By Neil Marks
The head of the country’s financial watchdog says insurance companies and other agencies covered by money-laundering laws should not be asking about citizens’ political affiliation, and an intervention by Bank of Guyana could see a reversal of the policy.
The News Room was able to confirm that some insurance companies have begun asking persons to state their political affiliation on their forms.
But Matthew Langevine, the Director of the Financial Intelligence Unit (FIU), suggests that the policy was developed out of a misunderstanding of the application of anti-money laundering legislation in dealing with politically exposed persons or PEPs.
PEPs are considered as high-risk customers mainly because of their position of influence.
These are persons, the FIU says, who are able to influence decisions, control human and financial resources and impact policy decisions within government institutions and international organisations.
Since these persons can become corrupt, it became necessary for “enhanced customer due diligence measures” to be applied so that “blind eye is not turned” for illegal transactions conducted by prominent public functionaries.
“…based on their internal knowledge of who is that Politically Exposed Person (PEP) then they would refer to as a PEP list – a list within their office of all the PEP based on the definition provided – and they would treat with and deal with those persons based on their knowledge and understanding that those persons are PEP,” Langevine said in an interview Wednesday.
“It is not intended to work by these reporting entities asking you about your political affiliation,” Langevine said.
According to the law, a political exposed person is “any individual who is or has been entrusted with prominent public functions on behalf of a state, including a Head of State or of government, Senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials, including family members or close associates of the politically exposed person whether that person is resident in Guyana or not.”
But Langevine said that agencies are expected to use their own internal mechanisms to know who a politically exposed person is and act accordingly; in any case, he said it would be foolhardy for entities to ask persons about their political affiliation since they may not be honest.
“Persons will give information that could be misleading.
“So, it is not for you (insurance companies) to go questioning every single person whether they are politically exposed or not. You are supposed to make that determination based on your knowledge of the office that that person may hold,” Langevine stated.
He noted that the need for insurance companies and other institutions to engage in a higher level of information seeking is grounded in Recommendation 12 from the Financial Action Task Force (FATF), the global body which set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats.
Guyana’s Anti-Money Laundering and Countering the Financing of Terrorism (AMLCFT) Act of 2009 created the obligation for reporting entities to have appropriate risk management systems in place to determine whether a customer is a PEP.
The FIU states on its website that the definition provided by the AML/CFT Act can be interpreted very widely, as it covers a wide range of prominent functionaries, whether foreign, domestic, present or past, including the family members and close associates of those prominent public officials.
“Given that the AML/CFT Act did not include a list of specified public positions, family members or associates that would be subject to the Act, it is critical that the reporting entity be always vigilant, and mindful of the levels of ML/TF risks associated with all PEPs across the various categories and apply mitigation measures accordingly,” the FIU said in a missive to the agencies informing them of how the regulations are meant to work.
And so Langevine insisted that the regulations do not apply to “just any customer” but that companies should know their customer and act accordingly.
He said that he has already contacted the supervisory authority at the Bank of Guyana for them to reach out to insurance companies to clarify how their due diligence should be conducted.
“We do not want this to be a further burden on customers of different entities, including, but not limited to the insurance companies; but we want this to be something that is expected to work very smoothly and really address the issue understanding the nature of transactions being done by these kinds of individuals,” Langevine stated.
A reporting entity is responsible for developing its own policies and procedures, that best suit the nature, size, complexity and money laundering and terrorist financing risks associated with the entity.
The full list of politically exposed persons can be found on the FIU website (www.fiu.gov.gy).
