Lok Sabha Question No. 2477 (UNSTARRED), answered on 2023-12-18
Subject: Politically Exposed Person
Ministry: FINANCE
Asked by: Manish Tewari

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTEMENT OF REVENUE

## LOK SABHA UN-STARRED QUESTION NO. 2477

## TO BE ANSWERED ON MONDAY, THE 18 th  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;

(b)  Recommendation  12  of  the  FATF  recommendations  concerns  Politically  exposed persons. As per the said Recommendation, in respect of clients who are PEPs, Financial institutions  are  required  to  perform  certain  additional  and  enhanced  due  diligence measures.

- (c)    No such proposal is currently under consideration.

(d) The government reviewed the technical compliance with the FATF recommendations and notified various amendments to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 vide the following notifications in the last ten months:

- (i) Gazette Notification No.S.O.1074(E) dated 07.03.2023 amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.
- (ii) Gazette  Notification  No.S.O.1072(E)  dated  07.03.2023  under  the  Prevention  of Money-laundering Act, 2002.
- (iii) Gazette  Notification  No.S.O.2036(E)  dated  03.05.2023  under  the  Prevention  of Money-laundering Act, 2002.
- (iv) Gazette  Notification  No.S.O.2135(E)  dated  09.05.2023  under  the  Prevention  of Money-laundering Act, 2002.
- (v) Gazette Notification No.G.S.R.652(E) dated 04.09.2023 amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.
- (vi) Gazette Notification No.G.S.R.745(E) dated 17.10.2023 amended the Prevention of Money-laundering (Maintenance of Records) Rules, 2005.

(e)    No  such  comments  or  recommendation  have  been  made  as  of  now.  Any  such recommendations or comments will be part of the FATF Mutual Evaluation Report, which is likely to be adopted in June 2024.

(f)  The MER discussion was conducted in accordance with the Procedures for the FATF Fourth Round of AML/CFT Mutual Evaluations document and the FATF and the 2013 FATF Methodology.

(g) (i) Sectoral risk assessments of the financial sectors were undertaken as part of the Risk, Trends and Methodologies Report, 2019 and the National Risk Assessment, 2022.

(ii) On the basis of identified risk theaters for terrorist financing and multiple other data sources, the risk for TF abuse of the NPO sector was also assessed.