2. Understanding Risks

يسري تنفيذه من تاريخ 1/8/2022

Article 15 of the AML-CFT Decision and the FATF standards impose specific Customer Due Diligence (CDD) obligations on LFIs with respect to Customers that are Politically Exposed Persons (PEPs) which include the Direct Family Members or Associates Known to be Close to the PEPs. The AML-CFT Law and Decision give special attention to these customers because they are likely to expose LFIs to a heightened risk of money laundering, terrorism financing, and other illicit finance. The special requirements related to PEPs are not an indication that LFIs should avoid dealing with such customers. Instead, these requirements are meant to ensure that LFIs have done the due diligence necessary to fully identify, understand their customers and have made fully-informed decisions regarding whether or not to accept the customer or to continue the relationship. There are three sub-groups of PEPs:

	•	PEPs who are or have been entrusted with their prominent public position in the UAE are known as “domestic PEPs”;
	•	PEPs who are or have been entrusted with their prominent public position in any other foreign country are known as “foreign PEPs”; and
	•	PEPs who are or have been entrusted with the management or any prominent function within an international organization are known as “Heads of International Organizations (HIOs)”.

Customers that are PEPs, and transactions involving PEPs, receive special attention under the UAE legal and regulatory framework and the FATF standards because they bear a higher risk of involvement in certain proceeds-generating offenses: corruption, misuse or theft of public funds, and bribery. It is important to note that the majority of PEPs are law-abiding public servants and that no more than a small percentage of PEPs are involved in these offenses. Nevertheless, the risk is still higher than in the general population.

PEPs are at higher risk of involvement in these crimes because of the powers that come with their position or status. Most importantly, a PEP has power or influence over how government funds are spent, or over state action. PEPs may use their power or influence to directly enrich themselves, their family members, and their associates, by stealing or misdirecting government funds. Or they may sell their power or influence to illicit actors who are seeking to obtain a specific outcome, whether it is a lucrative contract, the passage of a regulation, or the transfer of government secrets.

The AML-CFT Decision also requires LFIs to perform the same specific due diligence on the direct family members and known close associates of a PEP. These individuals may not themselves have any direct power or influence over government actions, but they nevertheless present higher risks to LFIs as a result of their relationship with a PEP.

	•	PEPs, knowing that their financial transactions will be subject to scrutiny, may use family members or associates to carry out illicit transactions or collect illicit funds, in an attempt to hide their involvement in a transaction and their illicit gains. In many countries where corruption is an issue, PEPs themselves may nominally possess few assets, while their family members and associates openly display their wealth.
	•	Illicit actors seeking to persuade a PEP to take certain actions may seek to achieve this goal by paying off the people close to the PEP, the PEP’s family members and close associates. For instance, a person seeking a government contract may pay a PEP’s spouse to “put in a good word for him or her” with the PEP, or to gain access to the PEP by inviting the contractor to the PEP’s home. These payments may be made with or without the knowledge or consent of the PEP.

Article 15 of the AML-CFT Decision also requires LFIs to identify those legal person and legal arrangement customers that have at least one beneficial owner who is a PEP (see sections 3.2.1 and 3.2.2 below). In this Guidance, customers that are the direct family members of a PEP, the known close associates of a PEP, or that are legal persons or legal arrangements with at least one beneficial owner who is a PEP will be referred to as “Related Customers.”

Although LFIs are required to apply special procedures for all PEPs and Related Customers, not all PEPs and Related Customers are equally high-risk. The sources of risk for a PEP are closely related to the risk that a PEP could have abused his or her position for financial gain. Some factors that can influence the risks of a particular PEP are:

	•	The PEP’s ability to control highly consequential outcomes. Certain roles are more likely to attract large-scale corruption. For example, a judge in a traffic court may be offered bribes, but these are likely to be lower in value than the bribes potentially offered to a judge who presides over the trials of organized criminal groups.
	•	The authority and independence inherent in the PEP’s role or function. Where a PEP has greater authority or independent decision-making authority, he or she is more likely to be able to achieve outcomes that are beneficial to him/herself or his/her family or associates.
	•	The access to funds inherent in the PEP’s role. A PEP that can control the disbursement of funds is likely to have more opportunities for engaging in embezzlement and self-dealing.
	•	The nature of governance in the state or organization that has entrusted the PEP with a prominent function. Poor governance undermines transparency and accountability. Strong governance can help ensure that public officials are unable to use their office for gain, or are quickly caught if they do so. Governance is a broad category that includes the strength of anti-corruption laws, the vigor with which corruption is investigated and prosecuted, and the authority of independent public auditors.
	•	The overall level of corruption in the state or organization that has entrusted the PEP with a prominent function. Where corruption is rife, public officials are unlikely to be entirely immune.

The sources of risk for a Related Customer can be divided into two broad categories:

	•	The risk of the PEP to which the Related Customer is connected (i.e. understanding the risk of the PEP and its characteristics).
	•	The relationship between the Related Customer and the PEP (i.e. the type and strength of the relationship (e.g. the closer the relationship, the more likely the Related Customer is to share the PEP’s risk)).