US authorities clarify the Bank Secrecy Act Due Diligence requirements for Politically Exposed Persons


The US Financial Crimes Enforcement Network (FinCEN) and several other authorities have issued a joint statement stating that Bank Secrecy Act (BSA) due diligence requirements for politically exposed persons (PEPs) should be proportionate to the risks that the PEP relationship present.

PEPs include foreign individuals in public office, and their close relatives and associates. As such, there is a greater risk of their wealth being derived from proceeds of corruption and other illegal acts. The joint statement acknowledges that the risk of money-laundering depends on the precise type of PEP relationship.  For instance, some PEPs who do not engage in large volume transactions and have legitimate funding sources may pose lower customer risk of money-laundering.

Therefore, even though banks must follow effective customer due diligence (CDD) protocols based on specific risks, this is not a regulatory requirement. Banks need not have supplemental CDD steps for PEPs. However, the statement reiterates that banks must abide by all existing BSA and AML rules for effective risk management.