- The Act on Preventing Money Laundering and Terrorist Financing defines persons who are entrusted with prominent public functions, as well as their family members and close business associates, as ‘politically exposed persons’ (PEPs), whose background and activities must be screened especially carefully.
- The obliged entities have growing need of up-to-date PEP information due to tightening compliance requirements and the growing tensions in the national and international operating and security environment.
- PEP information is currently collected and updated from various sources, which impairs its reliability and maintenance.
- Collecting PEP information in a centralised register would improve its availability, completeness, reliability and timeliness.
- The Ministry of Finance has published a feasibility study on the establishment of a national PEP register. Finance Finland is strongly in favour of the proposal.
- A similar register has been in use for several years in Denmark, with positive results.
Finance Finland is pleased to note that the Ministry of Finance has started to prepare the collection of information on persons working in prominent public positions – so-called PEPs – in a national information system maintained by the authorities.
“Finance Finland proposed the establishment of a PEP register already during the enactment and subsequent transposition of the fourth EU anti-money laundering directive. A national PEP register would enable financial sector companies to reliably identify Finnish PEPs as well as their family members and close business associates”, says Mika Linna, head of financial crime and cybersecurity at Finance Finland.
For a financial sector customer, inquiries on PEP status are a typical manifestation of anti-money laundering regulations at work. A customer who is opening a bank account, for example, will be asked if they themselves or anyone close to them are politically exposed. Simply serving in a prominent public function does not, of course, cut off a person’s access to banking services, but it is by law deemed to involve a heightened risk of money laundering, which mandates enhanced assessment and monitoring of the person’s background, activities and transactions.
A centralised register would enable the verification of a customer’s PEP status quickly, reliably and with due respect to data protection requirements. Linna emphasises that the register must only include information that is essential to identifying money laundering risk.
“As regards PEP status, relevant information includes whether the customer is, for instance, a high political party official. However, information on the person’s political views or convictions is irrelevant and should not be included in the register.”
The need for a reliable PEP register has notably increased due to reasons such as tightening compliance requirements and the growing tensions in the national and international operating and security environment. A similar register has been in use in Denmark for many years, and experiences of its use have been positive.
“Reporting, collecting and maintaining PEP information should be the responsibility of those public institutions, authorities and state-owned companies that have PEPs in their employment. Secondarily, this responsibility should be with the data controller of the register. Financial sector companies and other entities subject to the customer due diligence obligations should be able to rely on the information in the register without having to request additional information from the customer or from other sources”, Linna points out.
The information in the PEP register must be equally and reasonably accessible by all obliged entities. The information should also be available to foreign PEP information providers under normal commercial terms.
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