Politically Exposed Persons (PEP's)

A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function. PEPs are higher-risk customers for financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) because they have more opportunities than ordinary citizens to acquire assets through unlawful means like embezzlement and bribe-taking and thus are more likely to launder money. That said, being a PEP does not in itself equate to being a criminal or suggest a link to abuse of the financial system.

 

After determining that a customer is a PEP, financial institutions and DNFBPs in most jurisdictions must apply additional AML/CFT measures to the business relationship. They are also responsible for conducting ongoing due diligence specifically tailored to the client’s PEP status. These requirements are preventive in nature and should not be interpreted as meaning that all PEPs are involved in criminal activity.

 

The term “politically exposed person” emerged in the late 1990s in the wake of the Abacha affair, a money laundering scandal in Nigeria which galvanised global efforts to prevent abuse of the financial system by political figures. A similar term, often used interchangeably with PEP, is “Senior Foreign Political Figure”. Although there is no universal definition of who classes as a PEP, most countries base their definitions on the guidelines created by the Financial Action Task Force (FATF). The FATF defines a PEP as:

  • a current or former senior official in the executive, legislative, administrative, military, or judicial branch of a government (elected or not)

  • a senior official of a major political party

  • a senior executive of a government owned commercial enterprise, being a corporation, business or other entity formed by or for the benefit of any such individual

  • an immediate family member of such individual; meaning spouse, parents, siblings, children, and spouse’s parents or siblings

  • any individual publicly known (or actually known by the relevant financial institution) to be a close personal or professional associate.

Different types of PEP are usually regarded as presenting different levels of risk. The below categorisations are not intended to be absolute, but might prove useful in thinking about which PEPs require the most careful due diligence work.

HIGH RISK - LEVEL ONE PEP

  • Heads of state and government

  • Members of government

  • Members of Parliament

  • Heads of military, judiciary, law enforcement

  • Top officials of political parties

MEDIUM RISK - LEVEL TWO PEPs

  • Senior officials of the military, judiciary and law enforcement agencies.

  • Senior officials of other state agencies.

  • Senior members of religious groups.

  • Ambassadors, consuls, high commissioners

MEDIUM RISK - LEVEL THREE PEPs

  • Senior management of a board of directors and state owned enterprises.

LOW RISK - LEVEL FOUR PEPs

  • Mayors, governors and members of local and city assemblies.

  • Senior officials of international organisations

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Wuhan conspiracy theories aside, diplomatic traction is the reward.

 

A week or two ago we wrote an article "Conspiracies & Ripples" which focused primarily on conspiracy theories and kicked off with the rather obvious statement that a conspiracy theory is simply a theory without the facts i.e. just a theory.  Within that we highlighted that ‘flavour of the month’ theorist’s delight, the origins of the Coronavirus and its links to Wuhan.  This echoed our views published in February which, as many did, ponder the chances of this remote coincidence maybe actually being true.  Since then there have been swathes of articles on the topic citing all sort of sources and from numerous ‘renowned’ scientists.  We have also recently had the opinions offered by those whose opinions really count, that this virus originating from the labs in Wuhan may not actually be so far-fetched after all.

We do tend to agree, or at least we did.  That was then and this is now and in the world of Politics things move quickly and one does have to look at the reality of the situation.  If there is enough fog between you and your destination, then sometimes the route you take can change, leaving you all sorts of options.  If the objective was originally to circumnavigate through uncertain waters to establish who, what, why and when the virus came about – then that is now lost in the fog.  It is arbitrary.  Now we have something that is far more concrete and tangible to use to our advantage – we have uncertainty.  We now have enough debate and conspiracy to render the findings of the scientists open to interpretation.  And that… is a diplomat’s dream come true.   This particular carcass will feed many and although the WHO will go in, on the ground, and no doubt find yet more uncertainty…it really is irrelevant.  You will certainly not find individual government’s chomping at the bit to send their representatives into Wuhan anytime soon, and even if they did, why?  Wuhan is not some sleepy suburb in leafy Northamptonshire… it is in China.  Whatever was there has long gone, if indeed it was ever even there.  So perhaps it would be wise to assume that at least for the next few decades this is a conspiracy that will never find out those salient facts. 

Now, listening to the scientists, there is an overwhelming urge to say, “shush now”.  Step back ladies and gentlemen and look at the bigger picture at play.  Nobody is actually interested whether or not the virus started in Wuhan, intentionally or not.  As long as it is open to debate, it is far more valuable.  The scientists have debated at length and argued, but there is still no unequivocal proof either way that satisfies all parties…and why could that be?  Scientific fact is not open to debate or questioning, that is a given.  However, to say Science is correct, is not true.  That is because Science has Scientists, and Scientists are human beings who in turn are fallible and motivated by many many other factors.  In China for example, one might say that scientific fact is exactly what they want it to be.  Indeed, who is to say it ends in China.

 

So why is uncertainty such a blessing in this case?  It provides an additional bargaining chip and a weapon in the armoury for all Governments to now use against the Chinese.  Maybe on the other side of the fence their own initial conspiracy theory that a foreign Government (the US) planted the virus in their midst, is being written about in their own press.  Or maybe not. The fact is it is a safe bet to assume that no body will ever know.  There will be no compensations or admissions of guilt in this case sadly…however the capillaceous network that is politics, diplomacy and economic negotiations will be the real beneficiaries.

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