As part of the fight against money laundering, art market players need to consider the notion of politically exposed persons (PEPs).
Transactions carried out with the assistance of such persons call for particular vigilance, as the risk of money laundering is considered higher due to their exposure to corruption.
According to the official definition, a politically exposed person is an individual holding a high-ranking political, jurisdictional or administrative position with a state (French or foreign) or an international organization.
To be considered a PEP, the individual must exercise his or her function at national level, and correspond to the list of functions giving rise to the status of PEP.
This qualification also concerns the close family of these individuals and any person known to be associated with them in business dealings.
It should be noted that a person who ceases to exercise his or her functions remains considered a PEP for the following year.
The anti-money laundering directives require art professionals to detect any Politically Exposed Person and apply additional vigilance measures to manage the risks posed by this person.
These additional vigilance measures involve setting up a special KYC procedure, during which three points must be observed
Only one person in the company (director, manager, etc.) can decide to start or continue a business relationship with a politically exposed person. Thus, a gallery employee cannot conclude the transaction.
Theorigin of the assets and funds involved in the transaction must be known
Professionals are required to step up their vigilance measures, for example by gathering information useful for risk assessment during the transaction, as well as upstream and downstream of it.
Applied to the subject, this means being vigilant by constantly monitoring your customers to make sure you know if they are PPE. Last but not least, professionals in the art sector are required not only to be vigilant when entering into a relationship, but also to be vigilant after the transaction. Indeed, a regular client (known as a business relationship) may become a PEP without necessarily informing you. Anti-money laundering regulations therefore require you to update your KYC information for each new transaction.
By doing so, you ensure that you do not hold any obsolete information.
To identify a politically exposed person, the easiest way is to ask
In some cases (such as family names or popularity), the obviousness of the situation means you don't have to ask. Otherwise, rest assured: your customers are used to answering these questions.
Banking organizations standardized the KYC procedure several years ago, making the PPE question a very straightforward one to ask. Other questions (such as the identification of persons listed on the asset freeze) may prove more complex. On the other hand, easy questioning does not exempt you from the application of due diligence measures. To ensure compliance, consider anti-money laundering training.
Finally, if you don't dare ask that question, Eunomart offers automatic identification of people who hold or have held senior public office, using only their first and last names. Simple, fast and reliable
For information :
Article R561-18 CMF defines a politically exposed person as a person who performs or has performed one of the following functions:
“I. - For the application of 1° of article L. 561-10, a person exposed to particular risks by virtue of his functions is a person who exercises or has ceased to exercise for less than one year one of the following functions:
1° Head of state, head of government, member of a national government or of the European Commission;
2° Member of a national parliamentary assembly or of the European Parliament, member of the governing body of a political party or grouping subject to the provisions of law no. 88-227 of March 11, 1988 , or of a foreign political party or grouping;
3° Member of a supreme court, constitutional court or other high court whose decisions are not, save in exceptional circumstances, subject to appeal;
4° Member of a court of auditors;
5° Officer or member of the governing body of a central bank;
6° Ambassador or chargé d'affaires;
7° General officer or senior officer in command of an army;
8° Member of an administrative, management or supervisory body of a public company;
9° Director, deputy director or member of the board of an international organization created by treaty, or a person occupying an equivalent position within such an organization.
The international organizations accredited on national territory draw up and update, each for its own part, the list of positions mentioned in 9°.
A decree issued by the Minister for the Economy sets out the list of functions to which the functions listed above correspond at national level.
II. - The following are deemed to be direct family members of the persons mentioned in I:
1° Spouse or common-law partner;
2° A partner bound by a civil solidarity pact or a partnership contract registered under foreign law;
3° Children, as well as their spouse, their partner bound by a civil solidarity pact or by a partnership contract registered under foreign law;
4° First-degree relatives in the ascending line.
III. - The following are considered as persons closely associated with the persons mentioned in I:
1° Individuals who, together with the person referred to in I, are the beneficial owners of a legal entity, collective investment scheme, trust or comparable legal arrangement governed by foreign law;
2° Individuals who are the sole beneficial owners of a legal entity, collective investment scheme, trust or comparable legal arrangement under foreign law known to have been set up for the benefit of the person referred to in I ;
3° Any natural person known to have close business ties with the person mentioned in I.”