I am of An Age where every working surface in our house has been equipped with a cheap pair of reading glasses – who knows when I will need to read that care label, cooking instruction or baffling piece of American guidance? But even wearing my very best pair of specs, polished robustly, and with the font size turned up loud, I am still questioning what I am reading.
On 21 August 2020, FinCEN – the American FIU – issued a “Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons”. (The other parties involved are all the big hitters: the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; the National Credit Union Administration; and the Office of the Comptroller of the Currency.) US banks have asked for clarification on “how to apply a risk-based approach to PEPs consistent with the CDD requirements contained in FinCEN’s 2016 CDD Final Rule” – which seems a bit late in the day to me, but hey-ho. And three points in the clarification have me reading and re-reading in case it’s one of those situations where I have missed a crucial word, such as “not” or “must” (or “federal incarceration”).
The first is this: “The Agencies do not interpret the term ‘politically exposed persons’ to include US public officials.” Out of step with the rest of the world, the US definition of PEP is still outward-looking only. (Further reading reveals that there is the definition of the “senior foreign political figure” contained in the section of the Bank Secrecy Act that refers to private banking – but this is a niche concept, and only private banking services are required to take any notice of it.)
The second head-shaker is this: “BSA[Bank Secrecy Act]/AML regulations do not define PEPs, but the term is commonly used in the financial industry to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.” Why on earth do those regulations not define PEPs? Everyone else does – FATF, Basel, EU – so why not the US?
And now for the real WT* moment: “There is no regulatory requirement in the CDD rule, nor is there a supervisory expectation, for banks to have unique, additional due diligence steps for PEPs. The CDD rule also does not require a bank to screen for or otherwise determine whether a customer or beneficial owner of a legal entity customer may be considered a PEP. A bank may choose to determine whether a customer is a PEP at account opening, if the bank determines the information is necessary for the development of a customer risk profile. Further, the bank may conduct periodic reviews with respect to PEPs, as part of or in addition to the required ongoing risk-based monitoring to maintain and update customer information.”
Like, dude, seriously? Are US banks really not required even to ask the PEP question unless they fancy doing so? Or is it my glasses?
I hate money laundering 
Further confirmation, if needed, of the US “do as we say not as we do” approach.
Astonishing – I still can’t quite believe the hypocrisy (when you consider what they demand with FATCA and the rest, when they can’t even be bothered to do basic PEP checks). Harrumph, etc.
Thank you for casting light. Even with three pairs of glasses on I could never see through this murky alphabet soup.
I know what you mean: I’ve had to triple-read it, and I’m still a bit worried I’ve misunderstood… At least by putting it in a blog post I know that someone will correct me if I am wrong!