Understanding who these people are and the risks they may pose to your business is essential for any company looking to protect itself from legal issues and maintain ethical and legally compliant operations. But how can you identify these people?
In this article, we will explain the concept of PEP, detail the associated risks, and present strategies to effectively manage these exposures. Follow along and understand how your company can protect itself when dealing with PEPs!
What is a Politically Exposed Person?
A Politically Exposed Person is an individual who holds or has held a prominent public office, whether in Brazil or in other countries, and is therefore considered more exposed to involvement in corruption activities and other illicit practices.
The classification of PEPs is not limited to people directly involved in the position, but may also include family members, close collaborators and people with whom they have close relationships, due to the possibility of these relationships being exploited to facilitate acts of corruption or money laundering.
In Brazil, the definition of PEPs is regulated russia phone number by Resolution No. 29 of the Financial Activities Control Council (COAF) and includes authorities from all branches of government — executive, legislative and judiciary — at all levels of government, from ministers and secretaries to judges and members of public bodies. In addition, high-ranking military officers and individuals who have held relevant positions in the last five years may be considered PEPs, depending on the internal policies of each institution.
What are the risks of Politically Exposed Persons to business?
Politically Exposed Persons pose significant risks to businesses due to their potential involvement in illicit activities, such as corruption and money laundering. These risks can be amplified by the positions of power and influence that these individuals hold, facilitating illegal practices or the misappropriation of public funds.
Below, we detail some of the main risks associated with PEPs:
Reputational risk : associating with PEPs involved in illicit activities can seriously damage a company’s reputation. This can result in the loss of customers, business partners and even investors, who may prefer to avoid any association with illegal or unethical practices;
Legal and regulatory risk : companies that maintain relationships with PEPs without implementing the appropriate compliance measures may face severe legal and regulatory penalties. In Brazil, financial institutions are required to adopt strict procedures to monitor these individuals to prevent involvement in money laundering or corruption schemes;
Risk of conflict of interest : the presence of Politically Exposed Persons in a business relationship may create conflicts of interest, especially if they use their position to influence decisions for their own benefit or that of their allies;
Risk of financial sanctions : if a company is caught in transactions or partnerships with people involved in illicit activities, it may be subject to financial sanctions, asset freezes and even bans on doing business in certain markets, compromising the financial viability of the business.
These risks reinforce the importance of implementing robust and ongoing due diligence policies to identify and monitor Politically Exposed Persons, ensuring that companies can mitigate the associated risks and operate safely and in compliance with applicable regulations.
How to identify a PEP?
Identifying a Politically Exposed Person (PEP) is an essential process to mitigate risks in business transactions and relationships. A PEP, due to their position of power, may be more susceptible to engaging in illegal activities such as fraud, corruption or money laundering.
To ensure the security of a transaction or partnership, it is important for companies to carry out a detailed analysis of the PEP's profile. Therefore, we have listed some of the main criteria to consider when identifying it:
Check tax and financial information : assessing the PEP's tax and financial situation is important to identify irregularities, such as suspicious financial transactions or transactions that are incompatible with their declared income;
Search for a history of involvement in illicit activities : find out if the person has a history of involvement in fraud, corruption or other crimes , such as participation in money laundering schemes, slave labor or financing of terrorism;
Identify equity interests : examine the companies or entities in which the PEP has an interest. This helps identify potential conflicts of interest or links to illicit activities;
Analyze professional history and connections : Reviewing professional history , including past and current positions, as well as connections with other influential figures, can reveal associations that pose business risks.
Implementing robust internal control and compliance policies , using data monitoring tools, can help identify such risks and ensure regulatory compliance. Want to know how to use data technology to benefit your business? Check out the following.
How BigDataCorp can help your company verify Politically Exposed Persons
The Political Engagement Dataset, developed by BigDataCorp, is a powerful tool that helps companies identify and assess the political engagement of individuals or organizations. This dataset aggregates essential information related to political participation, such as:
Donations to electoral campaigns;
Involvement in public contracts;
Provision of services for campaigns, and current or previous political positions held by members of a company's corporate structure.
By using this dataset, your company can conduct due diligence on Politically Exposed Persons (PEPs), ensuring compliance and mitigating potential risks associated with these relationships.
BigDataCorp's Data Platform provides access to a wide range of information organized in datasets that support various processes and areas of companies. These datasets can be easily integrated into existing systems, providing APIs that simplify access to the most reliable data on the market.