Authority publishes findings of PEP report

The Isle of Man Financial Services Authority has published the findings of its review into one of the biggest international crime threats to the Island’s reputation as a well-regulated jurisdiction.


A thematic exercise was carried out between 2021 and 2023 to evaluate the risks posed to the Isle of Man business sector in connection with foreign Politically Exposed Persons (PEPs).


PEPs are individuals who may present a higher risk in relation to money laundering, terrorist financing and proliferation financing because their position or influence may leave them more exposed to bribery or corruption.


The review conducted by the Authority tested the strength of measures and controls put in place by firms to mitigate PEP-related risks and protect their business from abuse by criminals.


The outcomes, which are available to view online, will help to inform the Authority’s overall picture of risk, as well as the Island’s National Risk Assessment.


Phase one of the PEP review comprised data collection and analysis of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) statistical returns and a specific questionnaire, while phase two involved a number of onsite inspections.


Work took place across a range of sectors, including banking, insurance, Trust and Corporate Service Providers (TCSPs), fund managers and investment firms, and designated businesses.


Inspectors found that some firms demonstrated a strong understanding of ML/FT risks, supplemented by good systems and controls, clear procedures, experienced staff, and documented evidence of the assessment and management of foreign PEPs.


However, contraventions of the AML/CFT Code were identified at a number of inspected firms. This ranged from relatively small-scale matters that can be quickly addressed by firms, to gaps and weaknesses that require more substantial remedial action.


Where material and significant contraventions were identified, the cases have been referred to the Authority’s Enforcement Division for consideration of appropriate next steps.


The PEP project supports the Isle of Man’s commitment to meeting international standards in respect of ML/TF and efforts to combat bribery and corruption involving PEPs, as set out in the Financial Crime Strategy.


All firms are encouraged to read the final report and take any action necessary to ensure their own risk-based compliance regimes in relation to foreign PEPs are effective, up-to-date, and properly documented.


Ashley Whyte, Senior Manager, AML/CFT Supervision, said: ‘The ability of the Isle of Man to attract and retain legitimate customers with clean funds depends in part on its positive international reputation as a sound and responsible jurisdiction. Due to the higher risk factors that present when dealing with a PEP, firms must ensure they have robust controls in place, as well as staff with the right skills to deal with this type of customer. The continued vigilance of regulated and designated businesses in this regard is crucial.’


She added: ‘We hope the PEP thematic report offers some useful learning points and suggestions of good practice to all firms, whether they were involved in the review or not. We would also recommend that firms refer to our AML/CFT Handbook when developing appropriate procedures and controls.’


A live webinar is being hosted at 10am on Wednesday 17 May 2023 to discuss the PEP thematic report and provide an opportunity for firms to ask questions. Further information and joining instructions will be highlighted on the Authority’s website and social media channels.