Pinpointing PEPs remains a critical risk management challenge
What constitutes a Politically Exposed Person?
While the name highlights a key factor—individuals within a country’s or region’s political leadership—the definition has broader applications.
- Family members of a PEP
- Professional or social associates of a PEP
- Central bank auditors
- Judicial officials
- High-ranking military officers
- Senior management of state-owned businesses
For more information, download our factsheet about what constitutes a PEP and how the lack of a global definition for a PEP requires comprehensive due diligence to mitigate the risk of enforcement actions for failing to meet FCPA and other anti-bribery and corruption requirements.
Tips for effectively managing PEPs risk
When it comes to PEPs, influence is key. That’s why the definition remains fluid. Politicians may leave office, however their sphere of influence may continue as they move into new roles related to government, such as lobbyists. As a result, companies need to establish a clearly defined PEPs policy that includes:
- Identifying key titles of PEPs based on applicable laws where you conduct business.
- Assessing the prominence of each PEP to determine the level of risk.
- Considering where the PEP is located to understand if the PEP comes from a country at high risk of corruption or one that is known for strong anti-bribery and corruption enforcement.
Beyond establishing a PEPs policy, risk management professionals can follow guidance from regulators and corruption watchdogs. For instance, the global, inter-governmental Financial Action Task Force (FATF) specifies that establishing a PEP’s source of wealth is a critical component of PEPs due diligence.
Interested in more expert tips? Download our factsheet to review 6 best practices for managing PEP risk.
