Introduction: Lok Sabha Unstarred Question No. 2477, presented by Shri Manish Tewari, explores the realm of Politically Exposed Persons (PEPs) and their implications. The inquiry spans the definition of PEPs, the influence of Financial Action Task Force (FATF), potential expansions of the definition, and India’s efforts to align with anti-money laundering laws.
Detailed Analysis:
(a) Definition of PEPs: The response from Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, introduces the official definition of Politically Exposed Persons as per the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. This sets the stage for understanding the scope and categories of individuals considered as PEPs.
(b) PEP Concept and FATF Influence: The article delves into the origin of the PEP concept, examining its connection to the Financial Action Task Force (FATF). It addresses whether PEP due diligence should be limited to cases involving terror and narcotic financing, providing insights into the regulatory framework surrounding PEPs.
(c) Potential Expansion of PEP Definition: The Minister’s response sheds light on the government’s contemplation of expanding the PEP definition. This includes the possibility of encompassing high-ranking officials such as the Prime Minister, Union Ministers, Members of Parliament, Chief Ministers, and other significant public figures. The discussion explores potential amendments to regulatory frameworks to achieve this expansion.
(d) Pre-Mutual Evaluation Review Efforts: An analysis of the government’s pre-Mutual Evaluation Review efforts uncovers the initiatives taken to align with FATF recommendations for anti-money laundering and anti-terrorism financing laws. This section explores the proactive measures undertaken to enhance compliance and international cooperation.
(e) FATF Comments on India’s Compliance: The article addresses whether the FATF has made any comments or recommendations on India’s compliance, providing a comprehensive overview of the global watchdog’s perspective on India’s efforts in combating money laundering and terror financing.
(f) MER Discussion and NGOs: The Minister’s response prompts an exploration of whether the Mutual Evaluation Review (MER) discussion included a shadow report on the alleged weaponization of laws against NGOs. This section delves into the broader implications of the discussion and its impact on non-profit organizations.
(g) Post-2010 Actions on Financial Institutions and NPO Sector: The detailed analysis concludes with an examination of the government’s post-2010 actions addressing financial institution assessments and the Non-Profit Organization (NPO) sector’s risk concerning terror financing. It assesses the efficacy of measures taken to safeguard against financial crimes.
Conclusion: In conclusion, Lok Sabha Unstarred Question No. 2477 provides a comprehensive exploration of the multifaceted world of Politically Exposed Persons. The detailed analysis encompasses the definition, regulatory influences, potential expansions, compliance efforts, and the broader implications of India’s stance on anti-money laundering and anti-terrorism financing.
Stay informed about the evolving landscape of PEPs, regulatory frameworks, and international compliance efforts. The transparency provided in the response to Unstarred Question No. 2477 contributes to a nuanced understanding of the government’s strategies to combat financial crimes.
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTEMENT OF REVENUE
LOK SABHA
UN-STARRED QUESTION NO. 2477
TO BE ANSWERED ON MONDAY, THE 18th DECEMBER, 2023
AGRAHAYANA 27, 1945 (SAKA)
Politically Exposed Persons
2477. SHRI MANISH TEWARI:
Will the Minister of FINANCE be pleased to state:
(a) the definition of a Politically Exposed Person (PEP);
(b) whether the PEP concept stems from Financial Action Task Force (FATF) which focuses on terror and narcotic financing, should PEP due diligence only apply when there‟s reason to suspect involvement in these illicit activities and if so, the details thereof;
(c) whether the Government is considering expanding the PEP definition, potentially encompassing PM, Union Ministers, MPs, Chief Ministers, Ministers of State, MLAs, Judges of Supreme and High Courts, IAS/IPS, IFS, and other All India Service officers, through amendments to RBI Master Circular, PMLA rules and relevant statutes;
(d) the details of the Governments pre-Mutual Evaluation Review efforts of the Government to align with FATF recommendations for anti-money laundering and antiterror financing laws?
(e) whether the FATF has made any comments or recommendations on India‟s compliance and if so, the details thereof;
(f) whether the MER discussion was inclusive of the shadow report on alleged weaponization of laws against NGOs and if so, the details thereof; and
(g) the details of the Governments post-2010 actions addressing financial institution assessments and NPO sector risk for terror financing?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) The definition of „Politically Exposed Person‟ as per clause (db) of sub-rule (1) of rule 2 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 is as under:-
“Politically Exposed Persons” (PEPs) are individuals who have been entrusted with prominent public functions by a foreign country, including the heads of States or Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials;
