LONDON, UK, September 14, 2023 – New research released today by Moody's Analytics has highlighted low awareness around the world about Politically Exposed Persons (PEPs) and the risks they can be connected to. The global survey polled more than 7,500 members of the general public across Europe, the US, and APAC. It found that only 45% of respondents know what a PEP is.
A politically exposed person (PEP) is an individual who holds a prominent public position. PEPs can include government officials, military officers, senior judges, high-ranking sporting officials, and high-ranking executives of state-owned enterprises. Family members or close associates of PEPs are also considered exposed to risk as ‘PEPs by Association’.
Awareness of connections to PEPs is also low. After being provided definitions of a PEP, fewer than 50% of respondents correctly answered that a person can be a PEP by association and nearly a third (33%) incorrectly believed having a public friendship would not qualify someone as a PEP by association.
Similar trends highlighted a lack of awareness when respondents were presented with a list of relationships that could legitimately qualify someone as a PEP by association. This included family members of prominent public officials, political friends, and other valid examples. 11% of respondents selected “none of the above” when asked which relationships would designate a PEP by association.
Scrutiny around managing the risks of PEPs has been a much-discussed topic in recent months, with the UK headlines dominated by several politicians claiming to have had banking services denied or withdrawn, due to their PEP status.
Nevertheless, awareness of what constitutes someone being considered a PEP and the implications for this across society remains low. Within the UK, 53% of respondents answered that once you are a PEP, you’re always a PEP, even after leaving the politically exposed role. The survey also revealed that very few respondents (19%) correctly identified the sports sector as an industry where politically exposed persons could be found. Instead, the private sector and media were incorrectly perceived as more likely sectors, 31% and 35% respectively, to find a politically exposed individual.
Worldwide, PEP regulations and definitions can vary by jurisdiction. The research reveals differences around the world in what individuals consider a PEP. For example, respondents who considered individuals in the military to be PEPs varied widely from 46% in Singapore to 58% in the UK, 61% in the US, and 75% in Australia.
Keith Berry, General Manager of Know Your Customer Solutions at Moody’s Analytics said, “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.
“It’s true that definitions and regulation relating to PEPs differs worldwide, so it’s important for organizations 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.
"However, FATF advice is clear that the heightened risk from PEPs should not lead to bias or denial of service. It means that working with a PEP or PEP by association requires enhanced due diligence and risk mitigation measures to lessen any potential associated risk and ensure compliance teams can make informed decisions as part of onboarding clients and monitoring ongoing risk.”
We partnered with a research consultancy, Censuswide, and used Surveyplanet, to design and conduct the study. The research is based on an in-depth survey of 7,688 members of the general public spanning North America, Europe and APAC.
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