Annex 1. Red flags

يسري تنفيذه من تاريخ 1/8/2022

The following is a list of red flags and indicators for suspicion associated with PEPs.⁵ PEPS ATTEMPTING TO SHIELD THEIR IDENTITY:

	•	Use of corporate vehicles (legal entities and legal arrangements) to obscure the beneficial owner.
	•	Use of corporate vehicles without valid business reason.
	•	Use of intermediaries when this does not match with normal business practices or when this seems to be used to shield identity of PEP.
	•	Use of family members or close associates as legal owner.

RED FLAGS AND INDICATORS RELATING TO THE PEP AND HIS BEHAVIOUR:

	•	Use of corporate vehicles (legal entities and legal arrangements) to obscure i) ownership, ii) involved industries or iii) countries.
	•	The PEP makes inquiries about the institution’s AML policy or PEP policy.
	•	The PEP seems generally uncomfortable to provide information about source of wealth or source of funds.
	•	The information that is provided by the PEP is inconsistent with other (publicly available) information, such as asset declarations and published official salaries.
	•	The PEP is unable or reluctant to explain the reason for doing business in the country of the financial institution or Designated Nonfinancial Business and Profession (DNFBP).
	•	The PEP provides inaccurate or incomplete information.
	•	The PEPs seeks to make use of the services of a financial institution or DNFBP that would normally not cater to foreign or high value clients.
	•	Funds are repeatedly moved to and from countries to which the PEPs does not seem to have ties with.
	•	The PEP is or has been denied entry to the country (visa denial).
	•	The PEP is from a country that prohibits or restricts its/certain citizens to hold accounts or own certain property in a foreign country.

THE PEP’S POSITION OR INVOLVEMENT IN BUSINESSES:

	•	The PEP has a substantial authority over or access to state assets and funds, policies and operations.
	•	The PEP has control over regulatory approvals, including awarding licences and concessions.
	•	The PEP has the formal or informal ability to control mechanisms established to prevent and detected ML/FT.
	•	The PEP (actively) downplays importance of his/her public function, or the public function s/he is relates to associated with.
	•	The PEP does not reveal all positions (including those that are ex officio).
	•	The PEP has access to, control or influence over, government or corporate accounts.
	•	The PEP (partially) owns or controls financial institutions or DNFBPs, either privately, or ex officio.
	•	The PEP (partially) owns or controls the financial institution or DNFBP (either privately or ex officio) that is a counter part or a correspondent in a transaction.
	•	The PEP is a director or beneficial owner of a legal entity that is a client of a financial institution or a DNFBP.

RED FLAGS AND INDICATORS RELATING TO THE INDUSTRY/SECTOR WITH WHICH THE PEP IS INVOLVED:

	•	Arms trade and defence industry.
	•	Banking and finance.
	•	Businesses active in government procurement, i.e., those whose business is selling to government or state agencies.
	•	Construction and (large) infrastructure.
	•	Development and other types of assistance.
	•	Human health activities.
	•	Mining and extraction.
	•	Privatisation.
	•	Provision of public goods, utilities.

BUSINESS RELATIONSHIP / TRANSACTION, PURPOSE OF BUSINESS RELATIONSHIP:

	•	Multiple STRs or other reports have been submitted on a PEP.
	•	(Consistent) use of rounded amounts, where this cannot be explained by the expected business.
	•	Deposit or withdrawal of large amounts of cash from an account, use of bank cheques or other bearer instruments to make large payments. Use of large amounts of cash in the business relationship.
	•	Other financial institutions and DNFBPs have terminated the business relationship with the PEP.
	•	Other financial institutions and DNFBPs have been subject to regulatory actions over doing business with the PEP.
	•	Personal and business related money flows are difficult to distinguish from each other.
	•	Financial activity is inconsistent with legitimate or expected activity, funds are moved to or from an account or between financial institutions without a business rationale.
	•	The account shows substantial activity after a dormant period; or over a relatively short time; or shortly after commencing the business relationship.
	•	The account shows substantial flow of cash or wire transfers into or out of the account.
	•	Transactions between non-client corporate vehicles and the PEP’s accounts.
	•	A PEP is unable or reluctant to provide details or credible explanations for establishing a business relationship, opening an account or conducting transactions.
	•	A PEP receives large international funds transfers to a gaming account. The PEP withdraws a small amount for gaming purposes and withdraws the balance by way of cheque.
	•	A PEP uses third parties to exchange gaming chips for cash and vice versa with little or minimal gaming activity.
	•	A PEP uses multiple bank accounts for no apparent commercial or other reason.

PRODUCTS, SERVICE, TRANSACTION OR DELIVERY CHANNELS:

	•	Businesses that cater mainly to (high value) foreign clients.
	•	Trust and company service providers.
	•	Wire transfers, to and from a PEP account that cannot be economically explained, or that lack relevant originator or beneficiary information.
	•	Correspondent and concentration accounts.
	•	Dealers in precious metals and precious stones, or other luxurious goods.
	•	Dealers in luxurious transport vehicles (such as cars, sports cars, ships, helicopters and planes).
	•	High-end real estate dealers.

COUNTRY SPECIFIC RED FLAGS AND INDICATORS

	•	The foreign or domestic PEP is from a higher risk country.
	•	Additional risks occur if a foreign or domestic PEP from a higher risk country would in his/her position have control or influence over decisions that would effectively address identified shortcomings in the AML/CFT system.
	•	Foreign or domestic PEPs from countries identified by credible sources as having a high risk of corruption.
	•	Foreign or domestic PEPs from countries that have not signed or ratified or have not or insufficiently implemented relevant anti-corruption conventions, such as the UNCAC, and the OECD Anti-Bribery Convention.
	•	Foreign or domestic PEPs from countries with a mono economies (economic dependency on one or a few export products), especially if export control or licensing measures have been put in place.
	•	Foreign or domestic PEPs from countries that are dependent on the export of illicit goods, such as drugs.
	•	Foreign or domestic PEPs from countries (including political subdivisions) with political systems that are based on personal rule, autocratic regimes, or countries where a major objective is to enrich those in power, and countries with high level of patronage appointments.
	•	Foreign or domestic PEPs from countries with poor and/or opaque governance and accountability.
	•	Foreign or domestic PEPs from countries identified by credible sources as having high levels of (organised) crime.

⁵ FATF: https://www.fatf-gafi.org/media/fatf/documents/recommendations/Guidance-PEP-Rec12-22.pdf