Demystifying Politically Exposed Persons (PEPs) in Singapore’s AML Landscape

As part of the Customer Due Diligence process, the AML regulations in Singapore mandate the regulated entities to identify if the customer or beneficial owner is a Politically Exposed Person (PEP), posing an increased financial crime risk to the business.

To determine the PEP, it is essential to understand who would qualify as PEP under AML Singapore regulations. For the purpose of AML compliance, the natural person entrusted with the following prominent public functions in Singapore or any other foreign country would be construed as PEP:

• Head of country of government
• Government ministers
• Senior civil servant
• Senior judicial/military official
• Senior official in a government-owned enterprise
• Senior political party official or any legislative member

Further, the person holding the position of director or a deputy director, board member or senior managerial personnel in the international organization would also be treated as PEP.
This excludes any middle-ranking or junior officials working with the government or international organization but shall include “Close Associates” of PEP, such as immediate family members or close professional connections (who may be subject to significant influence by PEP).

For determining the person or the beneficial owner’s status as PEP or close associates of PEP, the regulated entities may obtain self-declaration from the person and perform a search using reliable and independent data sources.

When the person is identified as PEP, the regulated entities must apply adequate due diligence measures, depending upon the overall risk exposure. However, the following Enhanced Due Diligence measures shall be applied in case of foreign PEP and when the ML/FT risk assessed is “high” for a domestic PEP and PEP through association with an international organization:

• Making inquiries into the PEP customer’s purpose of the transaction and proposed business relationship
• Understanding the PEP’s source of funds and wealth and obtaining relevant documents to determine its authenticity
• Appraising the senior management and seeking approval for engaging with PEP
• Business relationships and transactions with PEP shall be subject to enhanced ongoing monitoring

Here is an infographic discussing the definition of “Politically Exposed Person” under the Singapore AML regulations, identifying the person as a PEP or close associate of PEP, and the measures to be applied to manage the risk the PEP may pose to the business.

Allow AML Singapore to be your AML guide, helping you develop and implement a robust AML program to manage the ML/FT risks arising from customers, transactions and business relationships, including the ones connected with PEP.