Modification of the standards for Anti Money Laundering and Counter Terrorism Financing
By Holbert Ledesma, GRLAFT Compliance Office for Financiera Confianza
The main purpose of Resolution 073-2018-SMV / 02 is to take into account the changes in the FATF* recommendations and the standards applicable to regulated entities under the supervision of Peru’s Securities Market Commission (SMV), by making adjustments to current regulations for a better understanding of the risks associated with money laundering and financing of terrorism. These will relate to the due diligence of the identified party in KYC (know your customer) with respect to the use of cross-border correspondents, new products or business practices, electronic transfers and the use of new technologies.
In addition, it makes some adjustments to bring the standards into line with the analogous regulation drawn up by the Financial Intelligence Unit (hereinafter FIU), in AML and CFT matters.
- Article 2.- Definitions
The definition of Politically Exposed Persons (PEP) has been modified. The main change is an extension from 2 to 5 years for PEPs that perform or have ceased to perform outstanding public duties or play a prominent role in an international organization, in domestic or foreign territory. Furthermore, the new version expressly indicates recognition of the categories mentioned in Annex V of the resolution.
The implementing regulations modify the definition in the Law that creates the Peru Financial Intelligence Unit.
The standard that defines the concepts of Affiliation and Economic Group (Indirect Ownership Regulation of Indirect Ownership, Affiliation and Economic Groups, approved by Resolution SMV N ° 019-2015-SMV / 01) has been modified.
The definition of AML/TF risk has been altered. Referring to the risk factors, it notes that this definition does not include reputational or operational risk.
- Article 3.- Purpose and Scope of the Prevention of Money Laundering and Counter Terrorist Financing System
The scope of the AML / CFT System has been modified in cases where the identified party forms part of an economic group that has majority-owned branches or subsidiaries abroad and when the local regulations of the country in which the subsidiary or branch is incorporated, hinder compliance with the AML / CFT measures defined by the Securities Market Commission (hereinafter, SMV).
- Article 4.- Code of Conduct
The Resolution indicates that the Code of Conduct and its modifications must be approved by the Board of the identified party and be accessible to the SMV and the FIU-Peru, when these bodies so require. (It used to show an obligation to report the Code to the SMV and then submit updated versions of the document).
- Article 7.- Application of due diligence by the Identified Party with respect to its clients
It modifies the name of the article, considering the application of due diligence with respect to clients.
For natural persons, the item referring to identity has been expanded. PEPS must register and verify the relationship of legal persons or legal entities with which they have an interest of 25% or more in their share capital or equity.
It modifies the definition on the partial or total compliance with the stages of i) identification, ii) verification and iii) monitoring, which form part of the due diligence and KYC procedures.
- Article 16.- Nature, content and approval of the AML / CFT Manual
It indicates that the Manual and its modifications must be approved by the Board of the Identified Party 1y estar a disposición de la SMV y de la FIU-Peru, when these bodies so require. (It used to show an obligation to report the Code to the SMV and then submit updated versions of the document).
- Article 30.- Internal Audit
It modifies the point on the identified parties that do not have an Internal Audit department and explains how they should comply with the functions established in the Law, the FIU-Peru Regulation and this new Regulation.
Incorporation of new provisions
- Article 5.- Training programs
The minimum contentment of training programs is established. These programs are to be applied in line with the duties incumbent on directors, managers and employees.
- Article 7.- Identified Party’s application of due diligence with respect to their customers
Identified Parties are liable for the updating of documents, data and information gathered in due diligence into their customers.
The Regulation incorporates the procedures to be followed when, for reasons not attributable to the Identified Party, it cannot comply with the requirements of KYC due diligence.
It includes the considerations to be taken into account to ensure an intensified due diligence in line with greater exposure to AML or CFT risks that may arise in activities linked to transborder correspondent services, online transfers, new products and/or commercial practices or the use of new technologies.
