politically exposed persons(PEP) defination

In basic terms we can say , a Politically Exposed Person(PEP) 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.

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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

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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
• Siblings
• 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.