Baltic Journal of Economic Studies 111 Vol. 9 No. 5, 2023 This is an Open Access article, distributed under the terms of the Creative Commons Attribution CC BY 4.0 1 Zaporizhzhia National University, Ukraine (corresponding author) E-mail: t_deputy@ukr.net ORCID: https://orcid.org/0000-0003-1101-8073 2 Zaporizhzhia National University, Ukraine E-mail: darya_ezh@ukr.net ORCID: https://orcid.org/0000-0001-5334-8498 3 Zaporizhzhia National University, Ukraine E-mail: almak17@ukr.net ORCID: https://orcid.org/0000-0003-0042-165X 4 Zaporizhzhia National University, Ukraine E-mail: marina_5@i.ua ORCID: https://orcid.org/0000-0001-8200-2680 DOI: https://doi.org/10.30525/2256-0742/2023-9-5-111-118 POLITICALLY EXPOSED PERSONS IN TERMS OF STATE FINANCIAL MONITORING: ARE THE MODELS OF THEIR REGULATORY DEFINITION SUCCESSFUL? Tatiana Kolomoiets1, Daria Yevtushenko2, Oleksii Makarenkov3, Maryna Tytarenko4 Abstract. Given the recognition of the priority of the European integration and North Atlantic vectors of modern state-building and law-making processes in most countries of the world, the issue of "high terminological quality", "terminological purity", with the implementation of relevant international and European legal standards for the formation of "basic terminology", the basis for combating the legalisation of "dirty money" is not only relevant, but also of paramount importance, as it plays the role of "key provisions" of the entire regulatory framework. The purpose of the study is to analyse the existing international legal and European standards and national regulatory models for defining "politically exposed persons", with the aim of identifying "defects in their quality" and formulating proposals for their elimination. The object of the study is social relations directly related to the state financial monitoring of politically exposed persons. The subject of the study is the regulatory models for determining politically exposed persons in terms of state financial monitoring. The methodological basis was formed by both general scientific and special research methods, which made it possible to present a comprehensive cross-section of the relevant issue. Results. The "quality" of the regulatory definition of PEPs implies the following: a) consideration of international legal and European standards for preventing and combating the legalisation of "dirty money" as a "basis" for national thematic rulemaking; b) regulatory distinction between "main PEPs", with criteria that allow determining the "uniqueness" of their legal status, and "additional PEPs" (persons who do not have the main features of PEPs, but may potentially be involved in relations with them); c) "criterionality" of the "main PEPs" is directly related to the "influential" position and significant public functions performed by the person (it is mandatory to have these positions enshrined in the law, with the corresponding correlation of functions); d) delimitation of "additional PEPs", with the identification of those persons who are "related" by family and other relations with the "main PEP". For each category of such persons, the guideline is to standardise their list, which makes it impossible to vary the interpretation of the relevant provisions and diversify law enforcement practice. Key words: financial monitoring, politically exposed persons, money laundering, dirty money, politically exposed person, corruption, regulatory model. JEL Classification: G10, D73 1. Introduction In the context of intensification of state-building and law-making processes both in individual states and in the world as a whole, priority is given not to their quantitative parameters, but to their qualitative ones, which makes the issue of "qualitative" changes in the institutional capacity, functional purpose, and effectiveness of these modern processes more relevant. This fully applies Baltic Journal of Economic Studies 112 Vol. 9 No. 5, 2023 to the "big anti-corruption", "global anti-corruption" (involving "politically exposed persons", "significant political figures") issues, which include the area of preventing and counteracting the legalisation of "dirty money" and improving its regulatory framework, with the implementation of international and European legal standards (including those related to "terminological purity") of such counteraction in national lawmaking and law enforcement. It is worth noting that the "quality" of regulatory terminology to a certain extent determines the perfection of the content of legislation in general and the effectiveness of its application. Conversely, "terminological defectiveness" negatively affects both the general state of legal regulation of relations in a particular area and the formation of a stable and unified law enforcement practice. This also relates to the legislation that establishes the principles of preventing and combating money laundering (legalisation), including in terms of determining who should be considered "politically exposed persons", for whom financial monitoring is one of the effective preventive tools and counter- measures. Given the recognition of the priority of the European integration and North Atlantic vectors of modern state-building and law-making processes in most countries of the world, the issue of "high terminological quality", "terminological purity", with the implementation of relevant international and European legal standards for the formation of "basic terminology", the basis for combating the legalisation of "dirty money" is becoming more than just relevant, but also of paramount importance, as it plays the role of the "key provisions" of the entire regulatory framework for effective prevention and counteraction to the above-mentioned illegal phenomena, which significantly threaten the "reputational perception" of states as partners of the European and international community. The purpose of the study is to analyse the existing international legal and European standards and national regulatory models for defining "politically exposed persons", with the aim of identifying "defects in their quality" and formulating proposals for their elimination. The object of the study is social relations directly related to the state financial monitoring of politically exposed persons. The subject of the paper is the regulatory models for determining politically