The Inconvenient Truth: Congratulations on your public sector board appointment. You are now automatically a politically exposed person (PEP)

The Inconvenient Truth: You're Now a Politically Exposed Person (PEP)

A phone call late at night informs a professional that the President wants them to chair a strategic state enterprise. Within days, congratulatory messages pour in, while practical concerns emerge. The individual has now become a Politically Exposed Person (PEP), which carries significant implications.

What is a Politically Exposed Person? Under global standards against money laundering, a PEP is anyone who has or currently holds a prominent public function at home, abroad, or in an international organization. This includes heads of state, ministers, legislators, senior judges, military chiefs, party officials, and chief executives of state enterprises. The label extends to spouses, children, parents, and close business associates, regardless of location.

Banks must rigorously scrutinize PEPs, seeking senior management approval for business relationships, tracing the source of wealth, and closely monitoring accounts. The consequences can include lengthy paperwork, delayed or restricted transactions, and cautious lenders. Family members may also face scrutiny, raising questions about the appropriate role of family trees in financial matters.

While public service remains honorable, the burden of accepting a public board appointment has evolved in many African countries. Accepting such an appointment often comes with a modest sitting allowance that barely covers expenses, coupled with the expectation of family contributions and the illusion of controlling national resources. The risks, however, are substantial, ranging from liability for management decisions to a financial label that can outlast the appointment itself.

The existence of the watchtower stems from the need to combat money laundering after General Sani Abacha's alleged looting of Nigeria's resources. While the watchtower was essential, being a PEP without proper oversight can become a prison, with institutions opting to maintain the label indefinitely due to the perceived safety of continued scrutiny.

The European Union requires at least a year of heightened measures after an official leaves office, while Britain and the United States have varying rules based on domestic and foreign officials.

Ghana, Kenya, and South Africa illustrate how long-lasting the PEP shadow can be. Ghana's Anti-Money Laundering Act of 2020 and the Bank of Ghana's 2025 guidelines explicitly label state enterprise board members as PEPs, requiring banks to report all PEP transactions. Kenya's 2023 money laundering regulations cover anyone who has held a similar function, without a defined expiry date. South Africa once allowed a twelve-month window post-office, but has since removed it.

In some African societies, the appointment is viewed as "your turn to eat," perpetuating the notion that honest professionals are expected to use their position for personal gain. This attitude contributes to the ongoing challenges faced by PEPs and those associated with them.