Politically Exposed Persons

A simple guide on undestanding Politically Exposed Persons (PEP)s

Categories of Persons

“politically exposed persons (PEPs)”

Refers to:
(a) foreign PEPs – individuals who are or who have been entrusted with prominent public functions by a foreign country.

For example, Heads of State or Government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations and important political party officials;

(b) domestic PEPs – individuals who are or have been entrusted domestically with prominent public functions. For example, Heads of State or Government, senior politicians, senior government (includes federal, state and local government), judicial or military officials, senior executives of state-owned corporations and important political party officials; or

(c) persons who are or have been entrusted with a prominent function by an international organisation which refers to members of senior management.
For example, directors, deputy directors and members of the Board or equivalent functions.

The definition of PEPs is not intended to cover middle ranking or more junior individuals in the foregoing categories.

“family members of PEP” Refers to individuals who are related to a PEP either directly (consanguinity) or through marriage. A family member in this context, includes:
(a) parent;
(b) sibling;
(c) spouse;
(d) child; or
(e) spouse's parent,
for both biological or non-biological relationships.
“close associate of PEP”

Refers to any individual closely connected to a politically exposed person (PEP), either socially or professionally.

A close associate in this context includes:

(a) extended family members, such as relatives (biological and non-biological relationship);

(b) financially dependent individuals (e.g. persons salaried by the PEP such as drivers, bodyguards, secretaries);

(c) business partners or associates of the PEP;


(d) prominent members of the same organisation as the PEP;

(e) individuals working closely with the PEP (e.g. work colleagues); or

(f) close friends.

 

 

Source: Bank Negara Malaysia

 

  • 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 partnership.
  • Close associates are individuals who are closely connected to a PEP, either socially or professionally.

 

Source: Financial Action Task Force

Categories of Organizations

Note that in Popolo-spec standard, an organization which can have multiple child organizations and is any type of grouping which can have members and posts.

 

Organizations are mostly to track posts held and memberships of Persons.

Screenshot from 2021-02-08 14-26-49.png

A Government Agency

Screenshot from 2021-02-08 14-28-51.png


Memberships with Posts

Screenshot from 2021-02-08 14-29-37.png

Persons can either be just a member eg. director of a Board of Directors or hold a post in an organization eg. Chairman of Board of Directors (a Chairman is also a member of BoD)

Type of relationships

Person to Person

  1. Family
    1. Spouse (married or civil partnership)
    2. Parent
    3. Child
    4. Adopted child
    5. Stepchild
    6. Elder sister
    7. Younger sister
    8. Elder brother
    9. Younger brother
    10. Spouse of child
    11. Spouse of brother
    12. Spouse of sister

 

  1. Between people
    1. Business partner
      1. Editorial definition: Has joint investments, is listed in company records (Registrar of Companies), has a verbal or written agreement to jointly-administer, operate or invest in a business entity. 
    2. Associate:
      1. Editorial definition: Mutually know each other and interacted with one another in a social sense.
      2. Section 8(5) of the Malaysian Companies Act 2016:
        1. A person is an associate of another person if the person is
          1. A corporation which is a related corporation;
          2. A person in accordance with whose directions, instructions or wishes that other person is accustomed, or is under an obligation, whether formal or informal, to act in relation to the share referred to in subsection (4);
          3. A person who is accustomed, or is under an obligation, whether formal or informal, to act in accordance with the directions, instructions, or wishes of that other person in relation to that share;
          4. A body corporate which is, or the directions of which are, accustomed or under an obligation whether formal or informal, to act in accordance with the directions, instructions or wishes of that other person in relation to that share; or
          5. A body corporate in accordance with the directions, instructions or wishes of which, or of the directors of which, that other person is accustomed or under an obligation whether formal or informal, to act in relation to that share.
    3. Romantic partner
      1. Editorial definition: In a romantic or sexual relationship, without marriage.
    4. Employee
      1. Editorial definition: Is paid a salary/wage by an employer or a company.
    5. Employer
      1. Editorial definition: Pays someone for his/her services, usually as an owner of a firm. 
    6. Freelancer
      1. Editorial definition: Provides services on a one-off contractual basis to a company or an individual, in exchange for payment.
    7. Superior
      1. Editorial definition: In relation to a subordinate. I.e. Manages the performance or duties of a subordinate, usually in a workplace environment. May also apply to political parties.
    8. Subordinate
      1. Editorial definition: In relation to a superior. I.e Someone who is answerable to and whose performance is managed by a superior, usually in a workplace environment. May also apply to political parties. 
  2.  

Organization to Organization

  1. Between organisations 
    1. Subsidiaries:
      1. Section 4 of the Malaysian Companies Act 2016
      2. A company whose parent owns more than 50% stake or above in the ownership of the company.
      3. statements that X is a subsidiary of Y (opencorporates)
    2. Associates:
      1. Section 2(1) of the Malaysian Financial Services Act 2013: A corporation in which not less than 20% but not more than 50% of the voting shares of that corporation are held by another corporation, where the first-mentioned corporation is an associate corporation of the other corporation. 
    3. Share Holdings: statements that X holds shares in Y
    4. Acquisitions: statements that X acquired Y. Often these statements are derived from press releases, so are not considered as reliable as other kinds of statements.
    5. Branches: entities permitted to operate in a jurisdiction but with a legal personality registered elsewhere.

Organizations

GLIC

Government-linked investment companies (GLICs) refer to investment companies in which the federal government has influence over the management by appointing and approving board members and senior management, who in turn report directly to the government. The

government may also provide funds for operations or to guarantee capital (and some income) placed by unit holders. The Ministry of Finance or the Prime Minister’s office are usually the government representatives on the board of GLICs and thereby play a role in the governance and investment decisions of these companies. Representatives of GLIC beneficiaries (investors and pensioners) complement the board of directors.

 

GLICs allocate some or all of their funds to investments in government-linked companies (GLCs). Currently, there are seven GLICs in Malaysia?*  that directly control many listed GLCs and have minority stakes in several other listed companies. GLICs are also significant investors in a number of non-listed GLCs.

 

Source: OECD Investment Policy Review: Malaysia 2013 p.70 (Box 2.3)

GLC

GLCs are defined as companies that have a primary commercial objective and in which the Malaysian government has a direct controlling stake, i.e. the ability to appoint board members and senior management, make major decisions (e.g. contract awards, strategy, restructuring and financing, acquisitions and divestments) for GLCs either directly or through GLICs.

 

Hence, GLCs include companies where the government controls directly or collectively a controlling stake through state agencies, such as the Ministry of Finance Inc. or through GLICs, such as EPF and Permodalan. It also Includes companies where GLCs themselves have a controlling stake, i.e. subsidiaries and affiliates of GLCs.

 

GLCs and their controlling shareholders, GLICs, constitute a significant part of the economic structure of Malaysia. GLCs employ an estimated 5% of the national workforce and account for approximately 36% and 54% respectively of the market capitalisation of Bursa Malaysia and the benchmark Kuala Lumpur Composite Index. Even with active divestment and privatisation, GLCs remain the main service providers to the nation in key strategic utilities and services including electricity, telecommunications, postal services, airlines, airports, public transport, water and sewerage, banking and financial services.

 

Source: OECD Investment Policy Review: Malaysia 2013 p.70 (Box 2.3)

 

  • MoF companies and subsidiaries
  • Companies with BoD that are also MoF companies and subsidiaries
  • Political Parties and Division, Branch, Central Leadership