exposed persons in terms of state financial monitoring. The methodological basis consists of both general scientific and special research methods, which allowed to present a comprehensive overview of the relevant issue. Through the use of dialectical analysis, this issue is presented in dynamics, and the use of special methods allowed to identify the "basic" legal standards before the formation of the thematic conceptual apparatus (special legal), to establish a certain relevance of international legal and European analogues (comparative legal) in determining the "key approaches" to the designation of "politically exposed persons", with an emphasis on "national", "foreign" and "supranational", "basic" and "additional" elements of its content (logical), and their perception in national lawmaking of states, with their consolidation in various regulatory models (classification). The use of a special legal method also made it possible to identify "quality defects" in the definitions of "politically exposed persons" in acts of national legislation that set out the principles of preventing and combating the legalisation of "dirty money", and the modelling and forecasting methods allowed to formulate recommendations for eliminating these "terminological defects". Despite the availability of thematic sources directly dedicated to the issues of financial monitoring, the issue of the "quality" of the regulatory definition of "PEPs" remains beyond the attention of scholars. This is due to the complex nature of the issues of state financial monitoring and the focus of its analysis on economic, legal, social, political and other aspects, which has led to the emergence of a sufficient number of works by economists, lawyers, political scientists, sociologists, and so forth (works by K. Bysaha, M. Shevchenko, O. Dudorov, M. Khavroniuk, M. Bilukha, A. Bukhtiarova, Y. Dukhno, V. Dobrohorska, T. Kobzeva, S. Levytska, O. Osadcha, M. Perepelytsia, as well as I. Carr, D. Greenburg, J. Roth). Although legal scholars (representatives of various branch legal sciences – criminal, administrative, financial law, etc.) are interested in this issue, the "terminological quality" itself still remains poorly understood, playing the role of a "terminological defect" in the scientific basis for the relevant rulemaking and law application, which makes the new thematic scientific research relevant. The "quality" of the regulatory definition implies: a) consideration of international legal and European standards for preventing and combating the legalisation of "dirty money" as a "basis" for national thematic rulemaking; b) regulatory distinction between the "main PEP", with criteria that allow determining the "uniqueness" of its legal status, and "additional PEPs" (persons who do not have the main features of PEPs, but may potentially be involved in relations with it); c) "criterionality" of the "main PEPs" is directly related to the "influential" position and significant public functions performed by the person (it is mandatory to have these positions enshrined in the law, with the correspon- ding correlation of functions); d) delimitation of "additional PEPs", with the identification of those persons who are "related" by family and other relations with the "main PEP". For each category of such persons, the guideline is to standardise their Baltic Journal of Economic Studies 113 Vol. 9 No. 5, 2023 list, which makes it impossible to vary the interpre- tation of the relevant provisions and diversify law enforcement practice. 2. International Legal and European Standards for the Definition of PEPs According to the FATF recommendations, Politically Exposed Persons (PEPs) are "...persons who perform or have been entrusted with important publicly significant functions in states or foreign countries, such as heads of state or government, major politicians, senior government officials, judicial or military officials, senior officials of state-owned corporations, prominent political party figures, etc. Business relationships with family members or close associates carry reputational risks similar to those associated with the PEP itself. This definition should not apply to mid- or lower-ranking officials in the above categories." (International standards for combating money laundering, terrorist financing and proliferation of weapons of mass destruction: FATF Recommendations, approved by the FATF Plenary in February 2012). However, over time, these provisions have been extended to national politicians and officials of international organisations, thereby ensuring the correlation of these provisions with the requirements of Article 52 of the UN Convention against Corruption, namely: "...politically exposed persons are natural persons are natural persons who are or have been vested with significant public functions, members of their families and persons close to them" (United Nations Convention against Corruption). Thus, the "basic" approaches to the definition of PEPs in international legal acts are: a) an individual; b) holding an "influential" ("important", "significant", "key") position and/or performing "important" ("significant") public functions (The Use of the FATF), "political and official" (Chaikin, Sharman, 2009, p. 94); c) a combination of the "three-part" ("three-element") approach by "linking" the legal status of a person to either his/her (national) or foreign state or to an international organisation (which indicates the separation of national and supranational levels of regulation) and "equating" them; 4d) preservation of the relevant "special" ("unique, sometimes with legal immunity" (Chaikin, Sharman, 2009, pp. 86–87), "with elements of corruption by power" (Chaikin, Sharman, 2009, p. 195) legal status for the person both during the term of holding an "important" position or performing significant public functions and after termination. At the same time, it is worth noting that this status in itself "...does not stigmatise a person as a corrupt official and does not equate him/her to a criminal" (Discussion guide for the thematic discussion on article 52 (Prevention and detection of transfers of proceeds of crime), article 53 (Measures for direct recovery of property) and other relevant articles: Conference of the States Parties to the United Nations Convention against Corruption). It is