Often when I review mortgage documents with clients, I have to determine whether my clients are “Politically Exposed Foreign Persons” (PEFP). What does this mean, and why is it important?
Who is a PEFP?
You are a politically exposed foreign person if you hold or you have ever held one of the following offices or positions in or on behalf of a foreign country:
• a head of state or government;
• a member of the executive council of government or member of a legislature;
• a deputy minister (or equivalent);
• an ambassador or an ambassador’s attaché or counsellor;
• a military general (or higher rank);
• a president of a state-owned company or bank;
• a head of a government agency;
• a judge; or
• a leader or president of a political party in a legislature.
You are also considered a politically exposed foreign person if you are a family member of an individual described above.
Why does the lender need to determine if you are a PEFP?
This relates to the efforts of the Financial Action Task Force (on Money Laundering) (FATF), established by a G7 initiative in 1989, to combat money laundering and terrorism financing. Since September 11, 2001, over 100 countries have changed their rules for financial services regulation. Lenders may now view a PEFP as a potential compliance risk.
What if you are a PEFP?
I have yet to encounter a client that could be categorized as a PEFP. Clients are often curious as to what this all means. If a client was found to be a PEFP, my duty requires me to notify the lender. The mortgage application will be delayed as the lender will have to perform additional screening and due diligence.
Please contact Navigator Law LLP if you have any questions about PEFPs.