Politically Exposed Persons in Ireland: Section 37 Guide

Politically exposed persons, or PEPs, are one of the clearest examples of enhanced due diligence in Irish anti-money laundering law. Section 37 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 sets out who counts as a PEP and what a designated person such as an accountancy firm must do when a customer, a beneficial owner or a policy beneficiary falls into that group. This guide goes through section 37 using the Law Reform Commission's revised Act. For the Act as a whole, see our guide to Irish AML law for accountants.

Please read "What we could not confirm" at the end. We read the revised text of the section and its annotations, not supervisory guidance on how to apply it.

Who counts as a PEP

According to section 37, a PEP is an individual who is, or has been in the preceding 12 months, entrusted with a prominent public function. The specified roles include heads of state and government, ministers, legislators, members of a political party's governing body, senior judges, members of audit or central bank boards, senior diplomats and armed forces officers, and board members of international organisations. Board or management members of state-owned enterprises, and anyone performing a function the Minister prescribes, are also covered. Middle-ranking and more junior officials are excluded. The page we read does not draw a distinction between PEPs who live in Ireland and those who live abroad.

Family members and close associates

Family members include a spouse or a person treated as equivalent to a spouse, a child or a child's spouse (or equivalent), a parent, and any other family member of a class the Minister prescribes. A close associate is a person with joint beneficial ownership of a legal entity or arrangement with the PEP or other close business relations with them, or a person with sole beneficial ownership of an entity or arrangement set up for the PEP's actual benefit.

What a designated person must do

Identify PEPs before the relationship starts

Section 37(1) to (3) requires risk-based steps to determine whether a customer, a beneficial owner, or a life policy beneficiary is a PEP, a family member or a close associate. This must happen before a business relationship is established or an occasional transaction is carried out, or before a policy payout or assignment. Our guide to when customer due diligence is required in Ireland explains the trigger points that this screening sits within.

The three enhanced measures

Under section 37(4), once a PEP is identified, the designated person must obtain approval from senior management before establishing or continuing the relationship, establish the source of wealth and source of funds for relevant transactions, and monitor the relationship more closely. Section 37(4A) says these measures continue for as long as the continuing risk requires, which can be longer than the 12 months in the definition.

Life policies and account opening

Where there is a higher risk with a life policy, section 37(6A) requires senior management to be informed before payout and enhanced scrutiny to be carried out. Section 37(5) allows a credit or financial institution to open an account before completing the checks, but no transactions may take place until they are done.

If the customer will not cooperate

Section 37(8) says that if a customer fails to provide the information needed, the designated person must discontinue the relationship and not provide the service.

Penalties

Section 37(9) makes non-compliance an offence, with penalties on both summary conviction and conviction on indictment. We did not extract the penalty amounts for this section from the page we read.

How the section has changed

The annotations on the revised Act record amendments to the section, including substitutions made on 26 November 2018 by the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 and insertions made on 23 April 2021 by the 2021 Amendment Act. Anything older than those dates, including some commentary online, may describe an earlier version.

Our suggestions for an Irish accountancy practice

These are our own suggestions, not requirements of the Act. Ask the PEP question in the client acceptance form, and ask it about beneficial owners as well as the person you are dealing with. Record who gave senior management approval and when, and diary a review of each PEP relationship so that you can decide whether the risk continues after the 12-month period. Link the PEP file to your business risk assessment. Our guide to section 54 policies and training covers the related internal procedures. For structured study, see our CPD courses.

Frequently asked questions

Does PEP status end after 12 months?

The definition covers people who held the function in the preceding 12 months, but section 37(4A) allows the measures to continue as long as the risk requires.

Are family members PEPs?

They are covered by the same measures as family members of a PEP, as set out in the section.

What if the client will not say?

Section 37(8) says to discontinue the relationship and not provide the service.

What we could not confirm

The Law Reform Commission page does not state an explicit revised-to date, so later amendments may exist. We did not extract the penalty amounts for section 37(9). We did not read guidance from the Irish competent authorities or professional bodies on PEP screening, the definition of prescribed functions, or the Minister's prescribed classes of family member. This post is general information, not legal advice.