The Federal Board of Revenue (FBR) has directed the jeweler’s community to ensure enhanced due diligence of customers, who are Politically-exposed persons (PEPs) under the FBR’s Anti Money Laundering and Countering Financing of Terrorism Regulations for Designated Non-Financial Businesses and Professions.
The FBR has issued guidelines for dealers in precious stones and metals to provide guidance to Dealers in Precious Stones and Metals (DPMS) in implementing and complying with requirements in AML/CFT legislation.
All DPMS should review the guidelines to determine whether they meet the definition of a DPMS and engage in cash transactions with customers equal to or above the cash threshold of Rs 2 million. The higher risk categories are customers and those that use cash Rs. 2 million or above e.g. PEPs, international visitors.
The FBR’s guidelines are focused on AML/CFT measures such as risk assessment, AML/CFT program, Customer Due Diligence (CDD), beneficial ownership, politically exposed persons, reliance on the third party, targeted financial sanctions, Suspicious Transaction Report (STR), Currency Transaction Report (CTR) and record-keeping.
According to the FBR, Politically-exposed persons (PEPs) are individuals who, by virtue of their position in public life, may be vulnerable to corruption. The requirements of enhanced due diligence for PEPs and their close associates and family members are rule mandated.
Under Section 9 (1) of the FBR AML/CFT Regulations for DNFBPs, enhanced due diligence must be applied to all PEPs and their close associates and family members. Unlike for other customers, where enhanced due diligence will depend on whether the customer (and beneficial owner) is rated high risk or not.
The PEPs are defined in the Definitions sections of the FBR AML/CFT Regulations for DNFBPs, as:
“Politically exposed person” or “PEP” means an individual who is or has been entrusted with a prominent public function either domestically or by a foreign country, or in an international organization and includes but is not limited to foreign PEPs, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations and political party officials.
For domestic PEPs, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, political party officials. For international organization PEPs, members of senior management or individuals who have been entrusted with equivalent functions.
Section 9 of the FBR AML/CFT Regulations for DNFBPs state that DPMS must undertake enhanced CDD on PEPs, and their close associates and family members, and have risk management systems in place to identify PEPs, which includes whether any beneficial owners are PEPs. This includes whether any such persons are beneficial owners of a company or a trust, FBR stated.
The following provides more details on the definition of a PEP, particularly for PEPs in Pakistan:
- Heads of states, heads of governments, ministers, and deputy or assistant ministers;
- Members of the senate, provincial assembly, or national assembly;
- Members of supreme courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances;
- Government servants equivalent of BPS-21 or above;
- Military officers with a rank of Lt General or higher and its commensurate rank in other services;
- Directors and members of the board or equivalent function of an international organization;
- Members of the governing bodies of political parties;
- Members of the board or equivalent function in corporations, departments, or bodies that are owned or controlled by the state, FBR added.