Defining Politically Exposed Persons in Encouraging the Disclosure of Company Ownership

The efforts to foster good governance and corruption eradication through PEP’s (Politically Exposed Person) mechanism in general still encountering many challenges. The Part of the reason lies in regulatory aspects.

Cari Votava, Senior Financial Sector Specialist from World Bank highlighted the issue of PEP regulation. According to her, many countries still do not have a clear definition framework. Each country needs to formulate its own PEP definition by considering the issues at hand and the national structural characteristics. This was stated in the parallel discussion on Political Exposed Person and Asset Declaration as an integrated agenda of Global Conference on Beneficial Ownership Transparency, 24/10.

“Clear and objective definition also accordance with the local context are important aspects, since they affect the quality of the enforcement”, added Cari Votava. On the other hand, the clear definitions will also be necessary to minimize any avoidance by disobedient parties whereas they clearly belong to PEP categorization.

Referring to the national context, Indonesia, in fact, is already have fair and clear regulatory framework. Regulation on PEP in Indonesia can be seen on Bank Indonesia’s Regulation No. 12/20/PBI/2010. Furthermore, it’s also stipulated on PPATK (Indonesian Financial Transaction Reports and Analysis Center) regulation, No. Per-02/ 1.02/ PPATK/ 02/ 15. In these rules, Indonesia has defined PEP in detail also which parties belong to PEP’s category.

Above regulations are quite comprehensive because it has regulated other parties related to the officials who are included in PEP. The existing definition has been scrupulously considered in order to target the intended parties (eg from family, relatives, etc.).

“In practice, doing business with family and relatives of the PEP’s is as risky as having direct business with the PEP itself. PEP can serve as an instrument to prevent the negligible risks that may occur in business relationships with those relatives”, said Hardianto from Corruption Eradication Commission Indonesia.

On the other hand, the definition of PEP is still vague in certain aspects. For example, the link to the categorization of influential officials. Because oftentimes, in practice officials who no longer served still have a forceful influence in a certain period of time. In this regard, Ghazaal Habibyar, the Afghan Deputy Minister of Mines and Petroleum provided examples of cases in his country.

“Afghanistan was facing that kind of problem. Actually, the time span of influence has been regulated in the law, but the time span is set just two years after the official has not served. It’s too short”, affirmed Ghazaal. This condition consequently raises its own problems because the extractive companies board filled by former high-ranking officials who were still influential in the contracting process.

The PEP issue did not only occur in the realm of regulation but also in the realm of implementation. The effectiveness of implementation and law enforcement that has not gone well remains a shared problem that faced by many countries. “Poor governance of institutions in running the regulations led to inoptimum enforcement”, explained Tetiana Shevchuk, Anti-Corruption Action Center, Ukraine.

In response to this issue, the National Coordinator of Publish What You Pay Indonesia, Maryati Abdullah said that the government needs to ensure the effectiveness of the implementation of PEP. Thus, the transparency and openness can be pursued. She also emphasized the importance of prevention of conflict of interest due to the existence of double power where officials have the authority in the political and economic sector. [AP]

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