International laws vary as to which persons are of most interest to regulators in their anti-money laundering and bribery rules. This makes creating a list of politically exposed persons a difficult task — even if a critical one.
The list is large, nuanced and constantly changing.
There are 46,882 elected or appointed political representatives at a national level. Assembling all of the persons designated by myriad anti-corruption laws, including those officials’ close family and business partners, one would require a PEP (politically exposed person) list in the low tens of millions of individuals.
The penalties faced by companies that do not conduct appropriate compliance checks prove that even fairly low-level associations with public officials and organizations need to be considered.
The list need to be kept up-to-date and used to meet a variety of compliance obligations — from Know-Your -Customer rules in the financial services arena to the need for all businesses to properly screen their third parties.
The list should be consistently verified against lists from official sources, and over-dependence on any list can expose a company to risk if those using it don’t also actively try to identify PEPs worldwide on their own.
Although the term “PEP” is well-known in the compliance world and has a working definition in the guidelines published by the Financial Action Task Force (FATF), it is not used in the U.S. Foreign Corrupt Practices Act or the UK Bribery Act, where terms like “foreign official” and “foreign public official” are used.
The concept of a “politically exposed person” covers a complex collection of international designations, each of which leaves a fair degree of room for interpretation.
Given the complex regulatory landscape governing who qualifies as a PEP, organizations should consider expanding their screening activity to assess their exposure to those that could meet these definitions.
This post is based in part on an article written by Arachnys, a company offering IT programs for fraud and corruption investigations based in London. They can be contacted here.
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.