General Manager, member of the Board of Directors, Administrator, or member of the Supervisory Board of public limited companies or, regardless of their title, functions equivalent to those mentioned above

8 Subject to the provisions of Law No. 88-27 of March 11, 1988 9 Mentioned in Article L. 121-2 of the Administrative Justice Code, with the exception of Councillors of State in extraordinary service not exercising judicial functions 10 Mentioned in points 1°, 2°, 3°, 4°, 6°, 7°, 8°, and 9° of Article R. 421-1 of the Code of Judicial Organization as well as extraordinary members mentioned in Article 40-1 of Ordinance No. 58-1270 of December 22, 1958, organic law relating to the status of the judiciary 11 Mentioned in Article L. 112-1 of the Code of Financial Jurisdictions 12 Mentioned in Article L. 142-3 of the Monetary and Financial Code 13 Mentioned in Articles 1st and 13 of Decree No. 79-433 of June 1, 1979, relating to the powers of ambassadors and the organization of State services abroad 14 Mentioned in Article R.* 3121-1 of the Defense Code 15 Mentioned in Article R.* 3121-25 of the Defense Code 16 Mentioned in Article 1st of Decree No. 59-1293 of November 13, 1959, relating to the organization of the Secretariat General of the Constitutional Council