As you move through the Due Diligence Process with high net worth clients it is highly likely that you will be dealing with PEPs or Politically Exposed Persons. When dealing with PEPs it can be confusing to know how to proceed, so we’ve broken down what you need to know in order to transact with confidence. 

‍

What is a PEP?

A PEP (Politically Exposed Person) is someone who has a prominent public function or is related to/a close associate to someone with a prominent public function. 

‍

What is a prominent public function? 

A prominent public function can be many things. They can have roles in government such as: 

‍

• Heads of state
• Heads of government
• Ministers and deputy or assistant ministers. 
• Members of parliament or of similar legislative bodies. 
• Members of the governing bodies of political parties. 
• Members of supreme courts, of constitutional courts or of any judicial body

‍

Or they can high ranking people in prominent positions such as:

‍

• Ambassadors, charges d’affaires and high-ranking officers in the armed forces.
• Members of the administrative, management or supervisory bodies of state-owned enterprises. 
• Directors, deputy directors and members of the board of an international organisation.

‍

A PEP is not always criminal, but rather they present a higher risk than an ordinary person. This is because they have a prominent role in society that could mean they are susceptible to bribery or coercion. They also have the ability to influence the way that public funds are spent. 

‍

What Does it Mean For You?

If you are dealing with a PEP, you will need to conduct enhanced due diligence on your client. 

This means that you may need to go further than just proof of ID and address in order to ensure that the PEPs funds are legitimate and their own. We have put some additional information you can request below: 

‍

• Information on the source of funds or source of wealth of the customer
• Additional information on the intended nature of the business relationship
• The approval of your senior management to commence or continue the business relationship.

‍

At the end of the day what is key to consider is that these relationships are not negative ones, but rather just relationships that require increased monitoring and due diligence.

‍

If you would like to learn more about enhanced due diligence or how to deal with PEPs take our AML course here to get up to speed. 

‍