The FATF (Financial Action Task Force) defines a PEP as an individual entrusted with a prominent public function. The position held by a PEP can expose your company to heightened potential for AML (anti-money laundering), CTF (counter-terrorism financing) sanctions, and anti-bribery and corruption compliance risks.
Smartryk Calitz, Mubesko Africa’s head of Forensic Investigation, warns that companies engaging with PEP’s must implement enhanced due diligence measures which includes sourcing additional information while also conducting ongoing monitoring of the business relationship, including the keeping of records.
Failure to comply could result in the close attention of heavyweight authorities such as FICA (Financial Intelligence Centre), SARB (South African Reserve Bank), SARS (South African Revenue Service), FSCA (Financial Sector Authority), and NPA (National Prosecuting Authority).
Who is a PEP?
- Legislative Bodies: An example is a Member of Parliament
- Executive Bodies: A PEP could range from the head of state down to the assistant ministers
- Diplomatic Roles: Ambassadors or chargé d’affaires would be considered PEPs
- Judiciary Bodies: Key people working within supreme courts, constitutional courts or high-level judicial bodies
- State-Owned Enterprises: A PEP would typically be anyone from a senior executive upwards. However, even former members of the board of directors no longer associated with an organization may retain influence and still be flagged as PEPs
- Central Financial Institutions: Examples here would be the Court of Auditors and members on the boards of central banks
- Armed Forces: In this situation, a PEP rating would typically only apply to a high-ranking officer/li>
- International Sports Committees: Members of these committees may be influenced to vote on the location of major sporting events/contracts for building venues, etc., so have recently been included by FATF under their definition of a PEP
Known close associates of PEPS.
- Anyone with a close business relationship or joint beneficial ownership of legal entities or legal arrangements with a PEP
- Anyone who has the sole beneficial ownership of a legal entity which is known to have been set up for the benefit de facto of the PEP
Immediate family members of PEPS.
- Parents and children of PEPs.
- Spouse or partner.
- Siblings.
- Uncles and aunts.
- Indirect family members (such as in-laws).
As the definitions or categories of PEP’s may vary per country, Smartryk urges South Africans to study local definitions when doing business with global companies.
“South Africa has made some progress since being placed on the FATF grey list in February 2023. This grey list indicates ‘jurisdictions under increased monitoring’. Our listing has heightened awareness, and companies must develop and implement compliance programmes which present impeccable AML / CFT controls”.
https://www.icfp.co.za/2023/01/23/what-is-a-politically-exposed-person-pep/
Forensic Investigation as a core Mubesko service which can guide your compliance process when dealing with PEP’s, augmented by Mubesko’s exemplary consulting record in the public sector.
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