On April 2nd, Finland went to the polls and elected a new parliament. Voters chose 200 Members of Parliament (MP) to enact laws, supervise the activities of authorities subordinated to the Government and adopt international agreements.
Out of the 200 MPs, 139 MPs were re-elected, and 61 MPs were elected for the first time. 31 MPs lost their seat in the parliament and 21 MPs had already stated that they will not re-run in 2023 elections.
According to the Financial Action task Force (FATF), a politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function.[1] Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering (ML) offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing (TF). Read more about our insights on anti-bribery and corruption here.
To add to the definition, immediate family members, publicly known associates and even businesses that are either related to or closely associated with a PEP are also considered a risk and must be both screened and regularly monitored. This group of people and entities are called Relatives and Close Associates (RCAs).
PEP is a person, who according to Finnish Act on Preventing Money Laundering and Terrorist Financing (Finnish AML Act), is or has been entrusted with prominent public functions.[2] Government Decree further stipulates Members of the Parliament as roles in which a person must be addressed as PEP.[3]
Enhanced Customer Due Diligence (EDD) obligations defined by the Finnish AML Act require that there needs to be risk-based procedures in place to manage risks associated with PEPs. This requires actions when onboarding customers and during the customer life cycle. PEPs and RCAs need to be identified to ensure that proper actions are taken to mitigate the risks associated with them.
On the back of the Finnish parliament elections; there are 61 new MPs who needs to be identified from the customer base with their RCAs and have an appropriate risk rating determined. For the 139 MPs who were re-elected (and their RCAs); their status should remain the same since they continue their work as an MP.
When PEPs no longer hold their prominent public function role, they need to be reassessed to ensure a risk-based approach with appropriate risk level. This would be the case for those 52 MPs who either lost their seat or who did not re-run for their seat. The Finnish AML Act states that PEP status is no longer valid when the PEP “has not held an important public position for at least one year”.[4] Therefore, the MPs not elected need to be reassessed one year from now along with their RCAs. This activity will ensure that the risk level of the entire customer portfolio is up to date and represents the risk exposure correctly.
Know Your Customer and Enhanced Due Diligence are not just a tick in a box exercises, but they lay the baseline for a strong and sustainable financial crime prevention model. When you know your customers you can apply your risk mitigation efforts both effectively and efficiently.
Did your company already assessed the potential risks and customer portfolio changes and ensured that your risk mitigation plan is up to date?
BearingPoint can support your organization with its experience from risk management and regular compliance to more operational KYC remediation.
[1] FATF Guidance - Politically Exposed Persons. Guidance-PEP-Rec12-22 (1).pdf
[2] Laki rahanpesun ja terrorismin rahoittamisen estämisestä. (23.3.2023/444)
[3] Valtioneuvoston asetus rahanpesun ja terrorismin rahoittamisen estämisestä annetussa laissa tarkoitetuista merkittävistä julkisista tehtävistä (610/2019)
[4] Laki rahanpesun ja terrorismin rahoittamisen estämisestä. (23.3.2023/444)
Sanna Nikkanen
Senior Business Consultant, BearingPoint Finland
Timo Törrönen
Business Advisor, BearingPoint Finland