also worth noting that the international legal standards for the definition of PEPs cover not only "main" subjects (persons who directly hold office and/or perform public functions"), but also "additional", "indirect", "related" subjects, such as: a) family members of the said persons; b) persons "from the close environment" of such persons ("related" to such persons by business relations), in relations with whom there is also a possibility of "reputational risks". "Public figures, given their influence and visibility in the country and abroad, often use representatives and other intermediaries to conduct business in their own interests" (Chaikin, Sharman, 2009, p. 100). The analysis of these provisions allows to identify both "positive results" ("quality of terminological definition") and "defects". If the first ones, for example, are: regulation of the "same order" ("in equation") of the legal status of a foreign politician, national politician, persons performing significant public functions in international organisations; preservation of the relevant status for persons in the "post-employment" period of their life, since their "influence" may well continue after they leave office (cease to perform relevant public functions). "Such individuals remain influential for a long time, if not forever... the influence they wield lasts longer than the time they are in office." (Shevchenko, 2019, p. 96) Moreover, "...figures and their inner circle may deliberately wait for dismissal (resignation) in order to actively operate with 'dirty money' afterwards" (Greenburg, Roth, 2011, p. 129). Whereas "defects" should be considered the "oversaturation" of these normative definitions with evaluative provisions (e.g., "important functions", "major politicians", "senior government officials", "prominent political party figures", etc.), which creates preconditions for diversity in their interpretation and application in practice. The only thing that makes it possible to realise the desire to normalise the "specialness", "importance" "influence" of PEPs, as opposed to the whole variety of officials and persons performing public functions, is the provision that "...these standards should not apply to mid- ranking and lower-ranking officials from the above categories" (International standards for combating money laundering, terrorist financing and proliferation of weapons of mass destruction: FATF Recommendations, approved by the FATF Plenary in February 2012). Accordingly, it is important to analyse the provisions of each country's legislation, as well as the provisions that define the Baltic Journal of Economic Studies 114 Vol. 9 No. 5, 2023 organisational and legal structure, and therefore the status of specific officials in international organisations, in order to determine their "ranking", and therefore to identify those persons who should be considered "superior", "influential", "high-ranking", and therefore PEPs. In general, the approaches to regulatory consolidation of the definition of PEPs in EU acts are also typical. For example, Directive 2015/989 not only enshrines the provisions on politically exposed persons, but also the "technical criteria" for a simplified procedure of so-called "customer due diligence", targeting such persons. In addition to the indication that such a person must be an "individual", a list of positions considered "important", "influential", "key", the occupation of which implies the acquisition of "influential legal status" (even after the loss of the person's "link" to the said position), including: "...heads of state, heads of government, ministers, members of parliament; members of supreme courts, constitutional courts and other high-level judicial bodies whose decisions are not subject to further appeal, except in special cases; ambassadors, envoys... etc." (Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC) Such detailing undoubtedly contributes to the unification of law enforcement precisely because it is "tied" to a specific position and defines its specifics in the country's legislation. Less "qualitative" in the substantive sense are the positions on the recognition of "indirect", "additional", "adjacent", "tied" entities, such as "close family members" ("spouse or any person who is equated to such according to the law; children and their spouse or cohabitants; parents" and "close employees" ("assistants"), which include "...any person known to have joint beneficial ownership in a legal entity or legal association; or other close business relations with politically exposed persons; any individual who has exclusive beneficial ownership in a legal entity or legal association known to have been established for the actual benefit of politically exposed persons" (Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC). Thus, on the one hand, there is a harmonisation of these standards with international legal analogues in terms of "covering" additional "indirect" persons who are "related" to politicians by "family or business" relations. However, on the other hand, the "defect" of the definition again lies in the "too narrow" approach to the understanding of "close persons", "close family members" (given the proposed list of them), since other persons who are also "close", are in "family relations" and may well be involved in relations related to the illegal use of PEPs' "influence" are left out. The detailed approach to the definition of "close associates", "close associates", "close employees" looks even more "defective" (in the sense of the existence of prerequisites for the diversity of law enforcement) precisely because of the use of the "basic" assessment provision "close business relations". Thereby, it covers an excessively wide range of different persons, including, for example, personal advisers, financial advisers, etc. Despite the constant attention of the community to ensuring the relevance of international legal and European standards for the definition of PEPs to the real requirements of the time for effective prevention and counteraction to the legalisation (laundering) of "dirty money", the "basic" provisions are still "somewhat complicated" for perception and sometimes generalised. Specifically, the UNCAC does not distinguish between national and foreign PEPs, but at the same time, it sets out provisions that require