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PEP Talk: Dealing with a Politically Exposed Person on your Team

Abstract

The concept of Politically Exposed Person (PEP) figures prominently in the know-your-customer due diligence required of financial institutions in the fight against bribery, corruption, money laundering and terrorism finance. By its function, the term is broad and vague. Now assume you are negotiating a major project loan. One morning, you learn that two individuals closely connected with the project have turned into PEPs. What does this mean for the project; and how to deal with it? The article discusses the concept of PEP and how to address the situation in a practical manner. Since the concept is vague, it is not possible to proceed on the basis of a check-list, nor are there clear lines separating the safe from the problematical. As a policy consideration, the article seeks to raise awareness for the problems presented in legislation, regulation and practice by innocuous PEP situations, where a mechanical, undiffe¬ren¬tiated approach leads to unfair outcomes, especially for individuals. This may not be intended, yet by the logic of the prevailing dynamics in the regulation of the standard of care in financial transactions, and unless common sense prevails, this is the direction we are heading.

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Author

Portrait image of Jürg Gassmann
Jürg Gassmann
Principal, Gassmann Consulting., Ireland

Dr. Jürg Gassmann is an independent practitioner based in Switzerland. Since 2002, he has been acting as ‘outside in-house counsel’ for developers and investors where the business volume does not justify a senior lawyer on staff. He specialises in electricity generation (both renewable and traditional), resource valorisation, water/wastewater and similar infrastructure projects as well as advising venture capital investors. Before establishing his own practice, he was Of Counsel with Freshfields Bruckhaus Deringer in London; in an in-house legal role with Black & Veatch in Hong Kong and Kansas City; with a Swiss venture capital investor in Zurich; and with The Sumitomo Trust & Banking in Tokyo. Jürg took his licentiatus iuris at the University of Zurich in 1986 as well as his doctorate in law in 1989, following a research fellowship at the University of Tokyo. He is qualified as a Swiss Rechtsanwalt and as an English solicitor (not practicing), and speaks German, English, French, Italian, Japanese, and some Urdu. He was an infantry officer in the Swiss Army and spends his leisure time with his family, historical fencing and researching history.

Company

Gassmann Consulting.

Jurg acts as "outside-in-house counsel" for investors with complex international infrastructure projects, where the project volume does not justify the cost of a senior lawyer on staff. This approach allows clients to benefit from affordable forward-looking expert advice from the project's early development stages until financing. He is also advising Envisionation, a consultancy specialising in climate change issues and sustainability projects.

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