Financial Crime World

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Luxembourg Banks Face Scrutiny Over Bank Secrecy Act Compliance

Luxembourg, August 21, 2020

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Financial Crimes Enforcement Network have issued a joint statement aimed at clarifying Bank Secrecy Act (BSA) and anti-money laundering (AML) regulatory requirements for customers who may be considered politically exposed persons.

What is a Politically Exposed Person?

According to the joint statement, a “politically exposed person” refers to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates. The term “senior foreign political figure” should not be confused with the term “politically exposed person,” as defined under the BSA private banking regulation.

BSA/AML Regulatory Requirements

The agencies emphasized that the BSA/AML regulations do not define the term “PEP,” which means that banks do not have a regulatory requirement to have unique, additional due diligence steps for customers who are considered PEPs. Instead, banks can apply a risk-based approach consistent with requirements contained in the Financial Crimes Enforcement Network’s 2016 customer due diligence final rule.

Key Takeaways

  • The BSA/AML regulations do not define the term “PEP.”
  • Banks do not have a regulatory requirement to have unique, additional due diligence steps for customers who are considered PEPs.
  • Banks can apply a risk-based approach consistent with requirements contained in the Financial Crimes Enforcement Network’s 2016 customer due diligence final rule.

Additional Guidance

The joint statement addresses potential risk factors, levels and types of due diligence, and other BSA/AML regulatory requirements applicable to PEPs’ relationships. The statement is intended to provide guidance for financial institutions operating in Luxembourg and may be subject to change as regulations evolve.