What is a Politically Exposed Person?
A politically exposed person (PEP) is defined by the Financial Action Task Force (FATF) as “an individual who is or has been entrusted with a prominent public function. Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering (ML) offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing (TF).”
There are many individuals that may be considered as a potential PEP in different roles and parties, such as members of parliament in a Legislative Body, Senior Executives in a state-owned enterprises, Board members of financial institutions and many more. A politically exposed person does not always mean an individual who directly holds public office and it also includes their immediate family members, as well as close business associates. Aside from the different local PEP requirements to comply with, defining a PEP may be challenging and each country may have different requirements when doing business in that region. It can be difficult to determine whether customers or beneficial owners are PEPs and/or finding out who are. Assessing their relations as their family members and close associates can be challenging, particularly when dealing with foreign PEPs for whom current information may not be readily available. Hence it is important to stress that Customer Due Diligence (CDD) is essentially important as a source of information for the purpose of determining a customer as a PEP.