- Article 36.- Know your suppliers
The Identified Parties must perform due diligence procedures when selecting suppliers. To comply with these, they must require and verify at least the following minimum information:
a) Full names or trade name or corporate identification, when the supplier is a legal person.
b) Filing on the tax register (Registro Único de Contribuyentes or RUC), or equivalent for parties not domiciled in Peru.
c) Type and number of identity document, when the supplier is a natural person.
d) Address of the headquarters, main office or principal store.
e) Years of experience in the market.
f) Where the supplier offers its products and/or services.
g) Identification of shareholders, partners or affiliated parties with direct or indirect holdings of over 25% of the share capital, equity or interest in a legal person, and the name of the legal representative, considering the information required for natural persons
h) Affidavit that the supplier does not have a criminal record.
Identified Parties must:
a) When selecting suppliers and after establishing a relationship with them, Identified Parties must check the list in Annex V to determine whether they are or are not included on it.
b) Periodically update the information. This must be done at least every two (2) years. If the information has not changed in this period, that must be explicitly recorded.
c) Assess cases where, taking into account the sector where the business activities are being performed, the contracts with the suppliers should include the obligation to meet the AMF / CFT regulations, and other aspects related to the duty to reserve the information to which they have access.
d) Establish warning triggers related to suppliers, and the procedures to be followed when these are activated.
- Third final subsidiary provision
Identified Parties must meet the provisions of these regulations no later than November 30, 2018.
- Fourth final subsidiary provision
The report to the SMV by Identified Parties refered to in the final paragraph of section 3.5 of Article 3 in the Anti Money Laundering and Counter Financing of Terrorism Regulations must be submitted before December 31, 2018 at the latest.
LIST OF FUNCTIONS AND POSITIONS OCCUPIED BY POLITICALLY EXPOSED PERSONS (PEP) REGARDING AML AND CFT MATTERS
1. PEPs are Peruvian or non-Peruvian natural persons WHO in the last five (5) years have performed or have ceased to perform outstanding public duties or play a prominent role in an international organization, in domestic or foreign territory, whose financial circumstances may be of public interest.
2. By way of example, PEPS are people who perform or have performed, according to the content of this regulation, the following duties and/or posts in national or foreign territory:
- Presidents, heads of state or similar positions.
- President of the Council of Ministers, Ministers, Deputy Ministers and General Secretaries of the Executive Branch.
- Regional governors and mayors or the highest authorities in regional or local governments, deputy regional governors, and those managing local and regional governments.
- Members of Congress, members of Parliament or similar; members of the senior administration of Congress or similar.
- President of the Judiciary and President of the Supreme Court of Justice; supreme-court judges, high-court judges, specialist and generalist judges, general managers, general secretary or equivalent position within the military jurisdiction.
- Public Prosecutor, high-court prosecutors, court-prosecutors for provincial and regional courts; general manager and general secretary of the Public Prosecution Office; and equivalent positions within military jurisdiction (prosecutors for military courts).
- Commander General of the War Navy, Commander General of the Airforce, Commander General of the Army and Director General of the National Police Force, or similar positions in the armed forces and public security corps.
- General manager, managers or senior executives, ie, managers working directly with the general management in the implementation of the board’s decisions and policies; and directors of companies with majority State interest in their equity, such as Banco de la Nación, Fondo Mivivienda and Corporación Financiera de Desarrollo, as well as municipal savings and loans institutions.
- The highest authorities, directors, members of collegiate bodies, secretaries general, heads of personal staff and advisors to publicly-owned entities, regulated public bodies and/or specialist supervisors, executors and constitutionally autonomous bodies.
- Ambassadors, consuls and plenipotentiaries.
- Public servants or officials in the body in charge of procurement, within the framework of applicable regulations on State procurement for all public entities. Likewise, the heads or managers of the treasury, budget, finance and logistics areas of the public sector.
- The chief authority of the international body in the execution of board policies and resolutions; and its directors or similar positions. International organizations are those bodies established under official political agreements between the different States, which have the status of international treaties, whose existence is recognized by law in the respective States and which can be differentiated from organizations of the country in which they are operating. This category includes, but is not limited to, the United Nations and UN programs, funds and specialist agencies listed on its website.
- Founders, members of board committees, legal proxies, chief financial officer and candidates to elections for political parties or electoral alliances.
3. PEPs will also deemed to be those working directly for the persons included on the list above, when these are the maximum authority of the institutions to which they belong. Working directly for means that they report directly to them and have decision-making powers.
4. Identified parties will include natural persons who, although not included on the above list, have similar features to some of the persons mentioned in the annex.
* Financial Action Task Force.