22/02/2025
PEP LAW (POLITICALLY EXPOSED PERSON)
In financial regulation, a politically exposed person (PEP) is one who has been entrusted with a prominent public function. A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence they may hold.
In Malaysia...
A PEP is an individual who holds prominent public functions in a government body or international organisation, either in Malaysia or a foreign country. The family members and/or close associates of these individuals are also considered PEPs.
In Malaysia, "PEP law" refers to the regulations regarding "Politically Exposed Persons" (PEPs), which are individuals holding significant public positions in the government or international organizations, requiring financial institutions to implement enhanced due diligence measures when dealing with them due to the heightened risk of money laundering and corruption associated with such roles; these regulations are primarily enforced under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) and overseen by Bank Negara Malaysia (BNM).
Key points about PEP law in Malaysia 》》
Definition of PEP:
A PEP is someone holding a prominent public function in a government body or international organization, including high-ranking officials, politicians, judges, and family members or close associates of such individuals.
Enhanced due diligence:
Financial institutions must conduct stricter customer due diligence (CDD) procedures when dealing with PEPs, which may include additional verification, more frequent monitoring of transactions, and scrutinizing the source of funds.
Risk assessment:
When dealing with a PEP, financial institutions are required to assess the potential money laundering risk based on the individual's specific position and the nature of their business relationship.
Reporting obligations:
If suspicious activity is identified related to a PEP, financial institutions must report it to the relevant authorities.
No central PEP database:
BNM does not maintain a central database of PEPs, relying on institutions to identify potential PEPs through their own due diligence processes and external sources.
