What changed
The definition of Politically Exposed Persons (PEPs) has been removed from sub-clause (xvii) of clause (a) of Section 3 of the KYC Master Direction. It is now included as an explanation to Section 41, with the same wording as before, to provide better clarity.
What it means for you
Banks and regulated entities must update their KYC policies to reference the new PEP definition location. The clarified definition helps ensure consistent identification and enhanced due diligence for foreign PEPs, reducing compliance ambiguity.
What you must do
- Update internal KYC manuals and SOPs to reflect the new PEP definition location under Section 41.
- Train compliance and customer onboarding teams on the revised PEP definition and its implications.
- Review existing customer risk classifications to ensure foreign PEPs are correctly identified and monitored.
- Align AML/CFT systems to apply enhanced due diligence for customers meeting the new PEP criteria.
Who it affects
All regulated entities (banks, NBFCs, payment system operators, etc.), Compliance and AML teams, Customer onboarding and risk management departments
What is the key change in the PEP definition?
The definition has been moved from Section 3 to Section 41 of the KYC Master Direction, with a detailed explanation clarifying that PEPs are individuals entrusted with prominent public functions by a foreign country.
Does this change affect domestic PEPs?
No, the revised definition specifically applies to foreign PEPs. Domestic PEPs continue to be covered under existing KYC norms.
What should banks do immediately?
Update KYC policies, retrain staff, and ensure systems flag foreign PEPs for enhanced due diligence as per the new definition.