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PEPs: Guidance for Financial Institutions

The Central Bank of Aruba has issued guidelines regarding Politically Exposed Persons (PEPs) and their implications for financial institutions. This overview provides an understanding of the guidelines and their requirements.

Identifying PEPs

According to Article 12, paragraph 1 of the AML/CFT State Ordinance, a PEP is defined as a natural person who holds or has held a prominent public position. This includes:

  • Government officials
  • Politicians
  • Senior executives of state-owned enterprises
  • Family members and close associates of those individuals

Assessing Risk

Financial institutions must assess the risk associated with PEPs by considering the following factors:

  • The PEP’s occupation
  • The country where they hold office
  • Any sanctions imposed on them
  • Whether the account is held and used for the PEP’s own benefit or for a third party

CDD Measures

Financial institutions are required to apply Customer Due Diligence (CDD) measures when dealing with PEPs. This includes:

  • Identifying the customer
  • Verifying their identity
  • Gathering information about their business and financial activities

Simplified CDD Measures

Article 10 of the AML/CFT State Ordinance allows for simplified CDD measures to be applied in certain cases where the risk is deemed low. These include:

  • Customers who are governed by the AML/CFT State Ordinance
  • Customers with a specific legal status

Monitoring and Reporting

Financial institutions must monitor PEP accounts on an ongoing basis to ensure that they are not being used for money laundering or terrorist financing. They must also report any suspicious transactions to the relevant authorities.

Duration of PEP Status

According to Article 12, paragraph 2 of the AML/CFT State Ordinance, a person is considered a PEP up to five years after they have ceased to occupy a prominent public position.

Conclusion

Financial institutions must be aware of the guidelines issued by the Central Bank of Aruba regarding PEPs and take steps to ensure that they comply with the requirements. This includes:

  • Identifying PEPs
  • Assessing risk
  • Applying CDD measures
  • Monitoring accounts
  • Reporting suspicious transactions