Politically exposed person definition Hong Kong

What Is a Politically Exposed Person in Hong Kong?

A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function. Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), financial institutions and designated non-financial businesses must identify PEPs and apply enhanced due diligence measures. The definition covers foreign, domestic and international organisation PEPs, as well as their immediate family members and close associates.

PEP Hong Kong Definition

Hong Kong's definition of a PEP follows the Financial Action Task Force (FATF) recommendations. A foreign PEP includes a head of state, senior government official, senior judicial figure, senior military officer, or senior executive of a state-owned enterprise. A domestic PEP holds similar roles within Hong Kong. An international organisation PEP holds a senior role in bodies such as the United Nations or the World Bank. The status continues for 12 months after the individual leaves the position.

Enhanced Due Diligence PEP

Enhanced due diligence for a PEP goes beyond standard customer due diligence. The institution must establish the source of wealth and source of funds for the business relationship. Ongoing monitoring must be more intensive, and senior management approval is required before establishing or continuing the relationship. The purpose is to detect and prevent money laundering and terrorist financing involving proceeds from corruption or misuse of public office.

Foreign PEP Hong Kong

A foreign PEP in Hong Kong is an individual who holds a prominent public function in another country. Hong Kong's AML regime does not distinguish between foreign and domestic PEPs for the purposes of enhanced due diligence requirements. Both categories trigger the same compliance obligations.

Hong Kong AML PEP

The AMLO and regulatory guidance from the Hong Kong Monetary Authority and other sector regulators set out the obligations for dealing with PEPs. A risk assessment must be conducted for each PEP relationship. The institution must document the business rationale for the relationship and conduct enhanced ongoing monitoring throughout the relationship. The AML framework requires all PEP-related decisions to be approved by senior management.