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Questions and Answers
A Political Exposed Person is defined as someone who holds a public function.
True
FATF Recommendations 12 and 22 require countries to ignore potential risks associated with PEPs.
False
PEPs might misuse their positions for activities like money laundering and terrorist financing.
True
Denying a business relationship with a PEP is always in line with FATF recommendations.
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FATF stands for Financial Association Task Force.
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PEPs are individuals who have never been involved in public service.
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A Head of State is an example of a Politically Exposed Person according to the Dutch definition.
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A boyfriend or girlfriend is considered a close associate in the context of a PEP.
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The direct relationships of a PEP that need to be considered in an investigation only involve family members.
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The term limit for someone to be considered a Politically Exposed Person is defined by a specific time frame in the financial sector.
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A Member of a central bank's board of directors is not considered a Politically Exposed Person under the Dutch definition.
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The PEP definition varies significantly from country to country, with clear and universally accepted criteria.
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Study Notes
Definition of a Political Exposed Person (PEP)
- A PEP is defined by the Financial Action Task Force (FATF) as a person who holds, or has held prominent public function.
- Due to their position and influence, PEPs are at risk of abusing their power for money laundering, corruption, bribery, and terrorist financing.
FATF Recommendations for PEPs
- FATF Recommendations 12 and 22 require countries to ensure that financial institutions and designated non-financial enterprises take measures to prevent financial system and societal abuse.
- These measures are preventive and should not be interpreted to stigmatize business relationships.
Government Positions that Fit into the PEP Definition
- Head of state
- Head of government
- Minister
- Deputy minister or secretary of state
- Member of Parliament or member of similar legislative body
- Member of the executive board of a political party
- Member of a supreme court
- Member of a court of account or board of directors of a central bank
- Ambassador, chargé d'affaires or senior officer of the armed forces
PEP Investigation
- A PEP investigation should consider direct relationships with the PEP, including family members and close associates.
- Family members are included in the PEP definition to alert financial institutions to potential risks arising from close family ties.
- Close associates are relationships outside the family, such as a boyfriend, girlfriend, lover, or mistress.
Duration of PEP Status
- The duration of a person's PEP status is not clearly defined and can vary per financial institution, company, or profession.
- The treatment of PEP status should be based on a risk-based approach rather than a prescribed time limit.
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Description
Test your knowledge on the definition of Political Exposed Person (PEP) as outlined by the Financial Action Task Force (FATF). Learn about the increased risk associated with PEPs in the Know Your Customer field.
