Politically exposed persons (PEPs), heads of international organizations (HIOs), and Source of Wealth

PEPs and HIOs requirements under the PCMLTFA

All reporting entities (REs) including you as the advisor, 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.

The access, influence and control that PEPs and HIOs have can make them vulnerable to corruption. They can be 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. The family members and close associates of PEPs and HIOs are potential targets as well because it’s easier to avoid detection.

As part of knowing your Client requirements, you have PEP/HIO obligations. These include taking reasonable measures to determine whether a person is a foreign or domestic PEP, HIO, or a family member or close associate of a foreign or domestic PEP or HIO. This must be done at the time of opening a new policy/account and during an ownership change. PEP/HIOs may also be identified through regular reviews of Clients and in the course of on-going monitoring of a Client by Sun Life.

PEP information is collected on applications and forms provided by Sun Life.

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:

  • governor General
  • lieutenant governor
  • head of government agency
  • member of the Senate
  • member of House of Commons
  • member of a legislature
  • deputy minister (or equivalent) rank in government
  • ambassador
  • counsellor of an ambassador
  • attaché
  • military officer with a rank of general or above
  • president of a corporation that is wholly owned directly by Her Majesty in right of Canada or a province
  • judge of an appellate court in a province
  • judge of the federal court of appeal
  • judge of the supreme court of Canada
  • leader (or president) of a political party represented in a legislature
  • holder of any prescribed office or position
  • mayor

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

A person stops being a domestic PEP 5 years after they have left office or 5 years after they are deceased. You must continue to mitigate the risks associated with domestic PEPs until they are no longer domestic PEPs.

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:

  • head of state
  • head of government
  • member of the executive council of government
  • member of a legislature
  • deputy minister (or equivalent rank) in government
  • ambassador
  • counsellor of an ambassador
  • attaché
  • military officer with a rank of general or above
  • president (head) of a state-owned company
  • president (head) of a state-owned bank
  • head of a government agency
  • judge of a supreme court, constitutional court or other court of last resort; or
  • leader (or president) of a political party represented in a legislature.

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

Note: Once you determine that a person is a foreign PEP, they remain a foreign PEP forever (including deceased foreign PEPs).

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

  • an international organization established by the governments of states; or
  • 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 stops being a HIO 5 years after they are no longer the head of the organization or institution or 5 years after they are deceased. You must continue to mitigate the risks associated with HIOs until they are no longer HIOs.

Examples of international organizations include, but are not limited to:

  • North Atlantic Treaty Organization (NATO)
  • Organization for Economic Co-operation and Development (OECD)
  • International Monetary Fund (IMF)
  • World Bank Group
  • World Health Organization (WHO)
  • La Francophonie

People considered as family members of PEPs and HIOs are:

  • their spouse or common-law partner,
  • their biological or adoptive child(ren),
  • their mother(s) or father(s),
  • the mother(s) or father(s) of their spouse or common-law partner (mother-in-law or father-in-law), and
  • the child(ren) of their mother or father (sibling(s)).

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:

  • are the business partners of, or who beneficially own or control a business with, a PEP or HIO,
  • are in a romantic relationship with a PEP or HIO,
  • are involved in financial transactions with a PEP or a HIO,
  • serve as prominent members of the same political party or union as a PEP or HIO,
  • serve as a member of the same board as a PEP or HIO,
  • carry out charitable works closely with a PEP or HIO, or
  • are listed as joint on a policy where one of the holders may be a PEP or HIO.

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

If determined that a person is a PEP, HIO, or a family member or close associate of a PEP or HIO, you must take reasonable measures to establish the source of the owner(s)/applicant(s) wealth. This is collected using Sun Life forms.

You are also required to obtain the source of funds that will be used for a transaction or that is expected to be deposited into an account. This should be collected in new account opening applications or other Sun Life forms.

If a transaction or the account activity is inconsistent with the information you have about the source of funds or the source of the person's wealth, 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 money laundering (ML) or terrorist financing (TF) offence, you must file a suspicious transaction report with FINTRAC.

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:

  • the ex-spouse or partner of a foreign PEP, is considered a family member of a foreign PEP forever; and
  • the ex-spouse or partner of a domestic PEP or HIO, is considered a family member of a domestic PEP or HIO until the domestic PEP or HIO is no longer a domestic PEP or HIO.

Is a PEP or HIO's stepchild or stepsibling considered a family member?

A stepfamily 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.

If a marriage includes stepsiblings, these stepsiblings are not considered family members if they are not legally adopted by the stepparent. However, you may want to consider the stepfamily members as close associates of the PEP or HIO, depending on their relationship (refer to guidance on who is considered a close associate above).

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 above 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. You may want to consider extended family members as close associates of the PEP or HIO, depending on their relationship (refer to guidance on who is considered a close associate above).