Politically exposed persons and heads of international organizations guidance

February 2021

This guidance comes into effect on June 1, 2021.

All reporting entities (REs) have politically exposed persons (PEPs) and heads of international organizations (HIOs) requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. However, some requirements and the examples given in this guidance may only apply to certain REs.

References to PEPs in this guidance include both foreign and domestic PEPs, unless otherwise specified.

The access, influence and control that PEPs and HIOs have can make them vulnerable to corruption and the potential targets of criminals who could exploit their status and use them, knowingly or unknowingly, to carry out money laundering (ML) or terrorist activity financing (TF) offences.Footnote 1 The family members and close associates of PEPs and HIOs are potential targets as well because they can more easily avoid detection.

This guidance explains your obligations under the PCMLTFA and associated Regulations in relation to determining who are PEPs, HIOs, and persons related or closely associated to them. It also provides clarity on related terminology and considerations. In addition to this guidance, RE sector specific PEP and HIO requirements are detailed in the applicable guidance pieces listed below:

This guidance answers the following questions:

  1. Who is a domestic PEP?
  2. Who is a foreign PEP?
  3. Who is a HIO?
  4. What is an international organization?
  5. Who is a family member of a PEP or HIO?
  6. Who is considered a close associate of a PEP or HIO?
  7. What does it mean to "detect a fact" about a PEP or HIO?
  8. How do I establish the source of funds, source of virtual currency (VC), or source of a person's wealth?
  9. Who can review a transaction or allow an account to stay open?
  10. How do I establish that a person is a high-risk PEP or HIO?

This guidance also includes examples of international organizations and institutions to help REs identify potential HIOs in Annex 1.

1. Who is a domestic PEP?

A domestic PEP is a person who currently holds, or has held within the last 5 years, a specific office or position in or on behalf of the Canadian federal government, a Canadian provincial (or territorial) government, or a Canadian municipal government. Specifically, the person has held the office or position of:Footnote 2

**Note: In line with legislation across Canada, municipal governments include cities, towns, villages and rural (county) or metropolitan municipalities. As such, a mayor is the head of a city, town, village and rural or metropolitan municipality, regardless of the size of the population.

A person ceases to be a domestic PEP 5 years after they have left office or 5 years after they are deceased.Footnote 3 You must continue to mitigate the risks associated with domestic PEPs until they cease to be domestic PEPs.

2. Who is a foreign PEP?

A foreign PEP is a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:Footnote 4

These persons are foreign PEPs regardless of citizenship, residence status or birthplace.

Once you determine that a person is a foreign PEP, they remain a foreign PEP forever (including deceased foreign PEPs). You are not required to determine whether they are a foreign PEP again.Footnote 5

3. Who is a HIO?

A HIO is a person who currently holds or has held within the last 5 years the specific office or position of head of an international organization and the international organization that they head or were head of is either:Footnote 6

  1. an international organization established by the governments of states; or
  2. an institution established by an international organization.

An institution established by an international organization does not have to operate internationally and it is possible that an institution only operates domestically, or in one jurisdiction.

The HIO is the primary person who leads the organization. For example, the HIO could be a president or CEO.

A person ceases to be a HIO 5 years after they are no longer the head of the organization or institution or 5 years after they are deceased.Footnote 7 You must continue to mitigate the risks associated with HIOs until they cease to be HIOs.

4. What is an international organization?

To determine whether a person is a HIO, you must first determine whether you are dealing with an international organization. An international organization is set up by the governments of more than one member country, has activities in several countries, and is bound by a formal agreement among member countries. An international organization has its own legal status, and it is an entity that is distinct from the member countries.

Looking at how an organization was established will help you to determine if it is an international organization. For example, if the organization was established by a formally signed agreement between the governments of more than one country, then it is likely an international organization, and the head of that organization is a HIO.

International organizations are recognized by their member countries, but they are not resident organizations of any country. For examples of international organizations and institutions established by international organizations, see Annex 1.

5. Who is a family member of a PEP or HIO?

If a person is a PEP or HIO, some of their family members are considered family members of PEPs or HIOs under the PCMLTFA and associated Regulations. These family members are:Footnote 8

Once you determine that a person is a family member of a foreign PEP (including a deceased foreign PEP), they remain a family member of a foreign PEP forever and you are not required to make this determination again.Footnote 9

Once you determine that a person is a family member of a domestic PEP or HIO, they remain a family member of a domestic PEP or HIO until five years after the domestic PEP or HIO has left office.Footnote 10 In the case of a deceased domestic PEP or HIO, persons that are their family members remain a family member of a domestic PEP or HIO for five years after the domestic PEP or HIO ceases to be a domestic PEP or HIO. So, you must continue to mitigate the risks associated with the family members of domestic PEPs or HIOs during that time.

