What is a Politically Exposed Person (PEP)?
A Politically Exposed Person (PEP) is an individual who is or has been entrusted with a prominent public function. Due to their position and influence, PEPs are considered to be at a higher risk for potential involvement in bribery, corruption, money laundering, and other financial crimes.
FATA Definition of Politically Exposed Persons (Recommendations 12 and 22)
The Financial Action Task Force (FATF) defines a Politically Exposed Person (PEP) as an individual who is or has been entrusted with a prominent public function. This includes both domestic and foreign PEPs. The FATF emphasizes that PEPs are at a higher risk of being involved in bribery, corruption, and money laundering due to their influential positions. The Financial Action Task Force (FATF) defines a PEP as:
An individual who is or has been entrusted with a prominent public function. Due to their position and influence, it is recognized that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing.
FATF Guidance
What is the criteria for Deciding Who Is a Politically Exposed Person?
- Position held: Individuals in high-level positions in government, judiciary, military, or state-owned enterprises.
- Level of seniority: Focus is on senior public officials rather than middle-ranking or junior individuals.
- Country context: The definition may vary based on the country’s political and economic structure.
- Current or former role: Both current and former position holders may be considered PEPs.
- Family members and close associates: Immediate family and known close associates are often included.
What are the different types of Types of Politically Exposed Person (PEPs)?
- Domestic PEPs: Prominent public functions within the country.
- Foreign PEPs: Prominent public functions in a foreign country.
- International Organization PEPs: Senior management or board members of international organizations.
| PEP Category | Role Description | Practical Examples |
|---|---|---|
| Heads of State or Government | Highest-ranking officials in a country | President of the United States, Prime Minister of the UK, Chancellor of Germany |
| Senior politicians | High-ranking members of political parties and legislative bodies | Senators, Members of Parliament, State Governors |
| Senior government officials | Top-level bureaucrats and administrators in government departments | Cabinet Secretaries, FBI Director, CIA Director |
| Senior judicial officials | High-ranking members of the judiciary | Supreme Court Justices, Chief Judges of federal courts, Attorney General |
| Senior military officers | High-ranking members of the armed forces | Generals, Admirals, Chiefs of Defense Staff, Commanders of military branches |
| Senior executives of state-owned corporations | Top management of government-controlled businesses | CEOs of national oil companies, Directors of state-owned banks, Chairpersons of public utilities |
Who is Domestic PEPs?
A Domestic Politically Exposed Person (PEP) is an individual who holds or has held a prominent public position within their own country. These individuals are considered high-risk due to their potential involvement in corruption, bribery, and other financial crimes. The definition and criteria for identifying Domestic PEPs are guided by the Financial Action Task Force (FATF) recommendations.
Here are the specific roles that typically qualify someone as a domestic Politically Exposed Person (PEP):
Heads of State or Government e.g. President, Prime Minister, Monarch
Reason: These individuals hold the highest executive authority in a country, making critical decisions that affect national policies, international relations, and economic strategies. Their positions provide significant control over government resources and influence over legislative and judicial branches, increasing the risk of corruption and misuse of power.
Senior Politicians e.g. Members of Parliament/Congress, State Governors, Leaders of Major Political Parties
Reason: Senior politicians are involved in creating and passing laws, overseeing government operations, and representing the interests of their constituents. Their legislative power and political influence make them susceptible to bribery, lobbying, and other forms of corruption.
Senior Government Officials e.g. Cabinet Ministers, Deputy/Assistant Ministers, Heads of Government Agencies (e.g., FBI Director, CIA Director), Senior Civil Servants
Reason: These officials manage critical government departments and agencies, overseeing significant budgets and policy implementations. Their roles often involve decision-making on public contracts, grants, and regulatory approvals, making them targets for corrupt practices and financial crimes.
Senior Judicial Officials e.g. Supreme Court Justices, Chief Judges of Federal Courts, Attorney General
Reason: Senior judicial officials interpret and enforce laws, making decisions that can have profound legal and financial implications. Their authority over legal proceedings and judgments makes them vulnerable to attempts at bribery and undue influence to sway legal outcomes.
Senior Military Officers e.g. Generals, Admirals, Chiefs of Defense Staff, Commanders of Military Branches
Reason: High-ranking military officers control substantial military resources and have significant influence over defense policies and procurement processes. Their positions can be exploited for personal gain through corrupt defense contracts and other illicit activities.
Senior Executives of State-Owned Corporations e.g. CEOs of National Oil Companies, Directors of State-Owned Banks, Chairpersons of Public Utilities
Reason: These executives manage large state-owned enterprises that control critical national resources and services. Their roles involve significant financial transactions and strategic decisions, making them prone to corruption, embezzlement, and other financial crimes.
Central Bank Officials e.g. Central Bank Governor, Members of the Central Bank’s Board or Equivalent Body
Reason: Central bank officials oversee national monetary policy, financial regulation, and the stability of the banking system. Their influence over interest rates, currency issuance, and financial regulations makes them key targets for corrupt activities and financial manipulation.
Ambassadors and High-Ranking Diplomats e.g. Ambassadors, Consuls, Chargés d’Affaires
Reason: Diplomats represent their country in foreign relations, negotiating treaties, and managing international agreements. Their positions provide opportunities for corruption through diplomatic immunity and access to confidential information and resources.
Members of Administrative, Management, or Supervisory Bodies of State-Owned Enterprises e.g. Board Members, Senior Managers
Reason: These individuals oversee the operations and strategic direction of state-owned enterprises, making decisions that impact national economic interests. Their roles involve significant financial oversight and control, increasing the risk of corruption and financial crimes.
High-Ranking Officials of Major Political Parties e.g. Party Leaders, Senior Party Members
Reason: Political party officials influence party policies, candidate selections, and election strategies. Their positions can be leveraged for corrupt practices, including vote-buying, political patronage, and misappropriation of party funds.
