KYC360º FAQ

What is a PEP?

PEPs are Politically Exposed People (or Persons). There are numerous definitions of PEPs some defined at a regional level and others come from international bodies such as the FATF or the Wolfsberg Group which states:

Financial Institutions should consider a range of factors when determining whether a particular holder of a public function has the requisite seniority, prominence or importance to be categorised as a PEP. Relevant factors could include examining the official responsibilities of the individual’s function, the nature of the title (honorary or salaried political function), the level of authority the individual has over governmental activities and over other officials, and whether the function affords the individual access to significant government assets and funds or the ability to direct the awards of government tenders or contracts.

PEPs are also often the subject of intense public and media scrutiny, with the increased possibility of commensurate reputation risks for Financial Institutions that maintain relationships with them.

Characterisations of specific senior public functions, such as those noted below, can be useful as indicators of seniority, prominence or importance and used to determine whether an individual should be considered a PEP:

• Heads of State, Heads of Government and Ministers

• Senior Judicial Officials

• Heads and other high-ranking Officers holding senior positions in the armed forces

• Members of ruling Royal Families with governance responsibilities

• Senior Executives of state-owned enterprises

• Senior Officials of major political parties

In addition, the following may also be considered to fall within the definition but may be excluded in areas where the risk of corruption or abuse is considered to be relatively low as they do not have the same ability to control or divert funds.

• Heads of Supranational Bodies, e.g. UN, IMF, WB

• Members of Parliament or National Legislatures, senior members of the Diplomatic Corps e.g.

Ambassadors, Chargés d’affaires or Members of Boards of Central Banks

Holders of public functions not meeting the above-referenced standards of seniority, prominence or importance (and therefore not categorized as PEPs) could still represent a heightened reputational or money laundering risk for Financial Institutions. Such individuals should be assessed using appropriate risk factors.

Wolfsberg Frequently Asked Questions (“FAQs”) on Politically Exposed Persons (“PEPs”) 2008

The Financial Action Task Force state in Recommendation 6: “Financial institutions should, in relation to politically exposed persons, in addition to performing normal due diligence measures: a) Have appropriate risk management systems to determine whether the customer is a politically exposed person ……”