Bank Regulators Clarify Due-Diligence Requirements for Politically Exposed Persons

Five agencies said in a joint statement that the level of risk associated with politically exposed individuals varies

Guidance on how financial institutions should deal with politically exposed persons came from the Federal Reserve and four other regulators.

Photo: leah millis/Reuters

Banks and financial institutions need to assess money-laundering risks and conduct appropriate due diligence when dealing with foreign public officials and their families or associates, five regulatory agencies said.

People who are considered politically exposed may pose higher risks because their funds may be the proceeds of corruption or other illicit activities, the banking regulators said in a joint statement. The agencies added, however, that risks associated with politically exposed individuals vary and not all of them are automatically higher risk. The agencies don’t include U.S. public officials in the politically exposed persons category.

香蕉视频苹果下载“The risk depends on facts and circumstances specific to the customer relationship,” issued Friday by the Federal Reserve Board, the Federal Deposit Insurance Corp., the U.S. Treasury Department’s Financial Crimes Enforcement Network, the National Credit Union Administration and the Office of the Comptroller of the Currency.

For instance, a politically exposed individual who has a limited transaction volume and a low-dollar deposit account with a bank, and whose source of funds is known and legitimate, could be characterized as a lower risk, according to the statement.

The agencies also clarified that there are no regulatory requirements or expectations for financial institutions to have unique, additional due-diligence steps for clients who are considered politically exposed. But they said banks are required to “identify and report suspicious activity, including transactions that may involve the proceeds of corruption.”

Banks had raised due-diligence questions and requested clarifications on how to apply a risk-based approach to politically exposed clients that is also compliant with anti-money-laundering rules, the agencies said in the statement.

香蕉视频苹果下载The notice comes as banking regulators aim to address concerns from the banking industry that compliance with Bank Secrecy Act due-diligence requirements has become overly burdensome and costly, which has led to many banks closing high-risk accounts, said Daniel Stipano, a partner at law firm Buckley LLP who was previously deputy chief counsel at the OCC.

The U.S. Treasury Department and several banking regulators have issued other notices recently to make clear that compliance with the Bank Secrecy Act should be risk-based, he said.

“It’s a conscious effort to react to the banks’ concerns,” Mr. Stipano said.

Write to Mengqi Sun at

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