Gherson's white-collar crime team have been dealing with an increasing number of enquiries from individuals who are facing issues accessing various services (including financial) because they believe some incorrect information has been shared about them, including by compliance databases.
It is often felt that this information is not properly checked, and it is shared in clandestine ways, thus causing despair at the unfairness of the situation and frustration at the lack of ability to challenge it appropriately.
For example, we have been approached by individuals who feel that they have been listed incorrectly as a Politically Exposed Person ("PEP") on a compliance database.
What is a (Primary) PEP?
The Financial Action Task Force ("FATF") provides the definition of a PEP.
A primary PEP is an individual who:
- is (or has been) elected or appointed to a prominent public function (other than as a middle-ranking or more junior official); and
- through said prominent position or influence, is more susceptible to being involved in corruption (e.g., bribery, money laundering, etc.).
The current UK regulations in force1 sets out examples of individuals considered to be entrusted with prominent public functions, including (but not limited to):
- heads of state
- ministers
- members of high-tier judicial bodies
- members of management of central banks
- ambassadors
- members of management of state-owned enterprises
- members of management of international organisations.
What is a (Secondary) PEP?
A secondary PEP is a family member (usually an immediate relative, but it can be extended to other relatives) or close associate of that individual.
As recommended by the FATF, secondary PEPs are generally to be treated as primary PEPs for the duration of the PEP status because of the potential for abuse of the relationship for the purposes of terrorist financing, moving the proceeds of crime or facilitating their placement and disguise.
Could I be incorrectly listed as a PEP?
There are at least two circumstances where one could be incorrectly listed as a PEP on a compliance database such as World-Check.
I have never been a PEP
If you have never met the above criteria (either for a Primary of a Secondary PEP), and you can evidence this, then you can make representations to the relevant compliance database that you should not be classified as a PEP. This can include:
- Evidence that you have never held a prominent public function.
- Evidence that you are not classified as a PEP in a specific jurisdiction.
I used to be a PEP but not anymore
Under UK legislation, an individual who is no longer "entrusted with a prominent public function" continues to be considered a PEP for:
- at least 12 months after the date on which that person ceased to be entrusted with that public function; or
- for longer as is relevant and considered appropriate to address risks of money laundering or terrorist financing in relation to that person.
Accordingly, there is no UK statutory requirement for the continued designation of the person as a PEP after the 12-month period has elapsed and as long as (a) the person does not perform a high-profile public role and (b) the person is not considered to present (further) risks of corruption.
Therefore, UK legislation indicates that the continued designation of PEP status should surpass the mandatory 12-month period only where necessary, based on the facts of each case, in which instance measures may have to be put in place for a longer period to adequately address the risks of corruption (bribery, money laundering, terrorist financing, etc.) in relation to each case.
Therefore, the duration for which someone is considered a 'Former PEP' is not universally fixed and can vary depending on several factors, including the jurisdiction and the specific policies of financial institutions. Some jurisdictions and institutions may consider a person as a former PEP for several years after they leave their official position, while others may do so indefinitely depending on the perceived risk level associated with the individual.
If you feel that you should no longer be defined as a PEP, and you can evidence this, you can make representations to the relevant compliance database that you should not be classified as a PEP. This can include:
- Evidence that you have not functioned in a public role for a specific period.
- Evidence that you should no longer be deemed to be high risk.
General Process – If the information on a compliance database file is wrong
If you think that the information held about you on a compliance database file is wrong (including an incorrect categorisation as a PEP), based on false information, or if you suspect that someone else may have used your details, there is a process which should allow you to achieve some redress.
The first stage in this process is to ascertain whether you have been listed on one or more compliance databases. This may be discovered via receiving a message from an entity that relies on these databases, such as a bank informing you that you are unable to open an account or apply for a loan with them, or from making direct enquiries with a particular database under applicable data protection laws.
What information is being shared?
Once this is established, the next step is to understand what information, whether incorrect, misleading or inaccurate, is being circulated and shared through these databases. Depending on your individual circumstances, this may be relatively simple to deduce, though the particulars of this information may be difficult to determine.
Having a firm grasp of the law and regulatory frameworks that govern this area is of particular importance here, and Gherson, with its wealth of experience in this field, can assist in this regard.
How can I amend information on these databases?
Most compliance databases have internal mechanisms in place for individuals to attempt to update or correct the contents of data subject reports about them. The individual will need to have valid reasons for doing so and produce documentary evidence in support their assertions. Being incorrectly listed as a PEP could be a relevant reason, especially if supported by evidence.
Importantly, the legislation in this field does not automatically guarantee individuals the absolute right to have their personal data expunged or amended in accordance with their wishes.
These databases will only accede to requests where they are compelled to do so; indeed, these databases make every effort to free themselves of any liability for publishing potentially false, inaccurate or misleading information by specifically informing subscribers of a number of caveats, which include emphasising the need for users to conduct their own independent checks to verify the credibility of information displayed in the report.
As such, it is advisable to consult experienced legal professionals who can assist with navigating this complex legal and regulatory landscape.
Footnote
1. UK Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.