Sources you can trust

A politically exposed person (PEP) refers to an individual – whether foreign or domestic – with a prominent public function, as well as his or her family members and close personal or business associates. Because of their position and potential influence, PEPs often present a greater risk for involvement in such crimes as corruption and bribery.

It is important to note, however, that just because someone is a PEP, it doesn’t necessarily mean they are engaged in criminal activity.

Why Dig Deeper?

Whether they’re in government or another organisation, politically exposed persons pose a higher risk of exposure to money laundering and other economic offences. It’s important to identify and investigate any potential PEPs, as a partnership could expose your business to potential risks. If a potential customer or business partner is identified as a PEP, you must ensure effective risk management with an enhanced due diligence procedure.

Money laundering

Money laundering is the ‘cleaning’ of large amounts of illegally obtained funds to conceal its original origins, by passing ‘dirty’ money through bank transfers and various entry points in the financial system. PEPs have a high risk of being involved in such activities, and should be investigated as such.

Corruption

Corruption is the misuse of power and position by an individual for personal gain. It can involve such acts as abusing their function, position or influence; extorting money or other articles of value; embezzling funds; self-dealing; and bribery. Corruption impacts political stability, economic development, the financial landscape and crime.

Bribery

Bribery, a form of corruption, is promising or giving something of value – such as money, position, privilege or preferential treatment – in return for corrupt behaviour. Bribing or attempting to bribe public officials – an unfortunately prevalent practice worldwide – is a crime with serious penalties for both individuals and organisations. In today’s global business environment, it’s critical to minimise the legal and financial risks of a PEP impacting your organisation. This means doing your research to better understand your customers, your employees and your vendors.

Finding relevant information

Without the right resources, background checks can be time-consuming and overwhelming, as they involve using large databases to uncover reputable, factual information. With robust background checks, you can identify PEPs before you establish a business relationship with them, as well as monitor your current employees, partners and customers for potential legal, financial or reputational risks.

A background check is a comprehensive review of an individual or an organisation for information including:

• Names
• Dates of birth
• Identification numbers
• Photographs
• Education
• Employment history
• Commercial activities
• Financial records
• Criminal records

Types of politically exposed person (PEP)

It is important to understand what type of politically exposed person you are screening, as this will help you better understand the risk that they may pose.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) identifies three types of PEPs:

• Domestic politically exposed person - entrusted with a prominent public role in a national government.
• Foreign politically exposed person - a high ranking political figure in a foreign country.
• International organisation politically exposed person - prominent public members of an international organisation, such as the UN, WTO or NATO.

Examples of PEPs

Examples of politically exposed persons include:

• Heads of government or heads of state
• Senior politicians and government officials
• Top military or judicial officials
• Senior executives of government owned organisations
• High ranking political party members

Close associates such as immediate family members and support staff are also considered PEPs.

CleverKYC

In addition to Nexis Diligence+™, our suite of due diligence tools includes CleverKYC risk-assessment software. This robust regulatory compliance tool lets you monitor and manage cases, screen third parties, set risk profiles and assess risk to help you continually meet regulatory expectations.

The software lets you capture a real-time daily assessment of your business risk, so you can ramp up your due diligence efforts as needed. CleverKYC also allows you to incorporate additional internet research into your screening process, so you can be rest assured that as regulations evolve, CleverKYC will keep up.