What is an Isle of Man ‘PEP’ (Politically Exposed Person) ?
In layman’s terms – under Isle of Man law a ‘PEP’ is someone who is or has been appointed to ‘prominent public function’.
Politicians are the obvious and most cited example, but judges, senior members of the armed forces, diplomats and high ranking civil servants are PEPs as well.
Please note that the family members and ‘close associates’ of an Isle of Man PEP are also considered to be PEPs themselves.
Why do we care about PEPs in the Isle of Man ?
Businesses in the regulated sector (‘Relevant Persons’), such as financial services businesses and other regulated businesses (such as accountants and lawyers) ‘care’ about PEPs because people in prominent public positions may be susceptible to bribery and other forms of corruption and therefore are generally considered to present a higher risk of money laundering.
The Isle of Man Anti Money Laundering laws recognise this and therefore require regulated businesses to take special measures to deal with the enhanced risks that PEPs pose.
What special measures are required to be taken by Isle of Man regulated businesses (‘Relevant persons’) in respect of PEPs ?
The AML / CFT code (Code) sets out the legal obligations placed on ‘Relevant persons’ in the Isle of Man.
The part relating to PEPs is set out in s14. It is worth a detailed read but in summary it requires ‘Relevant Person’s to :-
- Determine if they are dealing with a PEP.
- Obtain senior management ‘sign off’ before carrying out a transaction or establishing or continuing a business relationship with a PEP.
- Take reasonable measures to establish the source of wealth of foreign PEPs and domestic PEPS who are considered as posing a higher risk of ML/TF.
- Perform ongoing and effective monitoring of business relationships with foreign PEPs and domestic PEPS who are considered as posing a higher risk of ML/TF.
s15 of the Code sets out circumstances where Relevant Persons should conduct ‘Enhanced customer due diligence’ and it requires that this is carefully considered where there is a business relationship or occasional transaction with a PEP .
Also see Section 17 of the FSA AML/CFT Guidance notes (October 2019) which deals with PEPs
What are domestic PEPs in the Isle of Man ?
Under Isle of Man law a “domestic PEP” means a PEP who is or has been entrusted with prominent public functions in the Island and any family members or close associates of the PEP, regardless of the location of that PEP, those family members or close associates;
…all other PEPs are ‘foriegn’ PEPs
Formal definitions of PEP under Isle of Man law.
Domestic PEP – a PEP who is or has been entrusted with prominent public functions in the Island and any family members or close associates of the PEP, regardless of location of that PEP those family members or close associates.
Foreign PEP – a PEP who is or has been entrusted with prominent public functions outside the Island and any family members or close associates of the PEP regardless of the location of those family members or close associates.
Politically exposed persons are defined in paragraph 3 of the Code and include natural persons who are or have been entrusted with prominent public functions and their immediate family members and close associates. This definition would include royal families as persons entrusted with prominent public functions. The Code definition is to be found on page 9 but is reproduced in full below:
“politically exposed person” or “PEP” means any of the following —
(a) a natural person who is or has been entrusted with prominent public functions (“P”), including —
(i) a head of state, head of government, minister or deputy or assistant minister; (ii) a senior government official; (iii) a member of parliament; (iv) a senior politician; (v) an important political party official; (vi) a senior judicial official; (vii) a member of a court of auditors or the board of a central bank; (viii) an ambassador, chargé d’affaires or other high-ranking officer in a diplomatic service; (ix) a high-ranking officer in an armed force; (x) a senior member of an administrative, management or supervisory body of a state-owned enterprise; or (xi) a senior member of management of, or a member of, the governing body of an international entity or organisation;
(b) any of the following family members of P, including —
(i) a spouse; (ii) a partner considered by national law as equivalent to a spouse; (iii) a child; (iv) a spouse or partner of a child; (v) a brother or sister (including a half-brother or half-sister); (vi) a spouse or partner of a brother or sister; (vii) a parent; (viii) a parent-in-law; (ix) a grandparent; or (x) a grandchild; AML/CFT Handbook Appendix A 10
(c) any natural person known to be a close associate of P, including —
(i) a joint beneficial owner of a legal person or legal arrangement, or any other close business relationship, with P; (ii) the sole beneficial owner of a legal person or legal arrangement known to have been set up for the benefit of P; (iii) a beneficiary of a legal arrangement of which P is a beneficial owner or beneficiary; or (iv) a person in a position to conduct substantial financial transactions on behalf of P;
DISCLAIMER; THIS ARTICLE IS A GENERAL EDITORIAL COMMENTARY ONLY. IT IS NOT INTENDED TO BE AND DOES NOT CONSTITUTE LEGAL ADVICE.