A politically exposed person is a term that describes someone who has a prominent public function. They are considered high-risk by financial institutions because of their potential to engage in bribery and corruption. Creating PEP lists is a difficult process.
So, Who are PEP?
The FATF defines a PEP as:
•Senior government official: executive bodies, diplomatic roles, legislative bodies, judiciary bodies
•Close family members: are individuals who are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of partnership.
•Organizations and Institutions: a senior executive of a government-owned commercial enterprise
•Close associates: are individuals who are closely connected to a PEP, either socially or professionally.
•A senior: official of a major political party
The FATF defines different types of PEP as; (FATF Guidance/2013)
•Foreign PEPs: individuals who are or have been entrusted with prominent public functions by a foreign country, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.
•Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.
•International organization PEPs: persons who are or have been entrusted with a prominent function by an international organization, refers to members of senior management or individuals who have been entrusted with equivalent functions, i.e. directors, deputy directors and members of the board or equivalent functions.
•The difference between a foreign PEP and a domestic PEP: is the country which has entrusted the individual with the prominent public function. Pursuant to the definition of PEPs, other factors, such as country of domicile or nationality, are not relevant in determining the type of PEP but may be relevant in determining the level of risk of a specific domestic PEP (as foreign PEPs are always a high risk). It should also be noted that a domestic PEP is subject to the foreign PEPs requirements if that individual is also a foreign PEP through another prominent public function in another country.
•Members of government
•Heads of government
•Heads of judiciary, military, law enforcement
•Prominent political party members
•Senior members of state agencies
•Ambassadors, consuls, commissioner
•Senior members of religious groups
•Mayors and members of local, district and city assemblies
•Senior officials of international or supranational business
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