Politically Exposed Persons (PEP’s) can be identified as individuals who are currently, or have previously been, in a position which holds a public function and involves vast responsibility due to their access to state information. Consequently, PEP’s are ideal targets for bribery and corruption, because they have vital information and funds to offer. Consequently, if an organisation is going to communicate and conduct business with a PEP, then they need to do so fairly and lawfully, through complying with the UK Bribery Act.
How can PEP’s be a risk to organisational integrity?
PEP’s can pose a risk to organisations through bribery, corruption and money laundering. Therefore, restrictions need to be placed upon PEPs in order to monitor their behaviour in an organisation. The Dow Jones Watchlist created a list of roles which can be expected to involve risk, and this list included:
– Heads of state/national/regional government.
– Senior members of the armed forces.
– Political pressure group officials.
– Senior members of the police services.
PEP’s are very controversial; therefore, they are subject to tighter controls and regulations within organisations. The Sommet Evian Summit in 2003, which was conducted by G8 Member Nations, including the UK and the US, voted in favour of the Organisation for Economic Co-operation and Development’s (OECD) decision to place controls over the due diligence of PEP’s. These tighter controls were established to monitor the financial processing conducted by PEP’s, which in the past has been corrupt.
The controversial nature of PEP’s was heightened following the 2016 incident involving finance minister Pravin Gordhan and the Gupta family, who were involved with Oakbay Investments. The Gupta family claimed to be victims of a political campaign, which involved Gordhan being forced by the Guptas to intervene in the closure of Gupta owned business bank accounts. This enforces the importance of due diligence to protect the integrity of an organisation from the involvement of PEP’s.
To prevent PEP’s posing a risk to your organisation and reputation, investigation of PEP’s and implementation of anti-bribery and corruption policies need to be in place. Rudi Kruger, manager at Risk Solutions at LexisNexis South Africa, stated that PEP’s are risky individuals to employ due to them posing a risk of “money laundering, bribery and corruption due to their position and influence.” The Money Laundering Regulations 2007 implemented the requirement of enhanced due diligence to deal with PEP’s, notably outside of the UK, to ensure they are monitored correctly.
Another recent bribery scandal in March 2018 involved two former Greek Prime Ministers and an EU Commissioner, who were apparently bribed by Novartis, a Swiss medical giant, from 2006-2015. Novartis were investigated for bribing officials regarding drug prices and sales to hospitals, these bribes eventually totalled up to over €10 million.
If an organisation wants to achieve fair and lawful business relations with PEP’s, then organisations need to ensure they remain compliant with the UK Bribery Act, Money Laundering Regulations 2007 and the OECD regulations.