Learn how to identify an international organisation politically exposed person (PEP). Then find out how to implement an effective risk-management process for customers you’ve identified as an international organisation PEP.
This page refers to the Act sections 5 and 28 and the Rules sections 5-5, 6-23 and 6-24
This example shows how to identify customers who are PEPs and what to do next. It explains the processes you need to assess, manage and mitigate risks associated with customers who are PEPs.
A prominent real estate company deals primarily in commercial and industrial property.
Zara, one of their senior agents, manages a client portfolio including businesses and property investors.
She is approached by David who is a representative of a property investment company that specialises in commercial acquisitions that have long-term yields. The property investment company wants to buy a commercial property valued at over $10 million.
Conducting initial customer due diligence
Following the real estate company’s initial customer due diligence (initial CDD) policy, Zara begins initial CDD on the property investment company as the customer. As she is completing this, she identifies John as the authorised agent to act on behalf of the customer (the property investment company) as its sole director. Even though David made the initial enquiry, John is the authorised person who is the focus of the customer due diligence process.
As part of the initial CDD process, Zara collects and verifies John’s:
- name
- date of birth
- residential address
- country of residence
- occupation.
She also requests documents to show the property investment company’s corporate and ownership structure.
John submits these documents which Zara reviews to identify the beneficial ownership and organisational structure. She sees that the company is owned by several shareholders.
Zara does a more in-depth search by doing current and historic ASIC searches on the company. This search identifies an individual who owns 25% of the company and is therefore the beneficial owner.
Identifying an international organisation PEP
Zara requests further information from John, explaining the need to collect and verify the beneficial owner’s identity.
John provides the required identification documents and Zara verifies these using a document verification system (DVS). She also asks John if the beneficial owner is a PEP.
John informs Zara that the beneficial owner is a family member of a person who holds a prominent position at an international aid organisation. Therefore, Zara identifies the beneficial owner as an international organisation PEP.
Zara does an online search on the beneficial owner’s background, including searching sanctions lists, other government lists, and on social media. She also uses one of the available PEP databases online that specialises in analysing corruption risks.
Zara confirms that the beneficial owner is a family member of an international organisation PEP from a low-risk jurisdiction and not on any sanctions lists.
As there are multiple lines of layered ownership, the customer is assessed as having a high ML/TF risk. Therefore, Zara proceeds to carry out enhanced CDD and establish both the customer’s and the PEP’s source of funds and source of wealth.
She asks John to provide details about the source of funds or source of wealth for both the customer and the PEP, who is the beneficial owner of the property investment company. Zara verifies the information she collects using other reliable sources.
Collecting other information
Zara also considers the information she collects from independent sources and confirms it's consistent with the customer’s explanation.
Through this process, Zara gets a clear understanding of the customer’s financial position and confirms the legitimate origin of funds for the commercial property purchase.
Even though the overall money laundering, terrorism financing and proliferation financing (ML/TF) risk is now assessed as low, enhanced CDD is still required because the beneficial owner is a foreign PEP.
She documents the explanation and monitors the customer to confirm that future activity is consistent with the explanation provided.
She applies risk mitigation controls and sends the risk assessment to the senior manager for review and approval before proceeding with the transaction for the purchase of the property.
Record keeping and senior manager approval
Zara maintains detailed records of all initial and enhanced CDD steps and the client’s risk rating. She seeks senior manager approval to continue the relationship with the client.
This guidance sets out how we interpret certain Australian legislation, along with associated Rules and regulations. Australian courts are ultimately responsible for interpreting these laws and determining if any provisions of these laws are contravened.
The examples and scenarios in this guidance are meant to help explain our interpretation of these laws. They’re not exhaustive or meant to cover every possible scenario.
This guidance provides general information and isn't a substitute for legal advice. This guidance avoids legal language wherever possible and it might include generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.