A politically exposed person is the term used to describe an individual’s perceived political influence, particularly when it comes to facilitating various benefits on behalf of others. People who hold political positions through elections or appointments would likely fall within this category. Other situations that may define someone as a politically exposed person include those who work in the field of financial services, lobbying, or those whose family members or associates serve in political offices. In some cases, members of a politically powerful individual’s entourage may also fall within this category. Individuals who hold influence as a result of political connections are often subject to laws that place restrictions on certain relationships or transactions.
Elected and appointed officials fall into the category of a politically exposed person, because they serve in a political capacity. As a natural outflow of their political influence, those who function in this capacity often possess varying degrees of power to determine or affect allocation of public resources. Examples of this may include an official who has the power to grant leases on public land, or to direct the spending of taxes that have been collected. Due to the temptation of self-aggrandizement this often presents to individuals serving in such a capacity, a politically exposed person may be subject to varying degrees of scrutiny. These can include mandatory reporting of certain financial transactions, or listing the various relationships the person has with individuals or commercial enterprises.
For example, the president of a large bank may give a campaign contribution to a member of a legislative body, with an informal whispered agreement that this contribution will come with additional unreported perks to the legislator in return for political favors. In this case, the bank president, due to his level of prominence in the community, and his political relationships with legislators, may be considered a politically exposed person. Relatives of the person may fall into this category, too. Within autocratic societies, a broader definition of a politically exposed person may extend to include a significant number of political cronies, officials, or even their extended family members.
In democracies and open societies that allow freedom of speech, a politically exposed person’s responsibilities are often clearly outlined within various laws. Those who seek to monitor these individuals generally have an easier time doing so in these circumstances, because laws that govern those with political influence are more likely to be enforced. Even so, the temptation to wield political influence may be very hard to resist, at times. As a result, reporting requirements may be quite complex, as governments use disclosure laws in an effort to discourage abuse of political influence.