A Politically Exposed Person (PEP) is someone who has been entrusted with a prominent public function. Due to the position that a PEP is in, there is a higher risk for that particular individual to be involved in corruption or bribery. This term is usually used in the financial services industry and its accompanying industries.
In 2003, the Financial Action Task Force on Money Laundering (FATF) standard was established and the definition of a Politically Exposed Person is usually drawn from its definition. FATF as an internation inter-governmental body was founded in 1989. It is important that stakeholders in countries that are part of the FATF adhere to its said terms and courses of action. It is there to set standards and to promote measures to combat money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction to preserve the integrity of the global financial system.
The FATF’s latest definition of PEPs are as such:
- Foreign PEPs: individuals who are or have been entrusted with prominent public functions by a foreign country, for example, Heads of state or Heads of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.
- Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials. (Not all countries subscribe to the concept of domestic PEPs with respect to regulatory requirements/application of due diligence. For example, US law, specifically Section 312 of the USA Patriot Act and its implementing regulations provide for enhanced due diligence for SFPFs (Senior Foreign Political Figure) only, defined as: “a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a ‘foreign’ government…a senior official of a major ‘foreign’ political party; and a senior executive of a ‘foreign’ government-owned commercial enterprise.)
- Persons who are or have been entrusted with a prominent function by a state-owned enterprise or an international organisation refers to members of senior management, i.e. directors, deputy directors and members of the board or equivalent functions.
It is important for companies and businesses in Singapore to take note of such individuals and adhere to FATF’s guidance on PEPs. It is the duty of the company and thus the directors or officers who are running the company or business owners to know who they are doing business with. Here is the FATF document for reference:
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
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