A Delicate Balancing Act: Working with Politically Exposed Persons
Welcome to the July 2024 edition of our newsletter! In this issue, we’ll examine how regulatory changes in the United Kingdom might signal a broader shift in the treatment of high profile politicians, and look at what your company should do if considering working with someone in that orbit.
Access and Exposure: What to Know About Who You Know
Political races have been ramping up across the globe, as has scrutiny of politicians throughout much of the Western world. In an effort to ensure that anti-money laundering regulations are applied properly to persons of political influence, the United Kingdom’s Financial Conduct Authority recently published guidance trying to balance the need to prevent public corruption while respecting an individual’s right to privacy. The authority highlighted the increased risk of politically exposed persons “and those connected to them, may be at risk of being targeted for bribery and corruption, with the financial system used to launder the associated proceeds,” while also stressing that “more intrusive measures” of inquiry should only be taken if an initial review identifies areas of concern.
Current and former politicians, and also their families and network of friends, often leverage their proximity to power to join advisory boards, consult for private business or lobby on their behalf (hopefully while registering to do so, although the line between lobbying and consulting is a blurry one.) If your company seeks access to persons close to seats of power, be vigilant in looking at their deficits as well as their beneficial attributes. Who has this person associated with in the past? What did they do, if anything, to gain their current status, and what was their professional and personal life like both before and after? Various countries and international law enforcement bodies also maintain watch lists of politically exposed persons, often a few degrees of separation from an actual politician, such as family members and former spouses.
Context always matters, and in an increasingly inward looking world, it might matter even more. Understanding who politically relevant persons have done business with, and had other relationships with, can help your company gain the perks of effective, high-level partners or representatives while minimizing the reputational risks they can bring if scandalous behavior comes to light.