According to FATF, what defines a Politically Exposed Person (PEP)?

• A. Individuals with minor public roles
• B. Individuals with prominent public functions
• C. Individuals working in private corporations
• D. Individuals under regulatory investigation

Answer: (B)

A Politically Exposed Person (PEP) is defined as individuals who hold or have held prominent public functions. This classification includes not only heads of state and government officials but also high-ranking politicians, judges, military leaders, and executives of state-owned enterprises. The significance of labeling someone a PEP arises from the heightened risk of involvement in corruption or money laundering due to their influential positions.

This definition is essential in the context of anti-money laundering (AML) efforts, as the activities and financial dealings of PEPs often attract extra scrutiny. Financial institutions are required to take appropriate measures when establishing business relationships with PEPs and must conduct enhanced due diligence to assess risks related to these individuals effectively.

The other options do not fit the definition: individuals with minor public roles do not possess the same level of influence or exposure to corruption risks as PEPs; those in private corporations may not operate within the public sector framework that warrants classification as a PEP; and individuals under regulatory investigation, while possibly significant in their own right, do not automatically qualify as PEPs based solely on that status.