Broadening of the definition of PEPs, in line with FATF

Of particular interest in the fight against corruption are the proposed updates in the regulation on politically exposed persons, so-called ‘PEPs’. This includes a broadening of the definition of who PEPs are, in line with international developments in the Financial Action Task Force (FATF) and the EU.

Completion Status:
Fulfilled

Commitment filtering:

Specific:yes

The commitment is specific in the sense that it defines a concrete area in which the intervention is intended: the regulation on politically exposed persons.

Measurable:yes

The broadening of the definition of PEPs in line with international developments in the Financial Action Task Force (FATF) and the EU is an action that can be measured to assess its fulfillment, although the way in which the commitment is formulated is non-committal. Feedback from Norway’s government indicates that the language is a follow-on from a longer text that indicates more detail about the ongoing initiative. For this reason, it was decided to include this commitment in the monitoring.



Last updated: 30 August 2022
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Evaluation:

This commitment refers to the ongoing work on the legislation regulating politically exposed persons (PEPs). The monitoring of this commitment takes into consideration: 1) the broadening of the definition, and 2) whether the update in the regulation has been made in line with international developments in FATF and the EU.

In June 2018, the legislation on PEPs was amended in the Act relating to Measures to Combat Money Laundering and Terrorist Financing (Anti-Money Laundering Act). This entered into force in October 2018, when the commitment was made.[1] Under this Act, the definition of politically exposed persons (PEPs) is extended to include persons with high-ranking positions in Norway.[2] A PEP is one who serves or has served in the position or function of:

1) head of state, head of government, minister or assistant minister

2) member of the national assembly

3) member of a governing body of a political party

4) member of a high-level judicial body, the decisions of which are not subject to further appeal, except in exceptional circumstances

5) member of the board of an auditor general’s office, a court of auditors or a central bank

6) ambassador, chargé d’affaires or high-ranking officer of the armed forces

7) member of an administrative, management or supervisory body of a state-owned enterprise

8) director, member of the board or other person in the senior management of an international organisation.[3]

The inclusion of high-ranking positions in the definition of PEPs is in line with international standards set by FATF[4] and the EU Directive 2015/849.[5] According to FATF, both foreign and domestic PEPs are individuals who are or have been entrusted with prominent public functions such as heads of state or government; senior politicians; senior government, judicial or military officials; senior executives of state-owned corporations, and important political party officials. In the EU Directive 2015/849, a PEP is defined as a natural person who is or who has been entrusted with prominent public functions, including:

1) heads of state, heads of government, ministers and deputy or assistant ministers

2) members of parliament or of similar legislative bodies

3) members of the governing bodies of political parties

4) members of supreme courts, of constitutional courts or of other high-level judicial bodies, the decisions of which are not subject to further appeal, except in exceptional circumstances

5) members of courts of auditors or of the boards of central banks

6) ambassadors, chargés d’affaires and high-ranking officials in the armed forces

7) members of the administrative, management or supervisory bodies of state-owned enterprises

8) directors, deputy directors and members of the board or equivalent function of an international organisation.

Deputy (person appointed to undertake the duties of a superior in the superior’s absence) and deputy directors are omitted from the definition of PEPs in Norway. The government considers that in Norwegian legislation, they are included in the reference to “senior management”.

The idea of high-ranking officials is emphasised with the clarification that “no public function referred to in points 1) and 8) shall be understood as covering middle-ranking or more junior officials”.[6] Nevertheless, there is no legal definition of what is considered high-ranking in the law, nor is it is clear what a “high level” of judicial body is.

Because the inclusion of high-ranking positions in the Norwegian definition of PEPs is part of how FATF and the EU define PEPs, we consider that the commitment has been fulfilled. However, the update of Norway’s legislation falls short in relation to FATF requirements regarding foreign PEPs, in terms of what type of PEPs are included. Under FATF’s recommendation 12, countries should implement measures requiring financial institutions to have appropriate risk management systems in place, to determine whether customers of beneficial owners are foreign PEPs, or related or connected to a foreign PEP.[7] The Norwegian legislation refers to foreign undertakings and foreign exchanges, and includes in its definition directors, board members and senior managers of international organisations, but there is no explicit reference to foreign PEPs. The Norwegian government claims that by eliminating the word “foreign”, included in the old Anti-Money Laundering Act, which only referred to foreign PEPs, it has extended the current Act, which now includes foreign as well as domestic PEPs.

 

[1] Norwegian Ministry of Finance, Act Relating to Measures to Combat Money Laundering and Terrorist Financing (the Anti-Money Laundering Act), https://lovdata.no/dokument/NLE/lov/2018-06-01-23

[2] SCHJODT, New money laundering rules will enter into force on 15 October, https://www.schjodt.no/en/news–events/newsletters/new-money-laundering-rules-will-enter-into-force-on-15-october/

[3] Norwegian Ministry of Finance, Act Relating to Measures to Combat Money Laundering and Terrorist Financing (the Anti-Money Laundering Act), https://lovdata.no/dokument/NLE/lov/2018-06-01-23

[4] Financial Action Task-Force (FATF), Glossary, https://www.fatf-gafi.org/glossary/n-r/; FATF, Politically Exposed Persons (Recommendations 12 and 22), https://www.fatf-gafi.org/media/fatf/documents/recommendations/Guidance-PEP-Rec12-22.pdf

[5] European Union (EU), Directive (EU) 2015/849 of the European Parliament and of the Council, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32015L0849

[6] European Union (EU), Directive 2015/849 of the European Parliament and of the Council, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32015L0849

[7] Financial Action Task-Force (FATF), Politically Exposed Persons (Recommendations 12 and 22), https://www.fatf-gafi.org/media/fatf/documents/recommendations/Guidance-PEP-Rec12-22.pdf

 

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