Politically exposed persons (PEPs) are high risk clients according to the international anti-money laundering standards. Search online for PEPs, their close associates and affiliated entities. The terms 'politically exposed person' and senior foreign political figure are often used interchangeably, particularly in international forums. Foreign official is a term for individuals deemed as government persons under the Foreign Corrupt Practices Act, or FCPA, and although definitions are similar to PEP, there are quite a few differences. Close persons – the term “close persons” (of a politically exposed person) is used in the meaning provided by the law of Ukraine “Corruption Prevention ”, i.e., people who live together, share common household and have rights and obligations in common with the entity mentioned in part one of the Article 3 of the Law (except persons. Politically exposed person. The PEP database contains the most comprehensive list of Politically Exposed Persons (PEPs) from more than 240 territories of the world, as well as from international organizations and political and diplomatic representations with around 1 million relevant PEPs.
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In order to ensure your organisation fully complies with the latest financial PEP regulations, it is essential that you and your team are aware of who or what a Politically Exposed Person (PEP) could potentially be.
Providing a definitive list of who could be classed as a PEP is difficult, as the criteria is so broad; international definitions vary and the Financial Action Task Force (FATF) is frequently issuing updated recommendations.
In basic terms, a Politically Exposed Person 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.
The Basic Criteria for Deciding who is a Politically Exposed Person
Anyone in any of the following roles should be considered a potential PEP.
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
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.
What is a PEP? Infographic
Test Yourself: Are these people PEPs?
- The mayor of Paris
- A former member of the board of directors for a state-owned enterprise
- A famous actress
- Head of the Olympic Committee
- The son-in-law of the mayor of Paris
- A town councillor
- The justice of the peace in a Magistrates Court
- The manager of a national football team
- The business partner of someone who has a sister on the Olympic Committee
View the PEP infographic for the answers and learn what constitutes a PEP.
How to easily identify these PEPs
It’s easy to see how the list of potential PEPs is huge and continually in flux as people move into new roles, family members change, regulations and recommendations from the FATF get updated on a local level, and the international landscape continually alters.
Request a demonstration to see how our KYC Due Diligence Data File can be seemlessly built into your PEP screening process to help streamline your due diligence and lower your exposure to risk and fines.
November 2, 2020
A politically exposed person (PEP) as an individual who is or has been entrusted with a prominent public function. Due to their position and influence, PEPs are at higher risk to be involved in money laundering and related predicate offences, including corruption and bribery.
Before you can check if someone is a politically exposed person, you first need to define who qualifies as a PEP. FATF defines PEPs as the following:
- Foreign PEPs includes Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials in a foreign country.
- Domestic PEPs like foreign PEPs are individuals who are or have been entrusted domestically with prominent public functions.
- International organization PEPs are persons who are or have been entrusted with a prominent position by an international organization. This may be directors, deputy directors and members of the board or equivalent functions.
- Family members are individuals who are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of partnership.
- Close associates are individuals who are closely connected to a PEP, either socially or professionally.
While there is overall agreement to the above, there can be some regional definitions that are worth noting. Regulatory obligations and due diligence recommendations may also vary by jurisdictions. This interactive map from Dow Jones provides an easy way to view how regulations vary by countries.
Compliance should consult with their legal team and/or country Financial Intelligence Unit (FIU) to confirm their obligations around politically exposed persons.
Using Free Lists for PEPs Screening
Compliance teams often ask us if there are free PEP lists and the answer is “Not really”. A few organizations do publish free information but almost all lack coverage necessary to meet country regulations. Here are a few examples:
Enhanced Politically Exposed Persons List
- CIA World Leaders List – This online directory of Chiefs of State and Cabinet Members of Foreign Governments is updated weekly by this U.S. Federal agency. The spelling of the personal names follows transliteration systems generally agreed upon by U.S. Government agencies, except in the cases in which officials have stated a preference for alternate spellings of their names.
- Rulers.org – This site contains lists of heads of state and heads of government of select countries and territories going back to 1700.
- Central Bank of Uruguay PEP List – The list includes people who hold or have held public functions of importance in Uruguay. It is not updated regularly and the last published list was April 2019.
Politically Exposed Persons List Download
As you can see from the descriptions, most of these free lists do not include local governments, international organization PEPs, family members or close associates, to name a few. When posed the question about using free PEP lists, the risk data experts at Dow Jones said the following:
Relying on free PEP lists can pose problems for PEP identification and screening in that the lists often do not provide the full name of the individual, names in original script, any identifying information (such as a date of birth), focus on top level roles only and specific countries only and do not update promptly.
