Law firms dropping politically exposed persons
The Central Bank (CB)’s noose on money laundering activities has gotten tighter in recent months so much so that now law firms are also quietly letting go of their PEPs (Politically Exposed Persons), following the lead of private banks, industry officials said.
“Now the regulator’s scrutiny is 10 times more than what it was and in the current context it is becoming increasingly serious,” a compliance officer in a law firm told the Business Times on Wednesday.
The CB sends a questionnaire each month to law firms, notaries, trustee services, and accounting firms on the details of the PEPs they are servicing. These entities must answer and resubmit a comprehensive questionnaire each quarter to the CB. “It requests information such as the total number of clients a law firm has, the breakdown in invoicing them which is essentially how much is charged in cash and how much isn’t etc. These details are constantly being reviewed by the regulator,” the compliance officer said. He added it is the responsibility of compliance officers like him to inform and educate each employee of the institution on the CB guidelines.
Last week the Business Times reported on how certain private banks are shedding their PEP clients.
PEPs are described as high-risk customers with more opportunities than ordinary citizens to acquire assets through illegal methods such as taking bribes and money laundering.
Due to their official status or position held and influence, it is recognised that many PEPs are in positions that potentially can be abused for money laundering and related predicate offences, including bribery and corruption, as well as activity related to terrorism financing. The potential risks associated with PEPs justify the application of additional Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures to prevent, detect and manage these risks emanating from their conduct. In the current context where the country is politically charged, certain law firms are quietly disassociating with PEPs, according to the compliance officer as well as certain industry officials.
Guidelines on Identification of Politically Exposed Persons, No. 03 of 2019 issued by the CB has detailed procedures identifying the risks associated with such persons and the monitoring mechanism that such institutions should follow.
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