High-risk client by nature, politically exposed person is not the easiest category to work with for everybody. Including those who build KYC/AML products.
However, with the proper risk prevention policy, we can work with the majority of them. And why shouldn't we? After investing in multiple marketing strategies, it is a bit silly to let the potential client go just because they fall under a certain profile. With this in mind, let's get to the bottom of who PEPs are and how to treat them in business.
What is the meaning of politically exposed person? As accepted by the majority of countries, a PEP is considered an individual who is currently or had been in a public position of great control. Highly influential and powerful, such people are more likely or have a greater chance of being involved in aiding or abetting money laundering, racketeering and financial fraud.
Considering all the above, working with politically exposed persons entails certain risks for financial institutions and certain Designated Non-Financial Businesses and Professions.
PEP as a term dates back to the 1990s and is a consequence of the political fraud in Nigeria. This huge money laundering uproar prompted global action towards preventing fraudulent behavior and financial system abuse by politicians and high-rank officials.
Although politically exposed persons require closer attention, the fact of being one does not provide a direct link to criminal activity.