Rethinking the meaning of a politically exposed person to promote substantive compliance of the financial action task force standards

Mashale, Nthabiseng Evenecias

Rethinking the meaning of a politically exposed person to promote substantive compliance of the financial action task force standards

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

Department of Commercial Law

Faculty

Faculty of Law

Abstract

This dissertation explores whether there is a need for a broader definition of Politically Exposed Persons (PEPs). It aims to enhance the understanding of PEPs to improve countries' abilities to substantially comply with the Financial Action Task Force (FATF) standards. The dissertation observes that the current definition of PEPs is deemed too narrow, thereby hindering substantial compliance with the FATF standards. It highlights the need to broaden the scope of PEPs beyond natural persons to encompass legal entities, similar to the EU model implemented in the UK. The paper presents a brief comparative analysis of the Anti-Money Laundering, Counter-Terrorism Financing, and financing of proliferation of weapons of mass destruction (AML/CTF) regimes of the FATF, South Africa, the EU, and the UK in relation to PEPs. It considers Recommendation 12 of the FATF, Mutual Evaluation Reports, domestic legislation of the respective jurisdictions, financial intelligence units' guidelines and international standard-setting bodies like Wolfsberg Group and Basel Committee on Banking Supervision and international instruments. The comparison reveals that the fundamental element of a PEP being a natural person is too restrictive, and thus ineffective in combatting ML/TF and hinders national efforts by countries like South Africa to promote substantive compliance with the FATF standards. Therefore, this paper suggests ways to respond to this and other challenges. It suggests that a broader definition of PEPs be adopted by the FATF on an international level and by South Africa, incorporating legal entities in the definition of PEPs to better comply with FATF AML/CTF standards.

Keywords

Policy exposed person

Financial action task force

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Masters

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