What is a Politically Exposed Person (PEP)?
Posted on 20th April 2022 at 10:02
Individuals holding prominent public positions, functions and authority are more susceptible to bribery, corruption and money-laundering offences because the authority vested in them are called politically exposed persons. To make certain your company completely conforms with the latest PEP guidelines, the organisation must be mindful of who or what a PEP could possibly be. PEP may include Governors of a State, Members of Parliament, Military Officers, Senior Government and Judicial Executive and heads of Local Bodies such as Municipal Corporations. Due to their position, they may get involved in offences like money laundering and financing terrorists; therefore, they need to be monitored. Family members, close relatives, and associates of such persons also fall into the politically exposed person category. Identification as PEP does not mean that they are involved in criminal activities. Still, appropriate precautions need to be taken as they are of higher risk to financial institutions.
Below are the different types of PEPs:
Domestic PEPS: A person that holds a primary public position or function internally.
Foreign PEPs: A person that holds a primary public position or function in another country.
International PEPs: A person that holds a high public in an international organisation.
Family members: People even indirectly related to a PEP can also be categorised as a PEP.
Close associates: A person who has close relations with a PEP, whether informally or professionally.
There are risks related to PEPs that explain strict actions to be taken to put a stop to financial crimes, like, money laundering, terrorism and drugs financing, etc. Companies should take precautionary measures while liaising with such people.
PEP regulations are enacted to prevent individuals from misusing their power and authority. Financial Institutions must implement some PEP and AML measures as preventive measures to avoid any possible fraud.
The Financial Action Taskforce (FATA) has introduced a regulatory framework for combating the risk associated with business and financial systems for illicit activities.
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