In a time where the US President is a notorious businessman, Politicians are constantly criticised regarding their dodgy taxes, and “dirty money” passes through hands of the government officials, it may seem more like a political drama than real life. However, it isn’t just fiction (nor has it ever been), so if you have a business it’s time you understand what a PEP is and what the laws surrounding them are.
Generally, a PEP is a “politically exposed person”. This is in reference to someone who is a prominent public figure and carries out a function in which they are trusted by the public.
The definition of a PEP can change, the criteria could vary from country to country or even company to company. Its seen as quite a broad phrase but some examples include:
These public figures present a higher risk of bribery, as there is a fear they could be corrupted and someone could take advantage of the influence this person may hold.
Therefore, a PEP isn’t just the influential person themselves that carries this reputation. It could include:
Basically, a PEP is anyone close enough to the politically exposed person in question that may be able to sway their influence through corruption, bribery, or in a position to help the individual exploit the public’s trust.
You’ve probably seen a lot of this if you’re a fan of Political TV dramas, but it happens in the real world too. Unfortunately, in the real world, it’s up to businesses to know the person they’re working with, and carry out the necessary checks to avoid the risk they may impose.
So you may be thinking, “so what if someone is in the public eye, how would this affect me and my business?”. Well, those people are far more likely to receive an opportunity to acquire assets through unlawful means. This can be anything from a little bribe to excessive money laundering, but also because these people can be targeted by others with bribery and blackmail for example. The KYC laws mean it’s the type of person you need to know you’re in business with.
Just because someone is a PEP doesn’t mean they are definitely up to no good and that you shouldn’t be in business with them, it just means you have to be more vigilant when observing your business relationship. You must perform enhanced due diligence checks (EDD), and prove you have conducted the correct PEP screening.
It’s important to avoid working with or funding anyone or any business that has been known to threaten the legal and operational functions of a business. This is why it is vital to have your PEP screening completed before forming any business relationships and during this ongoing relationship.
For example, if you are in the financial industry such as banking or insurance firms, and the corrupted PEP is trying to store assets with you in order to disguise untaxed money they have received through bribery, then you could also accountable in this crime if you cannot prove you have done enough to prevent this from happening.