As part of the fight against money laundering, players in the art market need to consider the concept of politically exposed persons (PEPs). 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 organisation.
To be considered as a PEP, the individual must exercise his function at national level and correspond to the list of functions giving 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 functions remains considered as a PEP for the year that follows.The anti-money laundering directives require art professionals to detect any Politically Exposed Person and to 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. A gallery employee will not be able to conclude the transaction.
- Theorigin of the assets and funds involved in the transaction must be known.
- Professionals are required to step up their due diligence measures, for example by gathering information useful for assessing risks during the transaction, but also upstream and downstream of it.
Lastly, art sector professionals are not only required to be vigilant when entering into a relationship, but also to be vigilant after the transaction. A regular customer (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 proceeding in this way, you ensure that you do not hold obsolete information.
The easiest way to identify a politically exposed person is to ask.
In some cases (such as family name or popularity) the obviousness of the situation exempts you from questioning. Otherwise, rest assured: your customers are used to answering these questions. Banking organisations standardised the KYC procedure several years ago, making the PEP question a very straightforward one to ask. Other questions (such as identifying the persons listed in the assets freeze) can be more complex, but just because the questions are easy to answer does not mean that due diligence measures do not need to be applied. To ensure compliance, consider anti-money laundering training.
Finally, if you don't dare ask this question, Eunomart offers automatic identification of people who hold or have held a senior public position, 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 purposes of 1° of Article L. 561-10, a person exposed to particular risks by virtue of his functions is a person who holds or has held for less than one year one of the following positions:
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 the European Parliament, member of the governing body of a political party or grouping subject to the provisions of law no. 88-227 of 11 March 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° Director or member of the management 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 organisation created by treaty, or a person occupying an equivalent position within such an organisation.
The international organisations accredited on national territory draw up and update the list of positions referred to in 9°, each insofar as it is concerned.
An order of the Minister for the Economy sets the list of positions to which the positions listed above correspond at national level.
II. - The following are deemed to be direct family members of the persons mentioned in I:
1° The spouse or common-law partner ;
2° The partner bound by a civil solidarity pact or by 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 to be persons closely associated with the persons mentioned in I:
1° Natural persons who, together with the person mentioned in I, are the beneficial owners of a legal entity, a collective investment, a trust or a comparable legal arrangement under 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 that is 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.’
