In order to ensure your organisation fully complies with the latest financial PEP regulations, it is essential that you and your team are aware of who or what a Politically Exposed Person (PEP) could potentially be.
Providing a definitive list of who could be classed as a PEP is difficult, as the criteria is so broad; international definitions vary and the Financial Action Task Force (FATF) is frequently issuing updated recommendations.
In basic terms, a Politically Exposed Person is someone who, through their prominent position or influence, is more susceptible to being involved in bribery or corruption. In addition, any close business associate or family member of such a person will also be deemed as being a risk, and therefore could also be added to the PEP list.
The Basic Criteria for Deciding who is a Politically Exposed Person
Anyone in any of the following roles should be considered a potential PEP.
PEPs in Government Roles
Legislative Bodies: A good example here would be a Member of Parliament
Executive Bodies: A PEP could range from the head of state down to the assistant ministers
Diplomatic Roles: Ambassadors or charges d’affaires would be considered PEPs
Judiciary Bodies: Key people working within supreme courts, constitutional courts or high-level judicial bodies
State-Owned Enterprises: A PEP would typically be anyone from a senior executive upwards. However, even former members of the board of directors no longer associated with an organisation may retain influence and still be flagged as PEPs
PEPs in Organisations and Institutions
Central Financial Institutions: Examples here would be the Court of Auditors and members on the boards of central banks
Armed Forces: In this situation a PEP rating would typically only apply to a high-ranking officer
International Sports Committees: Members of these committees may be influenced to vote on the location of major sporting events/contracts for building venues, etc., so have recently been included by FATF under their definition of a PEP
Known ‘Close Associates’ who are Considered PEPs
Anyone who has a close business relationship or joint beneficial ownership of legal entities or legal arrangements with a PEP
Anyone who has the sole beneficial ownership of a legal entity which is known to have been set up for the benefit de facto of the PEP
Immediate Family Members who are Considered PEPs
Parents and children of PEPs
Spouse or partner
Uncles and aunts
Even slightly indirect family members (such as in-laws) will be considered as a politically exposed person
Note: Each country may have different local PEP regulations that you need to comply with when doing business in that region.
Accuity has produced a handy infographic that summarises information on who should be classified as a Politically Exposed Person.
What is a PEP? Infographic
Test Yourself: Are these people PEPs?
The mayor of Paris
A former member of the board of directors for a state-owned enterprise
A famous actress
Head of the Olympic Committee
The son-in-law of the mayor of Paris
A town councillor
The justice of the peace in a Magistrates Court
The manager of a national football team
The business partner of someone who has a sister on the Olympic Committee
It’s easy to see how the list of potential PEPs is huge and continually in flux as people move into new roles, family members change, regulations and recommendations from the FATF get updated on a local level, and the international landscape continually alters.
Request a demonstration to see how our KYC Due Diligence Data File can be seemlessly built into your PEP screening process to help streamline your due diligence and lower your exposure to risk and fines.