Countries themselves can publish two types of PEP lists: a list of politically exposed positions or a list of the names of individuals holding PEP roles. These lists, together with other international and national regulations, have been considered when drawing up the Dow Jones PEP definition.
However, as the Financial Action Task Force (FATF) 2013 recommendations mention, these lists have potential shortcomings as they may not be complete (lacking names, identifiers, relatives), and are quickly outdated. We also find that very few countries publish a list of domestic PEPs.
Based on these observations and our experience, we do not recommend that organizations solely rely on public sources for an effective risk-based approach.
With this in mind, financial institutions should seriously consult with third-party risk data providers to help them screen for PEPs.
Using Third-Party Data for PEP Lists
Politically Exposed Persons List Providers
As outlined in our white paper, How to Test for Sanctions Screening Software, when engaging with third-party risk data providers to gain access to their PEPs lists, there are a few things that you should inquire about. Here are some sample questions:
- What is the geographic reach and jurisdictions covered by the data?
- Does the data go beyond world leaders?
- How many PEPs of each type to they have?
- How do they handle election results?
- How are impeachments, resignations and deaths tagged?
- How is information from non-democratic countries collected and updated?
- How are names from foreign countries stored? Native characters? Transliteration? Translated?
- How is information validated?
- How deep does the data go?
- How often is data updated?
- How is updated data sent?
- What information is collected about the PEP?
You will want to speak to a number of providers and compare their data sets to ensure proper coverage for your institution.
Minimum data quality standards required for effective PEP Screening
According to Wolfsberg group, financial institutions should have complete and accurate customer data records and the PEP database used for screening should contain sufficient unique identifying data.
Having good customer records and a PEP database that can be screened using unique identifying data will reduce the number of false positives and the overall burden on compliance teams.
Unique identifying data should include the following:
- Name (all known names and aliases)
- Date of Birth, and where this isn’t available, Year of Birth
- Country of political exposure
- Gender (where available)
- Politically exposed role(s), and date(s) or year(s) of appointment
- Date or year that the PEP left their position (where applicable)
- Where applicable, if the PEP is deceased.
Advice on screening for PEPs
- Where possible, use native character searching. Searching for names in their native language greatly reduces false positives by limiting transliteration issues.
- Use geography to help determine risks—not all countries pose the same risk. Lower risk countries present the opportunity to reduce the amount of time spent reviewing close associates and relatives.
- Reduce the number of hits you receive by using date of birth and age to refine your search.
- Utilizing a defined set of risk factors, build a PEP risk-scoring model that works for your organization. For each risk category, weight the risk factors and then build a defensible risk-scoring process.
- Consider changing screening levels by risk levels. For low-risk PEPs, consider screening and monitoring for sanctions only; for medium-risk, PEPs, screening and monitoring for sanctions and regulatory actions only; and for high-risk PEPs, screening and monitoring against an entire database.
Politically Exposed Person List
How long is a PEP considered a PEP?
When looking to see if you need to screen someone for being a PEP, when and for how long they were if office is a consideration.
According to the Wolfsberg Group, there is no agreed method for determining the time period that an individual should be regarded as a PEP after they have left the public function.
They go on to says that,
- The risk associated with a PEP is closely related to the political situation and the inherent corruption risk in their country, the office or function they held and the influence associated with that post.
- Influence may substantially reduce as soon as they have left office, but a PEP may have been in a position to acquire their wealth illicitly. For this reason, a high level of scrutiny may be warranted even after they have left office.
The Wolfsberg Group does not subscribe to the “once a PEP, always a PEP” as it is not consistent with a risk-based approach. When considering when a PEP should be de-classified, the group suggests that you should consider the following:
- The level of inherent corruption risk in their country of political exposure
- The position held and its susceptibility to corruption or misappropriation of state funds or assets
- Length of time in office and likelihood of return to office in future
- The level of transparency about the source of wealth and origin of funds, in particular those funds generated as a consequence of office held
- Links to any industries that are high risk for corruption
- The overall plausibility of the stated customer profile and their net worth
- The level of transparency and plausibility of transactions processed through the account
- Whether there is relevant adverse information about the customer widely published in reputable sources
- How politically connected they remain once they have left office
Pep Politically Exposed Person List
Any declassification of a PEP should be reviewed/approved by senior management and documented. In addition, prior PEP status should be noted, in the event of a suspicious activity reporting.
If you would like to learn more about screening PEPs, contact us. We can recommend a solution that is right for your organization.
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