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At Ethixbase360, we’re proud to support the next generation of compliance and risk management professionals. As part of our summer internship program, we invite our interns to explore timely compliance issues and share their perspectives.
In this post, Elliot Cocks, an incoming International Political Economy Master’s student at King’s College London, dives into the legal and ethical complexities surrounding politically exposed persons (PEPs) and corporate hospitality.
Author Attribution:
By Elliot Cocks, Summer Intern at Ethixbase360
Reviewed by James Swenson and Virna Di Palma
Inviting politically exposed persons (PEPs) to corporate events is a common business practice. It can help build relationships and serve as recognition for individuals who have been important business partners. While this is not prohibited, such hospitality must be carefully managed to avoid crossing ethical and legal lines. Nowhere were the risks of PEP hospitality more apparent than in the 2024 Iswaran Case, where corporate hospitality ultimately served as evidence of bribery due to a lack of transparency and legal compliance.
Who are PEPs?
Politically exposed persons are individuals entrusted with prominent public functions (e.g., government officials, senior executives of state-owned enterprises, or even leaders of international sporting committees). Due to their positions and ability to influence policy, PEPs are considered more susceptible to bribery and corruption. This is not to say that PEPs are inherently corrupt—it simply reflects the higher risk potential associated with their roles.
Global regulators almost unanimously flag interactions with PEPs as higher risk, necessitating enhanced due diligence and transparency. The U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, among others, contain provisions that prohibit the provision of hospitality intended to influence public officials or gain a business advantage. Another area of risk related to PEPs involves international sanctions. Agencies like the U.S. Office of Foreign Assets Control (OFAC) maintain lists of sanctioned individuals —often including public officials implicated in misconduct.
Managing the Risk
These risks do not mean that relationships with PEPs must be sacrificed in order to remain compliant. Instead, the risk must be identified and managed appropriately. Navigating the complexities of PEP hospitality can be challenging. Fortunately, Transparency International provides some guidance to help your organization stay compliant:
- Set Clear Rules: Define what counts as hospitality. Ensure it is legitimate, not extravagant and most importantly not used as a means to influence people or decisions.
- Train and Communicate: Educate members of your organisation and your third-party network on what’s permitted, with additional attention given to high-risk roles such as procurement or government relations.
- Monitor and Document: Keep detailed records of all gifts and hospitality as well as all invitees to corporate events.
- Respect local Laws and Customs: Tailor hospitality to local norms while staying within anti-bribery regulation.
Apply Risk Based Procedures: Ensure your organisation has the proper procedures in place to Identify, evaluate and mitigate any risks relating to PEP hospitality.
