Potential skippers: according to UK anti-money-laundering law, "politically exposed persons" pose a possible reputational risk to any firm that deals with them. Martin Nimmo explains who falls into this category.
| Author | Nimmo, Martin |
| Position | Legal briefing |
The UK Money Laundering Regulations 2007 (MLR) define a politically exposed person (PEP) as someone who "is, or has at any time in the preceding year been, entrusted with a prominent public function by a state other than the UK, a (European) community institution or an international body"--or a family member or known close associate of such a person.
This designation is aimed at preventing people who have been in a position of authority from making use of funds plundered from their state. So, former presidents such as Suharto (indonesia), Marcos (Philippines), and, probably most infamously, Abacha (Nigeria) and their families would all appear on a definitive list, if one were to exist.
Some countries have passed laws aimed at preventing "capital flight". Nigeria, for instance, prohibits state governors from holding bank accounts in other jurisdictions. But the likelihood is that, if someone has amassed funds illegally, they will somehow find a way to get them across the border before skipping the country themselves--perhaps even as "boarding school fees" for a child being educated abroad. Until allegations of criminality are actually made, capital flight may well be legitimate business. But it is estimated that as much as a quarter of Africa's combined GDP is the subject of capital flight.
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By no means all PEPs are former heads of state. Ministers, heads of nationalised industries, former military commanders and many others could come under such a heading. But in practice it may be difficult to identify an individual as a PER For example, does someone who last held a publicly prominent position in March 2008 suddenly become not politically exposed this month? It's also not obvious from the wording of the regulations whether heads of state of other EU countries are excluded from the definition of PEPs.
You should exercise caution if you're approached by anyone who is not a British national resident in the UK who has been a senior public official. The EU's expansion is bringing more and more countries into a position of privilege, but the recent history of some member states has identified individuals who may indeed be suspect--take the late President Ceausescu of Romania, for instance. You should be careful when dealing with nationals of less familiar countries. For example, Northern Cyprus is not part of the Republic of Cyprus (an EU member state) and is actually on HM Treasury's blacklist of states with which it...
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