Duhaime's Financial Crime & Anti-Money Laundering Law in Canada

PEPs

A politically exposed person (also called a PEP) is a person who holds, or has held, one of the following offices or positions:

• Head of state.
• Head of government.
• Member of the executive council of government.
• Member of a legislature.
• Deputy minister or equivalent.
• Ambassador or attache.
• Counsellor of an ambassador.
• Military officer with a rank of general or above.
• President of a state-owned company or a state-owned bank.
• Head of a government agency.
• Judge (any level).
• Leader or president of a political party represented in a legislature.

And in respect of any of the above positions or offices, the person’s:

• Spouse.
• Common law partner.
• Children.
• Parents.
• In-laws.
• Siblings.

Associates

It includes persons who are closely associated with the PEP in business or personally, such business partners, joint venturers, mistresses, etc.

Canadian Domestic PEP

Under Canadian law only, a domestic PEP is a person who holds, or has held, one of the following in Canada: Governor General, lieutenant general or head of government; member of federal or provincial Parliament; deputy minister; ambassador, attache or their counsellor; military officer with a rank of general or above; head of federal or provincial Crown corporation; head of government agency; judge; or mayor.

It includes persons who are closely associated with the PEP in business or personally, such as family members, business partners, joint venturers, mistresses, etc.

Head of International Organization

Under Canadian law, a PEP is also the head of an international organization established by a government and includes their close associates and family members. In some respects, this definition waters down the FATF Recommendations because the head of an organization established by a government already makes the person a PEP under the above definition (head of a government agency).

Everywhere else, PEPs include the head of any significant NGO or international organization that is not established by a government.

In Canada, financial entities, life insurance companies, life insurance brokers and agents, securities dealers and money services businesses are required to treat foreign PEP clients with heightened scrutiny.

PEPs who have been entrusted with prominent public functions, their family members and close associates, represent a greater money laundering risk because of the possibility that they may abuse their position and influence to carry out corrupt acts, such as accepting and extorting bribes or misappropriation of state assets and then use domestic and international financial systems to launder the proceeds.

The World Bank estimates that more than US$1 trillion is paid in bribes each year.  The Stolen Asset Recovery Initiative has estimated that corrupt money received by public officials in developing and transition countries is approximately US$40 billion per year, equal to 20%-40% of official development assistance.  Corrupt PEPs need to use foreign financial systems to launder (e.g. hold funds derived from corruption and other criminal activities).

The U.S. Senate Committee on Homeland Security and Governmental Affairs released a special Money Laundering Report (available at this site) that describes recent cases of PEPs who laundered hundreds of millions of dollars in the U.S.  According to the Report, in at least one case, Yamilee Bongo-Astier (an immigrant to Canada and the daughter of Omar Bongo, the former president of Gabon) received cash from Canada and elsewhere that she deposited into New York banks for family members.  In 2007, she had US$1 million in cash in her safety deposit box.  Her family is believed to have transferred over US$18 million into the U.S. financial system. The summary of the report is here.