Language selection

Search

Frequently asked questions about domestic politically exposed persons and heads of international organizations

May 2021

This page answers questions about domestic politically exposed persons (PEPs) and heads of international organizations (HIOs) and associated requirements. For more information on foreign PEPs and associated requirements, see FINTRAC's PEP and HIO guidance.

All businesses (commonly referred to as reporting entities in FINTRAC guidance) covered under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations, must have a process in place to determine if persons (that is, clients) are domestic PEPs, HIOs, or family members or close associates of a domestic PEP or HIO. When these businesses determine that a person is a domestic PEP, HIO, or a family member or close associate of a domestic PEP or HIO, as applicable, they may need to take other steps or obtain more information about the person in order to meet their legal requirements. This means that if a person is a domestic PEP, HIO, or family member or close associate of a domestic PEP or HIO, these business requirements could impact them if they conduct transactions or carry out activities with a business covered under the PCMLTFA and associated Regulations.

1. Who is a domestic PEP?

A domestic PEP is a person who 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. These offices or positions include:

2. Who is a HIO?

A HIO is a person who holds or has held within the last 5 years, the office or position of head of an international organization established by treaty or an institution established by an international organization. The HIO is the primary person who leads the organization. For example, the HIO could be a president or CEO. This person may or may not be a Canadian citizen.

3. How long is a person considered to be a domestic PEP or HIO?

A person ceases to be:

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

PEP and HIO family members include spouses or common-law partners, biological or adoptive children, parents, the parents of spouses or common-law partners, and siblings.

5. Who is a close associate of a PEP or a HIO?

  A close associate is a person connected to a PEP or a HIO for personal or business reasons. Examples of close associates include, but are not limited to, business partners, persons in a romantic relationship with a PEP or a HIO, and persons involved in financial transactions with a PEP or a HIO.

6. How long is a person considered to be a family member or close associate of a domestic PEP or HIO?

A person ceases to be considered a:

7. How do businesses determine if someone is a domestic PEP or HIO, or a family member or close associate of a domestic PEP or HIO?

Under the PCMLTFA and associated Regulations, as applicable, businesses must take reasonable measures to determine whether a person or certain family members or close associates are domestic PEPs or HIOs. Reasonable measures could include asking the person, conducting open source searches, retrieving information already available or consulting commercially available information.

8. Are all domestic PEPs, HIOs or family members or close associates of a domestic PEP or HIO automatically subject to extra monitoring, reporting or restrictions?

No. If a business determines that a person is a domestic PEP or HIO or family member or close associate of a PEP or HIO, as applicable, they are required to conduct a risk assessment to determine whether they consider there to be a high risk of a money laundering (ML) or terrorist activity financing (TF) offence being committed. Businesses are not required to take additional PEP or HIO related measures if they do not consider that there is a high risk of an ML or TF offence being committed.

However, if a business considers that there is a high risk of an ML or TF offence being committed, they must take the additional PEP or HIO related measures, which include establishing sources of the funds or virtual currency, establishing the source of the person's wealth, obtaining senior management review of transactions or obtaining approval to keep an account open, taking enhanced measures for high-risk persons, and keeping associated records, as applicable.

9. Do businesses always look to establish how domestic PEPs, HIOs or family members or close associates of a domestic PEP or HIO acquired their funds?

Businesses are required to establish how domestic PEPs, HIOs or family members or close associates of a domestic PEP or HIO acquired their funds, if they consider that there is a high risk of an ML or TF offence being committed. However, businesses may still need to ask about the source of funds to meet other requirements.

10. Why were domestic PEP and HIO requirements created by the Government of Canada?

The Government of Canada created domestic PEP and HIO requirements to detect and deter ML and TF. These requirements are based on internationally recognized standards established by the Financial Action Task Force (FATF) that recommends that all countries consider domestic PEPs, foreign PEPs, and HIOs as part of their approach to combatting ML and TF. In its 2016 evaluation of Canada, the FATF recommended that Canada take more action in relation to domestic PEPs and HIOs.

The Government of Canada's 2015 Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada considered the threat from corruption and bribery of PEPs and HIOs to be very high. This is due to their involvement in, and often influence over, the awarding of large public contracts, which could be used by organized crime groups to launder large amounts of illicit money.

11. Why are family members or close associates of domestic PEPs or HIOs covered by legal requirements?

Family members and close associates of domestic PEPs and HIOs are covered under the PCMLTFA and associated Regulations because domestic PEPs or HIOs looking to distance themselves from money they receive from illegal activities can use them to carry out (knowingly or unknowingly) illicit financial activity. They are potential targets because they can more easily avoid detection.

12. When did domestic PEP and HIO requirements come into effect?

Domestic PEP and HIO requirements came into effect in June 2017 under the PCMLTFA and associated Regulations. These requirements stem from legislative amendments to the PCMLTFA made in 2014. Requirements for foreign PEPs have been in effect since 2008.

Regulatory amendments have been made to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations to expand domestic PEP, foreign PEP, and HIO requirements to all covered business sectors. These amendments come into force on June 1, 2021. Prior to this date, PEP and HIO requirements applied only to financial entities, life insurance providers, securities dealers and money services businesses, subject to the PCMLTFA. 

13. How does a foreign PEP differ from a domestic PEP?

Foreign PEPs are persons who hold or have held important offices or positions in or on behalf of a foreign state. These offices or positions include:

When a business determines that a person is a foreign PEP, they remain a foreign PEP forever (including upon death).

14. How do I find out more about requirements relating to PEPs and HIOs?

Members of the public who have questions about PEP and HIO requirements can refer to FINTRAC's PEP and HIO guidance or contact FINTRAC at 1-866-346-8722 (communications3@fintrac-canafe.gc.ca). Media enquiries can be directed to Finance Canada at 1-613-369-4000 (fin.media-media.fin@canada.ca).

Date Modified: