Are Your Business Counter-Parties PEPs?

Are Your Business Counter-Parties PEPs? Rethinking Politically Exposed Persons Designations

Political Warfare is not just a national security concern; it’s also an enterprise risk issue for the private sector. Modern malign influence is exercised on a backbone of clandestine commercial infrastructure. While a great deal of national focus has been placed on effective tools for identifying malign influence in global media, less attention has been paid to identifying points of interdiction outside the media, such as in the financial sector. One such potential interdiction point is in Politically Exposed Persons (PEPs). 

Framing the Problem

Screening for PEPs is a key element in a variety of vetting and diligence processes mandated in the financial sector. A cursory review of the literature in this space consists of calls for international standards, lamentations as to the complexity of the task, references to existing lists (and their deficiencies), and discussions of supporting software services with better data. What is less commonly mentioned is the validity of the definition itself in the current geopolitical threat environment, and by extension, the effectiveness of the PEP screening process in this context.

Most compliance and due diligence personnel and entities rely on the definition (see box at right) of PEPs provided by the Financial Action Task Force (FATF), an intergovernmental body charged with protecting global financial systems and the economy from the threats posed by money laundering and terrorism financing. As such, the FATF’s guidance for defining and mitigating financial issues with PEPs is largely preventive in nature. In most cases, the FATF’s definitions focus on the national level of government and explicitly do not include more middle or junior-ranking individuals. As will be demonstrated later in this piece, these omissions may constitute a significant vulnerability.

It should be noted that in the diligence space, PEPs are not presumed guilty until proven innocent. Rather, their positions simply place them in the position of having an inherent capability to commit financial fraud on a grander and more impactful scale than others. The same is true for the potential of these individuals to be involved in political warfare operations, but in this latter case, these individuals may be unwitting parties. Like in the financial sector, this increased risk warrants increased diligence.

FATF’s guidance on PEPS – dated 2013 – is to implement effective due diligence on customers, determine if the customer is a foreign or domestic PEP, and, if they are,      take risk mitigation measures. Current commercial tools and metrics for following FATF’s guidance may indeed satisfy regulators and successfully minimize the fines and penalties levied for substandard diligence. However, not only is this guidance especially arduous and time-consuming, but it is also not broad enough to cover the depth and breadth of the problem set from a modern national security optic. 

Since 9/11, the FATF has been almost exclusively focused on countering money laundering, terrorism finance, and weapons of mass destruction; these definitions were developed in this context. While the FATF’s tools and guidance are still the gold standard for due diligence compliance, they do not effectively address modern geopolitical realities and threats. 

Political Warfare and Malign Influence in Practice

Regarding Russia, one scholar poses the astute question: “Perhaps the real question is not how far the state has managed to tame [organized crime], but how far the values and practices of [organized crime] have come to shape modern Russia.”  Another asserts succinctly that “the [intelligence] services have captured the Russian state [and the] result is a political community that sees the conduct of political warfare as the primary tool of power.” 

Concurrently, China is executing an aggressive and large-scale political warfare operation against the West that includes efforts to “penetrate a wide range of U.S. academic institutions, companies, government agencies, and nongovernmental organizations (NGOs).”

While the FATF is concerned with PEPs due to their unique position to commit financial crimes, we should be equally concerned about their ability to become entangled (wittingly or unwittingly) in hostile political warfare operations. Consider, for instance, the types of people who, according to recent scholarly research, both facilitate and are vulnerable to Russian political warfare:

  • Facilitators of Russian political warfare: “…friendly academics, experts and journalists, consulting firms, celebrities, producers, friendly foreign political actors, front organizations, business partners of Russian companies…”
  • Vulnerabilities to Russian political warfare: “…corruption as a lubricant for malign influence operations, anti-system parties […], defective democratic institutions…”

Beyond the preponderance of private sector actors illustrated above, PEPs are central to this problem set. Ultimately, Russia is selling kleptocracy, and PEPs, who are vulnerable to corruption, are both the primary market for these activities and the vector through which operational success is achieved. Because of this intentional targeting, the FATF should modernize their granular definitions of classes and types of PEPs to include this problem. 

An analysis of Chinese Communist Party (CCP) political warfare operations provides an      even more compelling case to expand the definition of PEPs. In the CCP, political warfare falls in large part to the United Front Work Department and its subordinate and affiliate entities. Note that in the graphic below, the organizations below the central horizontal line specify the types of organizations and activities that either play host to or serve as targets of these operations (e.g., Political parties, subnational governments, sister city programs, and friendship associations). If the senior people in these organizations were not considered PEPs before, they arguably should be now.

