Research by Moody’s Analytics reveals a lack of public awareness about Politically Exposed Persons (PEPs) and the associated financial risks.
Conducted globally across Europe, the US, and the Asia-Pacific region, the survey found that only 45% of over 7,500 respondents could accurately identify what a PEP is. A Politically Exposed Person is someone holding a significant public role, such as a government official or military officer, and by extension, their close associates and family members are also considered ‘PEPs by Association’.
Even when provided with a definition, fewer than half (49%) understood that a person could be categorised as a PEP by association. A substantial 33% wrongly believed that a public friendship doesn’t qualify one as a PEP by association. This lack of awareness extends to understanding what kinds of relationships could label someone as a PEP by association, with 11% of respondents incorrectly selecting “none of the above” when given a list of valid relationships.
The survey also highlighted a misunderstanding within the UK regarding the permanence of PEP status. Over half (53%) believed that once an individual is categorised as a PEP, the status is forever, even after they’ve left their politically exposed roles. Only 19% correctly identified that PEPs could exist in the sports sector. The majority mistakenly thought that the private sector and media, at 31% and 35% respectively, are more likely places to find a PEP.
Globally, there’s a divergence in understanding what constitutes a PEP, depending on jurisdiction. For instance, the percentage of respondents who considered individuals in the military to be PEPs ranged from 46% in Singapore to 74% in Australia.
Keith Berry, General Manager of Know Your Customer Solutions at Moody’s Analytics, emphasised the gravity of the findings. “Our research illustrates that globally there is no clear understanding of what a PEP is, who might be considered politically exposed persons in a compliance process, and crucially whether someone connected to a PEP could also be considered a PEP by association,” he said.
“It’s true that definitions and regulation relating to PEPs differ worldwide, so it’s important for organisations to consider this when structuring a risk-based approach to combatting financial crime. PEPs pose an elevated risk when it comes to bribery, corruption, and money laundering. This is due to the power, influence, and access to finances inherent in their positions.”
Keep up with all the latest FinTech news here.
Copyright © 2023 FinTech Global
