A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public position either when executing an agreement or within the preceding 12 months. Due to their influence and access to public funds, PEPs are considered high-risk clients in the financial sector.
Examples of PEPs Include:
- Heads of state or government;
- Ministers, deputy ministers, and assistant ministers;
- Members of parliament;
- Mayors;
- Judges of supreme or constitutional courts;
- Members of supervisory boards of state audit institutions or central banks;
- Ambassadors and chargés d’affaires;
- Senior officers of the Defence Forces;
- Members of the directing, supervisory, or administrative bodies of state-owned enterprises.
Family Members & Close Associates of PEPs
The PEP designation is not limited to the individual alone but also extends to their:
🔹 Spouse or equivalent partner;
🔹 Children and their spouses/partners;
🔹 Parents;
🔹 Close business associates.
AML policies
Most regulated financial brokers avoid dealing with Politically Exposed Persons (PEPs) due to the high risks of corruption, money laundering, and regulatory compliance issues. By adhering to strict AML policies, brokers ensure a secure and fair trading environment for all clients. The policy regarding PEPs includes the following aspects:
1. High Risk of Money Laundering & Corruption
Since PEPs often control or influence public funds, they are at greater risk of being involved in bribery, fraud, or embezzlement.
2. Strict Regulatory Compliance
Regulatory bodies including Cyprus Securities and Exchange Commission (CySEC), which regulates Eurotrader, enforce strict guidelines to prevent money laundering. Accepting PEPs would require brokers to take on additional risks, which could result in heavy fines, legal issues, or license suspension.
3. Increased Due Diligence Requirements
Accepting a Politically Exposed Person would require brokers to conduct Enhanced Due Diligence (EDD), including:
🔹Extensive background checks
🔹Ongoing monitoring of financial transactions
🔹Verification of the source of funds
4. Risk of Sanctions & Blacklisting
Some PEPs may be linked to sanctioned entities, governments, or organizations. If a broker facilitates transactions for a sanctioned PEP, such action can lead to severe legal consequences, financial penalties, and/or being blacklisted by regulatory authorities.
5. Protecting the Broker’s Reputation
Brokers aim to maintain a transparent and trustworthy reputation. A PEP engaging in illegal financial activities through a broker’s platform could lead to reputational damage, loss of clients and business partners, and increased regulatory scrutiny.
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