Beware of Politically Exposed Persons, If You Can Figure Out What They Are

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) wants compliance professionals to be particularly wary of politically exposed persons, which it refers to as “foreign individuals who serve in a prominent public role, foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.” So-called PEPs often trigger money-laundering and corruption concerns and are the subject of enhanced due diligence, but pinning down who they are isn’t easy. It changes according to where you’re looking. It might entail membership in a clan, a tribe, a family, being the alumnus of a school or simply having a lot of personal wealth. The Wolfsberg Group, an association of thirteen global banks that recommends standards for managing financial crime risk, warns: “There is no single, globally agreed definition of a PEP.” Instead it defines categories of individuals, including heads of state, members of royal ruling families, executives of state-owned enterprises, high-ranking military officers and senior political party officials. PEPs often control private organizations and state-owned bodies, so enhanced due diligence applies to those entities as well. Writing in FCPA Blog, Richard Cassin makes a case for keeping the definition hazy.