Austrac has issued a further draft guidance note on the key terms used in the ‘politically exposed person’ (PEP) definition in the AML/CTF Rules.

A PEP is defined by the Financial Action Task Force as an individual who is or has been entrusted with a prominent public function.

Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offences and related offences, including corruption and bribery, as well as conducting activity related to terrorism financing.

AUSTRAC has provided additional guidance on the following topics:

• the meaning of ‘as soon as practicable’
• the use of commercial databases
• the meaning of ‘reasonable measures’
• the timing of ‘senior management approval’
• the coverage of local government PEPs;
• the interaction of PEP Rules with other legislative requirements
• privacy requirements for ‘sensitive information’.

Austrac proposes that reporting entities may use commercial databases in order to assist in the identification of PEPs, although AUSTRAC notes that the exclusive use of a commercial database cannot be a substitute for a thorough and comprehensive risk assessment by the reporting entity. Such an assessment will include training for frontline staff in identifying whether a
person is a PEP.

Local government or municipal politicians will not be required to be treated as PEPs under Part 4.13 of the AML/CTF Rules. However, the normal obligations relating to customer identification in Chapter 4 and ongoing customer due diligence in Chapter 15 will apply to such persons.

If a reporting entity is unable to determine the source of wealth and the source of funds of a PEP after undertaking a demonstrated investigation, then the reporting entity may consider whether it is appropriate to continue the business relationship, or if the relationship does continue, whether to submit a suspicious matter report for that particular PEP.