3.2.2. Classifying Customers as Related Customers

Article 1 of the AML-CFT Decision defines direct family members of a PEP as the PEP’s spouses, children, spouses of children, and parents.

Article 1 of the AML-CFT Decision defines close associates of a PEP as:

Natural persons having joint ownership rights in a legal person or arrangement or any other close business relationship with the PEP; and

Natural persons having individual ownership rights in a legal person or arrangement established in favour of the PEP.

يسري تنفيذه من تاريخ 1/8/2022

The AML-CFT Decision requires LFIs to treat the direct family members and close associates of PEPs as if they were PEPs themselves.

The above-mentioned relationships should be viewed as a mandatory minimum, not as an exhaustive list of all relationships that may justify to treat a customer as a PEP. The link between the family member or the close associate with the PEP determine the level of risk. LFIs should take a risk-based approach and consider whether a relationship exists between their customer and the PEP that could be exploited or abused to obscure the PEP’s connection to illicit funds.

For example, an LFI may choose to also define as a direct family members any person in a relationship with a PEP, and, as close associates, partners, prominent members of the same political party or civil organization as the PEP; close friends or advisors; business partners or associates, especially those that share (beneficial) ownership of legal entities with the PEP, or who are otherwise connected (e.g. through joint membership of a company board) in accordance with FATF Guidance and the above mentioned definition.

Once an LFI has established that a qualifying relationship exists between a customer (or the beneficial owner of a customer) and a PEP, the LFI must treat the customer as a PEP (or as owned by a PEP). There is one important distinction, however, between a PEP and the direct family member or close associate of a PEP: the latter cannot transfer their status to their own family members and close associates. For example:

	•	General A is the head of the Air Force of a country. Mr. B, her son, is married to Mrs. B, a private citizen who owns a grocery store. General A is a PEP, and Mr. B and Mrs. B must be treated as PEPs because they are direct family members of General A.
	•	Mrs. B is the daughter-in-law of General A. Her brother, Mr. C, a lawyer in private practice, is not required to be treated as a PEP. Mr. C’s connection to the true PEP (General A) is too distant. Even though Mrs. B is treated as a PEP, Mr. C does not need to also be treated as a PEP merely because he is a sibling of Mrs. B.
		LFIs should, however, apply EDD requirements and/or enhanced monitoring of the relationship if they have identified any high risks, such as concerns that the more distant family members or business associates of a PEP may be involved in corruption or any other sort of illicit activity, whether or not it involves the PEP.

Similarly:

	•	Mr. X is a prominent politician in a country who recently left office, but who may run for office in the future. Following his departure from office, Mr. X and Mrs. Y became cofounders of a real estate development company, with each owning 50% of the company. Due to Mr. X’s prominent function, the partnership has been extensively covered in the media. Mr. X is a PEP because of his recent past position. Mrs. Y must be treated as a PEP because she is a known close associate of Mr. X.
	•	Mrs. Y is also a 50% owner of an entirely separate business that manufactures cell phones. Mrs. Y’s co-owner of that business, Mr. Z, does not need to be treated as a PEP. As the business partner of a business partner of a PEP, his connection to Mr. X is too distant. LFIs should, however, apply EDD requirements and/or enhanced monitoring of the relationship if they have any concerns that the more distant family members or business associates of a PEP are involved in corruption or any other sort of illicit activity, whether or not it involves the PEP.