MANILA, Philippines - A “politically exposed person” or PEP is a current or former senior official in the executive, legislative, administrative, military or judicial branch of a foreign government, elected or not; a senior official of a major foreign political party; a senior executive of a foreign government-owned commercial enterprise, and/or being a corporation, business or other entity formed by or for the benefit of any such individual; an immediate family member of such individual (including spouse, parents, siblings, children, and spouse’s parents or siblings); and any individual publicly known to be a close personal or professional associate.
The definition is provided by the Paris-based Financial Action Task Force (FATF), which considers PEPs high risk in the financial regulatory environment.
Over a decade ago, the FATF placed the Philippines on an international blacklist of money laundering havens, making financial transactions in the country difficult.
The blacklist led to the passage of the Anti-Money Laundering Act of 2001 or Republic Act 9160. Among the predicate crimes excluded from the law are corruption/bribery, malversation of public funds, terrorism and terrorist financing.
The FATF maintains a global PEP list that includes the profiles of PEPs as well as those of their family members and close associates.
In accordance with FATF guidelines and in line with international best practices in dealing with money laundering, the Bangko Sentral ng Pilipinas (BSP) adopted a PEP policy.
Last year the BSP issued Circular 706, requiring all banks operating in the Philippines to have a PEP policy in place.
Those doing business with PEPs, particularly in private banking transactions, are required to apply enhanced due diligence.
Heavy fines have been imposed on financial institutions that ignored the requirements on due diligence and “know your customer” procedures.