Picture: ISTOCK
Picture: ISTOCK

When making an investment, don't be surprised if you are asked if you're a politically influential person. Accountable institutions such as financial services providers need to know your status, and disclosing it should have no adverse consequences - provided you aren't involved in money laundering.

When seeking to increase contributions to his and his wife's Momentum retirement annuities recently, Leon White was asked if he was "politically exposed" and to provide details about the source of his income.

Momentum said it needed this information to process his request.

White, who is three years from retirement, was offended. "I have been a client since 1986 and if I wasn't so close to retirement, I would cancel my RA with Momentum with immediate effect."

Know your client

But Marius Kock, Momentum client care manager, said it was industry practice to check the "politically exposed person" status of a client whenever there was a "know your client" opportunity.

The concept of "politically exposed persons" was introduced in 2012 by the Financial Action Task Force, a global intergovernmental body of which South Africa is a member. The FATF aims to combat corruption, money laundering and the financing of terrorism.

The amended Financial Intelligence Centre Act, which refers to "prominent influential people", includes people in the private sector such as CEOs, chief financial officers, and chairpersons of boards and audit committees of any company that provides goods or services to the government. It has also expanded the definition of family to include life partner or civil partner, former spouse, stepchildren and their spouses, and stepsiblings and their spouses.

Closer scrutiny

In terms of FATF recommendations, accountable institutions must employ enhanced due diligence during the identification and verification process of such clients.

Faeeza Khan, a legal marketing specialist at Liberty, says that in identifying PEPs, standard practice may include asking an individual about any political functions. Once identified, PEPs, their families and close associates may be added to a PEP database.

Douw Lotter, head of anti-money-laundering operations at MMI, says an investment house or assurer is unlikely to reject a PEP as a client. But a client who declares that they are a PEP is subject to more scrutiny.

The FIC Amendment Act has introduced some new requirements, according to which accountable institutions need to identify "domestic prominently influential persons and foreign prominent public officials", says Vuyo Lee, the chief marketing officer of Old Mutual Emerging Markets.

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