Is a PEP or HIO's ex-spouse or partner considered a family member?

An ex-spouse or partner may continue to have access to a PEP or HIO's funds even when a divorce has taken place or a relationship has ended. Therefore, in the case of:

Is a PEP or HIO's stepchild or step-sibling considered a family member?

A step family relationship does not fall under the definition of a family member unless a child is legally adopted. For example, if Helen is a domestic PEP, and she has legally adopted her stepdaughter, then her stepdaughter is her child under the law and is considered to be the family member of a domestic PEP.

Similarly, if a marriage includes step-siblings, these step-siblings are not considered family members if they are not legally adopted by the stepparent. However, you may want to consider the step family members as close associates of the PEP or HIO, depending on their relationship.

Is the niece or nephew of a PEP or HIO considered a family member?

No. Only the family members of a PEP or HIO listed in this guidance must be regarded as family members of PEPs or HIOs. For example, if John is a PEP, then John's brother, Sam, is considered a family member of a PEP, however, Sam's daughter (John's niece) is not considered a family member of a PEP. However, you may want to consider extended family members as close associates of the PEP or HIO, depending on their relationship.

6. Who is considered a close associate of a PEP or a HIO?

A close associate can be a person who is connected to a PEP or HIO for personal or business reasons. Examples of relationships that could indicate that someone is a close associate (personal or business) could include, but are not limited to, persons who:

Once you determine that a person is the close associate of a PEP or HIO, they remain a close associate until they lose that connection.

7. What does it mean to "detect a fact" about a PEP or HIO?

Detecting a fact about a PEP or HIO is to discover (proactively or not) information about a person that could lead you to make a PEP or HIO determination or to update information about a known PEP or HIO. You detect a fact when you discover PEP or HIO related information about a person that has an account-based business relationship or a non-account-based business relationship with you, outside of your periodic review of existing clients. The information that you detect must be a fact that constitutes reasonable grounds to suspect that a person is a PEP, HIO, or family member or close associate of a PEP or HIO.

There is no requirement for you to have proactive processes in place to detect facts about existing clients, but if you do detect information related to a PEP or HIO determination, then you must act on that information. For example, you might detect a fact that would require further action based on information obtained from an existing client, monitoring efforts you may already have in place, knowledge of domestic and world events, or a search run against an open source or third party database.

While a name match is a fact, it is not necessarily a fact that constitutes reasonable grounds to suspect that an existing client is a PEP, HIO, or family member or close associate of a PEP or HIO. As a best practice, you could apply additional criteria (for example, address, date of birth, age, transaction activities, etc.) to a name match, to meet the reasonable grounds to suspect threshold.

8. How do I establish the source of funds, source of virtual currency (VC), or source of a person's wealth?

Once you have determined that a person is a PEP, HIO, or a family member or close associate of a PEP or HIO (in certain circumstances, as applicable), you must take reasonable measures to establish the source of the funds or source of VC used for a transaction or that is expected to be deposited into an account, and the source of a person's wealth. To do this you could take measures such as:

If a transaction or the account activity is inconsistent with the information you have about the source of funds or source of VC, or the source of the person's wealth, then you may want to follow up with the client for clarification. If the information remains inconsistent with what you know about the person, or you are not satisfied with their response and have reasonable grounds to suspect that a transaction or deposit is related to the commission or the attempted commission of an ML/TF offence, you must file a suspicious transaction report.

9. Who can review a transaction or allow an account to stay open?

A member of senior management must review transactions and allow certain accounts to stay open. A member of senior management is a person who has:

If you are a sole proprietor with no employees, agents or other persons authorized to act on your behalf, you are considered to be the senior manager.

10. How do I establish that a person is a high-risk PEP or HIO?

You must treat all persons that you determine to be foreign PEPs or family members or close associates of foreign PEPs as posing a high risk.

Persons that you determine to be domestic PEPs, HIOs, or family members or close associates of domestic PEPs or HIOs, must be treated as high-risk clients if you determine that they pose a high risk of committing an ML or TF offence.

Once you determine that a person poses a high risk, you must take the measures prescribed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. These measures should be detailed in your written compliance policies and procedures for high-risk clients. For more information about risk assessment considerations for PEPs or HIOs see FINTRAC's Risk assessment guidance.

Annex 1: Examples of international organizations and institutions established by international organizations

Examples of international organizations:

Examples of institutions established by international organizations:

Date Modified: