Politically exposed person
In the context of the regulation of the financial industry, a "politically exposed person" (PEP) is a person who has been given a significant public responsibility. A PEP is considered to carry a greater risk of possible engagement in illegal activities such as bribery and corruption as a result of the position they have achieved and the influence they may wield. Particularly in international settings, the words "politically exposed person" and "senior foreign political figure" are sometimes used interchangeably with one another. The term "foreign official" refers to individuals who, under the Foreign Corrupt Practices Act, or FCPA, are considered to be government persons. The definitions of "foreign official" and "politically exposed person" are comparable; however, there are quite a few differences between the two terms, and they should not be used interchangeably. The word "PEP" is most often used to refer to consumers in the financial services sector, but the phrase "foreign official" is used to refer to the potential dangers posed by interactions with third parties in all types of businesses.
The term "politically exposed individual" has its origins in the late 1990s, during a period of time that was referred to as the "Abacha Affair." Sani Abacha was a Nigerian dictator who, together with members of his family and friends, masterminded and carried out a large-scale, methodical theft of assets from the Nigerian central bank over the course of many years. It is thought that several billion dollars were stolen, and that the cash were moved to bank accounts in the United Kingdom and Switzerland. In 2001, the government of Nigeria that had taken power after the fall of the Abacha regime began an attempt to retrieve the money. It filed complaints with many European authorities, one of which being Switzerland's Federal Office of Police, which examined close to sixty different Swiss banks as a result of those accusations. During the course of this investigation, the idea of a "politically exposed person" came to light. In response to this idea, the United Nations established a committee in December 2000. This committee's work eventually resulted in the United Nations Convention against Corruption being approved in October 2003. The convention went into effect in December 2005, and ongoing annual reviews of its implementation and asset recovery continue to this day. In 2004, it was finally ratified as a law throughout the European Union.
PEP-specific compliance law tackles the connection between bribery of public officials, the laundering of illicit funds, and the funding of terrorist organisations. More than one hundred nations have amended their legal codes concerning the regulation of financial services in an effort to prevent political corruption after September 11, 2001.
In the case of Riggs Bank and other financial institutions, hefty penalties have been levied because these firms engaged in business with politically exposed persons (PEPs) without adhering to appropriate protocols.
In spite of regulations, political figures like as Muammar Gaddafi and Hosni Mubarak made headlines at 2013 for having their assets frozen in United States institutions that did not comply with due diligence requirements.