Identifying a PEP and the extent to which that person is considered politically exposed is one of the customer due diligence measures taken by the financial institution to implement the risk-based approach in conducting its business. The political influence and power of such person may lead to misuse of this power for illicit enrichment. Proceeds in this case are often transferred under names of relatives or persons close to a PEP for the purpose of concealment.
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Therefore, the financial institution shall take reasonable measures to identify whether a customer or beneficial owner is a PEP. In cases of high-risk business relationships with PEPs, the financial institution shall apply enhanced due diligence measures and apply the same to all types of PEPs, their family members, and persons close to those PEPs.
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| Article (8) of the Anti-Money Laundering Law and its Implementing Regulations require the financial institution to develop internal procedures and provide appropriate tools to identify PEPs and implement enhanced due diligence measures regarding them. | |
4.9 |
The financial institution shall use appropriate tools and measures to determine if a customer or beneficial owner is a PEP, whether that person is foreign or local. These tools and measures may include the following:
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| | a) | Searching for the customer in any available information sources.
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| | b) | Relying on a credible database to identify and verify the information of PEPs, including the use of programs or information systems that enable the financial institution to determine if a customer, potential customer, or beneficial owner is a PEP.
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| | c) | Include specific questions regarding a customer being a PEP at the start of the business relationship or when updating and reviewing customer information.
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| | d) | Verify the customer’s position and the potential use of power related to it.
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| 4.10 | The financial institution shall take into consideration that mere reliance on electronic systems and programs does not guarantee full compliance with the Anti-Money Laundering Law and its Implementing Regulations. The financial institution is responsible for determining whether a customer is a PEP or not, and combining the tools mentioned in Paragraph (4.9) may be highly effective in identifying and verifying the PEP.
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| 4.11 | The financial institution shall determine if a customer or beneficial owner is a PEP in the following cases:
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| | a) | Prior to starting a new business relationship.
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| | b) | Prior to making a transaction for a natural or legal person with whom there is no business relationship, whether such transaction is carried out in a single operation or in several operations that appear to be linked.
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| | c) | When updating or reviewing customer information.
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| | d) | Upon suspicion that the customer is a PEP.
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| 4.12 | The financial institution shall continuously apply due diligence to customers, business relationships, and beneficial owners to verify if a customer is a PEP, as mentioned in Paragraph (3.7) in the Due Diligence Section.
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| 4.13 | The financial institution shall classify the foreign person as a high-risk PEP customer and implement enhanced due diligence measures to mitigate risks, including:
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| | a) | Obtaining approval of the senior management before establishing or continuing a business relationship with that person.
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| | b) | Taking all reasonable measures to identify the source of the customer’s wealth and funds.
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| | c) | Implementing enhanced and continuous due diligence measures for the business relationship.
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The financial institution shall apply the same measures to local PEPs when the level of ML/TF risks is high.
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| 4.14 | The financial institution shall apply the same enhanced due diligence measures to the family members of the PEP as well as any person close to the PEP.
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| 4.15 | To determine the level and degree of risk posed by a local PEP, the financial institution shall observe the requirements mentioned in Paragraph (1.1) under the ML/TF Risk Assessment Section. It may also rely on the following information:
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| | a) | The period of time for which a local PEP has been entrusted with prominent public functions in Saudi Arabia or in a foreign country.
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| | b) | Corruption risks associated with the entity where a local PEP occupies his position and the extent to which that entity is exposed to corruption risks.
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| | c) | The customer's attempt to conceal or present inaccurate information related to the application of due diligence/enhanced due diligence, such as:
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| | | - | Concealing or providing inaccurate information related to the customer's job and the extent to which it is associated with high public positions or functions in Saudi Arabia or any foreign country.
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| | | - | Concealing or providing inaccurate information related to the source of income/wealth.
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| | d) | Reliance on the family members of a local PEP or persons close to that person to act on his behalf.
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| 4.16 | The financial institution shall have sufficient, reasonable and documented grounds based on the ML/TF risk assessment results if it decides that a local PEP, their family members, or persons close to that PEP do not pose high risk from the AML/CTF perspective.
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| 4.17 | If it is established from protection and/or savings policies or investment- related insurance documents that a beneficiary or beneficial owner is a PEP, the financial institution shall take enhanced due diligence measures to mitigate risks before the payment of benefits or exercise of any rights under those documents. Such measures shall include the following:
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| | a) | Notifying the senior management before the payment of benefits or exercise of any rights under those documents.
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| | b) | Carrying out a thorough examination of the business relationship with the customer and considering reporting to the SAFIU in case of a suspicious transaction.
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| | The rights exercised by a customer under a policy may include:
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| | • | Cancellation of the policy.
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| | • | Cancellation of the policy during the free-look period.
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| | • | Partial withdrawal of the investment amount.
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| | • | Change of investment fund.
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| | • | Payment of additional premiums.
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| 4.18 | If the financial institution fails to identify a PEP or has suspicions regarding a PEP, it shall include the following in its records:
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| | a) | The measures taken to determine the customer type.
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| | b) | Reasons for suspicions about the nature of the customer’s position or job or association with a PEP.
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| | c) | Reasons why the measures did not work.
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| | d) | The date on which the measures were taken.
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