Understanding the Definition and Risk of Politically Exposed Persons in the Philippines
The term “politically exposed person” (PEP) has gained attention in recent years as a result of the risks associated with money laundering and financing of terrorism. The Philippines is no exception when it comes to the need for accountability and transparency in financial dealings.
Who is considered a Politically Exposed Person?
A PEP refers to a person who currently or has previously held a high-profile public position in the government, military, or state-owned enterprises. This includes individuals at the national, provincial, or municipal levels.
However, it’s not limited to the direct person but also includes close family members, associates, and relatives. This group of people is considered as high risk because of the assumed power, influence, and access to government-connected resources that they have.
Why are Politically Exposed Persons a risk?
Because of the assumed power and influence, PEPs pose a higher risk for money laundering and corruption. Law enforcement agencies worldwide have repeatedly identified the risks that PEPs pose concerning corruption and bribery.
Furthermore, PEPs have the potential to evade the anti-money laundering measures that businesses put in place because of their political power and impunity, which makes them harder to track than the typical money launderers. This ease of access to power can incentivize the misuse of funds and influence-peddling.
The Regulatory Framework Surrounding PEPs
In the Philippines, the Anti-Money Laundering Act of 2001 (AMLA) has enumerated PEPs as high-risk customers. Philippine banks, financial institutions, real estate developers, companies and registered dealers in jewelry, precious metals, and stones are mandated to establish measures or procedures to identify and verify the identity of their customers and beneficial owners, including PEPs.
They are also required to conduct customer due diligence and ongoing monitoring of the accounts of PEPs and their close family associates and associates to help detect, prevent and deter a money-laundering activity.
The Importance of Identifying PEPs
Identifying PEPs is critical for businesses in the Philippines to protect their businesses, maintain their institutions’ integrity, and avoid heavy penalties and fines from regulatory bodies, such as the Bangko Sentral ng Pilipinas and the Anti-Money Laundering Council.
Understanding who PEPs are and the risks associated with them is crucial for businesses in the Philippines. With proper due diligence measures in place and a competent understanding of AML policies, businesses can effectively protect themselves and run successful operations that support the country’s economy while minimizing the risk of financial transgressions.
Conclusion
Politically exposed persons represent a considerable risk for businesses in the Philippines that need to be mitigated to avoid money laundering and financing of terrorism. Although identifying them can be demanding, knowing the regulatory framework and conducting customer due diligence and ongoing monitoring of the accounts of PEPs can help businesses protect operations and maintain their institutions’ integrity. It is essential to comply with the AML policies and guidelines to avoid penalties and fines from regulatory authority.
