A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function. The best canonical definition of a PEP is provided by [[FATF]]. ComplyAdvantage use the Financial Action Task Force (FATF) definition of PEP and PEP categorisation. FATF is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. The FATF currently comprises 34 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe.
The [[FATF]] are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats
to the integrity of the international financial system.
Because of the risks associated with PEPs, the [[FATF]] recommendations require the application of additional AML/CFT measures to business relationships with PEPs. These requirements are preventive (not criminal) in nature, and should not be interpreted as meaning that all PEPs are involved in criminal activity.
What is a tier one, two or three politically exposed person?
PEPS are sorted into the below classifications to measure risk.
High Risk – Level 1 PEPs
- Heads of state and government
- Members of government (national and regional)
- Members of Parliaments (national and regional)
- Heads of military, judiciary, law enforcement and board of central banks
- Top ranking officials of political parties
Medium-High Risk – Level 2 PEPs
- Senior officials of the military, judiciary, and law enforcement agencies
- Senior officials of other state agencies and bodies and high ranking civil servants
- Senior members of religious groups
- Ambassadors, consuls, high commissioners
Medium Risk – Level 3 PEPs
- Senior management and board of directors of state-owned businesses and organisations – e.g. Chairman of a Bank
Low Risk – Level 4 PEPs
- Mayors and members of local county, city and district assemblies
- Senior officials and functionaries of international or supranational organisations