A Proposed Expansion of Definitions and Structure for PEPs

Having seen that Russia and China both demonstrably use the private sector and commercial entities as both targets and weapons in modern political warfare, there appears to be a strong argument for expanding the definitions of PEPs to reflect this reality. Again, the FATF’s definitions were developed in the context of counterterrorism, but countering political warfare tactics requires rethinking what it means to be a PEP today. Running for political office, contributing to a political campaign, lobbying, or registering as a foreign agent constitutes political exposure, regardless of the outcome. In the FATF’s current view, those things do not necessarily make one a PEP. Being mindful of the positions and aspirations of the individuals frequently targeted by foreign intelligence services leads one to examine a much broader data pool. Accordingly, information professionals (public and private) should consider the following new or expanded definitions of PEPS:

  • Super Empowered Individuals (SEIs). Also often called “global elites,” the US Office of the Director of National Intelligence (ODNI) defines this category of person as follows: 

“…persons who have overcome constraints, conventions, and rules to wield unique political, economic, intellectual, or cultural influence over the course of human events… “Archetypes” include industrialists, criminals, financiers, media moguls, celebrity activists, religious leaders, and terrorists. The ways in which they exert their influence (money, moral authority, expertise) are as varied as their fields of endeavor. … this category [predominantly] excludes political office holders (although some super-empowered individuals eventually attain political office), those with hereditary power, or the merely rich or famous.” 

No official public lists of SEIs currently exist, but at least one private company has developed a proprietary initial list. Given the degree of agency derived from evolving into an SEI – for example, Bill and Melinda Gates, George Clooney, or Erik Prince – these individuals surely meet the FATF standard of “an individual who is or has been entrusted with a prominent function.” SEIs are included here as a separate non-tiered category of PEP, due to their unique level of agency and influence.

  • National-Level Politically Exposed Persons (Tier-1)
  • Heads of State, and elected and/or appointed officials in executive, legislative, and judicial branches of national government
  • First ladies and first gentlemen
  • Former living heads of state and key senior officials
  • Elected or appointed cabinet members
  • Senior leadership of national-level executive ministries, departments, and key agencies 
  • Diplomats and Heads of Mission
  • Senior executives and boards of directors of central banks
  • Senior executives and boards of directors of State Owned Enterprises (SOEs)
  • Military General Officers and Flag Officers
  • National-level political party leadership
  • Royal Family Members
  • Family members and close associates of the above
  • International Politically Exposed Persons (Tier-2)

While the FATF currently includes “persons who are or have been entrusted with a prominent function by an international organization” under their PEP standard, there is no mention of foreign agent registration schemes, which often involve lobbying. Critically, while modern political warfare tactics may use international organizations (the World Congress of Families is alleged to be used as a front for Russian political warfare activities), domestic organizations like the National Rifle Association have been entangled in these operations as well.,

Given current events, a list of the leadership of NGOs known or suspected to be correlated to foreign intelligence operations is warranted. So is the inclusion of the aforementioned sister city programs, friendship associations, and others.

  • Sub-national Politically Exposed Persons (Tier-3)
    • Senior-level PEPs at regional (e.g., state, provincial, tribal) levels of government, such as governors and other elected and appointed officials at the state/provincial/tribal level. These entities are established and widely accepted targets of Chinese political warfare tradecraft.
  • Municipal-level Politically Exposed Persons (Tier-4).  
    • Municipal leadership of cities with large populations and economies, sister city programs, foreign friendship associations, and/or hosting a foreign consulate
  • Political Influencers, Operatives, Financiers, and Support Staff (Tier-5).  
    • Could be subdivided to conform with the above data structure.

The tiered structure for PEPs proposed above is intended to provide user-friendly tools for assessing risk levels in the context of specific business purposes. PEPS in Tiers 1-2 and SEIs are likely to constitute a recognizably higher risk for most modern businesses. Tiers 3 and 4 vary greatly in terms of risk exposure, depending on the location of the determining business and its client base. Tier-5 is more akin to the SEI grouping in that it is less geographically fixed yet constitutes a fairly high potential level of risk exposure, particularly in relation to adversaries using political warfare tactics to exert influence and manipulate the civil population.


The current PEP screening process is generally assessed to be both unpopular with those who must conform to it and insufficient to disrupt authoritarian states’ current brand of warfare on Western democracies. Almost 25 years ago, the FATF designed the current PEP screening process to confront the greatest threat to free market capitalist democracies – a critical action that should not be abandoned because it is difficult, inconvenient, or expensive. However, the process must be modernized – at the definitional level – to address the current threat environment. Russia and China’s ability to degrade the integrity of Western democratic and financial institutions is almost entirely dependent on their ability to influence a broader spectrum of PEPs than is currently mandated for enhanced diligence. It is here where this war will be won or lost.


  • Foreign PEPs: individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political
    party officials.
  • Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political
    party officials.
  • International organisation PEPs: persons who are or have been entrusted with a prominent function by an international organisation, refers to members of senior management or individuals who have been entrusted with equivalent functions, i.e. directors, deputy directors and members of
    the board or equivalent functions.
  • Family members are individuals who are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of
  • Close associates are individuals who are closely connected to a PEP, either socially or professionally.


Kathleen Cassedy, VP/Forecasting, Orca AI, LLC

Ian Conway, CEO, Orca AI, LLC


  6. Shekhovtsov, Anton. Russian Political Warfare: Essays on Kremlin Propaganda in Europe and the Neighborhood, 2020-2023, SPPS Vol 271, Ibidem Verlag
  7. Hamilton, Clive and Ohlberg, Mareike. The Hidden Hand: Exposing how the Chinese Communist Party is Reshaping the World. Oneworld, 2020.