EU to Expand Definition of Politically Exposed Persons (PEPs): Siblings Included in New AML Regulations

In a significant development, the European Union (EU) is poised to introduce a ground-breaking regulation that will redefine the scope of Politically Exposed Persons (PEPs) to encompass their siblings. This progressive move comes following persistent advocacy from the Portuguese government and forms a crucial component of the EU's revamped Anti-Money Laundering (AML) package, representing a notable evolution in compliance obligations for various entities operating within the EU.

The decision to designate siblings of PEPs as PEPs themselves marks a notable addition to the new AML package, which recently received unanimous approval from both the European Parliament and national governments. This inclusion underscores the EU's commitment to fortifying its AML framework and enhancing transparency and accountability across the financial sector.

According to insights from an official familiar with the matter, the forthcoming regulations will mandate obliged entities conducting Customer Due Diligence (CDD) to actively identify and scrutinize the siblings of PEPs. Despite encountering resistance from certain member states, this measure aligns with recommendations set forth by the Financial Action Task Force (FATF) and aims to broaden the definition of individuals subjected to enhanced due diligence measures.

While some EU countries already subject the siblings of PEPs to heightened scrutiny, the impending legislation will standardize this practice across the entire EU under the Single Rule Book. Furthermore, the updated laws will bestow Beneficial Ownership registries with augmented powers, empowering them to conduct comprehensive checks and thwart attempts at fraudulent registrations.

Moreover, the regulatory ambit of the new laws extends to encompass Crypto Asset Service Providers (CASPs) and Virtual Asset Service Providers (VASPs) under the framework of Transfer of Funds incorporated into the Single Rule Book. Anticipating the establishment of the new Anti-Money Laundering Authority (AMLA), the European Commission is actively engaged in crafting Level 2 regulations and Regulatory Technical Standards (RTS) on Customer Due Diligence (CDD) to ensure effective enforcement and implementation.

In addition, the revised legislation expands the spectrum of entities falling within the purview of the Single Rule Book to include crowdfunding platforms, professional football clubs and agents, operators of investor residence schemes, and traders of luxury goods. Specific reporting thresholds for high-value purchases, such as cars and yachts, have been meticulously outlined in the directive to streamline reporting processes and bolster transparency.

Furthermore, the enhanced powers conferred upon Financial Intelligence Units (FIUs) under the updated laws empower national units to wield authority in temporarily suspending transactions and business relationships, thereby bolstering efforts to combat financial crime. Additionally, the regulations mandate retroactive registration of foreign entities engaging in relationships with obliged entities or acquiring property in the EU from January 1, 2014 onwards.

These sweeping regulatory measures underscore the EU's unwavering commitment to fortifying its AML framework, ensuring compliance with international standards, and fostering a robust ecosystem conducive to combating financial crime effectively.

By fLEXI tEAM