24 March 2022, 11:24
24 March 2022, 11:24
If you often find yourself reading about anti-money laundering (AML), you have likely come across the term PEP before.
A PEP (politically exposed person) is an individual who is at higher risk of being involved in financial crime. These individuals typically hold a prominent position or function in an organization, institution, or government, making them more likely to be offered bribes or have the opportunity to illegally obtain assets.
In this article, you can learn more about what is a PEP, and why they have are at higher risk of money laundering and other financial crimes.
A politically exposed person (PEP) is an individual who has public prominence through their position or function.
These individuals can fall into one of five general categories:
The main difference between domestic, foreign, and international PEPs is how far the prominence of their position or function extends.
A domestic PEP is an individual that holds a prominent public position or function in their own country, while a foreign PEP holds such a position or function in a foreign country. An international PEP holds this prominence by way of an international organization.
Family members of a politically exposed person may also be considered PEPs. This is also true of close associates of a PEP.
While not all PEPs engage in corrupt practices, they all have the opportunity to do so. There is a higher risk of PEPs being involved in bribery, corruption, and money laundering offences.
This is especially true of PEPs that serve a public function, such as PEPs that have access to state assets and funds or have authority over a region’s policies and operations. These PEPs, especially if they fall under the foreign category, are considered a higher risk of not following AML obligations.
PEPs are typically high-ranking individuals in a government or specific organizations, including:
If a person meets at least one of these basic criteria, they are likely to be a PEP. Depending on a person’s country and region, the titles a PEP falls under can change, as well as their AML obligations.
Those who are close associates of a PEP, whether socially or professionally, are also considered PEPs. Close associates include those who:
Immediate family members count as PEPs, whether they are direct relatives or relatives through marriage. This means that alongside parents, children, and siblings, uncles, aunts, spouses, and even in-laws are also considered PEPs.
With the higher risk PEPs pose in regards to financial crime, companies must take the appropriate precautions when handling one as a customer.
DX Compliance uses combined technologies to ensure companies all over the globe achieve AML compliance. Our full-solution transaction monitoring software detects, investigates, and reports suspicious transactions to reduce the risk of money laundering.
For more information about transaction monitoring and AML compliance, reach out to DX Compliance.
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