PEPs "located outside the jurisdiction to apply more stringent monitoring procedures" (Bysaha, 2017, pp. 42–43). This means that there are "different" approaches to "PEPs who hold important positions outside the country and reside domestically while under jurisdiction" and "PEPs who perform important public functions in foreign countries regardless of their country of residence" (6th FATF Recommendation) (International standards for combating money laundering, terrorist financing and proliferation of weapons of mass destruction: FATF Recommendations, approved by the FATF Plenary in February 2012). Accordingly, there is one more criterion for determining the status of PEPs – the place of residence of such a person and the place of performance of their functions, or their coincidence (one model), or their separation (another model). This is not just an "arbitrary" approach to the regulation of this provision, but different models of defining PEPs, since "if a family member of such a person (the main subject) lives outside the country, it is quite possible that strict checks by the state of residence of such a person may not be applied to such a person" (International standards for combating money laundering, terrorist financing and Baltic Journal of Economic Studies 115 Vol. 9 No. 5, 2023 proliferation of weapons of mass destruction: FATF Recommendations, approved by the FATF Plenary in February 2012). At the same time, according to the FATF guidelines, such a feature in the procedure is unacceptable. Different acts also differ in their approaches to the recognition of persons who are "close family members", given the different criteria for classifying persons as such. For example, the FATF guidelines do not detail these provisions at all, limiting them to "general features", while the EU acts additionally include "persons who have a share in joint ownership or par- ticipate in a joint arrangement" (Bysaha, pp. 42– 43), and sometimes supplement the list with "legal entities related to PEPs" (Bysaha, 2017, pp. 42–43). Nevertheless, it should be noted that both international legal and European standards for the definition of PEPs provide for: a) plurality in their understanding by "covering" national, foreign and supranational "elements", i.e., those persons who are national politicians, foreign politicians and "influential" persons in "connection" with international organisations; b) "linkage" of the main PEP to an "influential" position and/or "significant" ("prominent") public functions, which determines the "special" legal status of the respective entity; c) regulation of the internal division of PEPs into "main" (with "linkage" to the position and/or public functions) and "additional", "related", "connected", which, in turn, are divided into those "connected" by close family relations and those characterised by "close business relations" with the main PEP. 3. Normative Models for the Definition of PEPs in the National Legislation of Countries of the World It is worth noting that national models of regulatory consolidation of the definition of PEPs are based on manifestations of varying degrees of implementation of international legal and European standards, and, as a result, several such models can be conditionally distinguished in national legislation around the world. The dominant practice is to enshrine the definition of PEPs in separate special regulations (e.g., USA PATRIOT Act, Federal Anti-Money Laundering and Counter-Terrorist Financing Act, Swiss Confederation Act of 10 October 1997, 2007 Anti-Money Laundering and Counter-Terrorist Financing Regulations). Based on the "basic" international legal and European approaches to the definition of PEPs, national regulatory models also provide for the "binding" of a person to a position, holding which the person acquires a "unique" legal status, with wide opportunities to influence the implementation of policy in the state, making difficult decisions, using budget funds, etc., thereby playing the role of an "important key player" in the state and public policy. At the same time, taking into account the position (it would be more correct to speak of a "list of such positions") of PEPs, the regulatory models for defining the latter should be divided into: "complex" ("extended", "large") and "simple" ("simplified"). The former are associated with a rather large list of positions, which give a person "public influence" and are related to "significant public functions" performed by the person. This model is adopted, for example, in the legislation of Canada and Austria. Canadian legislation includes positions that are "tied" to PEPs: "head of state, head of government, ministers, deputy and assistant ministers, members of legislative bodies, members of the supreme court, constitutional court or other higher legal bodies whose decisions are not subject to further appeal except in exceptional circumstances, members of the court of accounts and the board of the central bank, ambassadors, attachés, military officers with the rank of general and above, heads of state institutions, members of collegial executive bodies of a state body, the place of the chairman..." (Bysaha, 2017, p. 98), as in the UK law, whereas, for example, in Austrian law, the list is much shorter and does not include mayors or members of collegial executive bodies of a public body (Bysaha, 2017, p. 95). Thus, the latter option is narrower than the analogue in Canadian law, but it is still an example of a "complex" model with a fairly extensive list of "influential positions". In contrast, the so-called "simple" model of defining PEPs, for example, in Chinese law, should be considered as a mandatory feature – "linkage" to the position of "head of state, head of government, minister, deputy or assistant, member of a state body, important member of a political party, member of a supreme judicial body, high-ranking officer of the armed forces, member of administrative governing, supervisory bodies of state-owned enterprises and senior civil servants" (Shevchenko, 2019, p. 259). The analogue enshrined in US law, with its emphasis on the "influence" of a person in "key" positions with "significant public functions", is not sufficiently quantitatively meaningful either. With regard to the members of the governing bodies of political parties, it is important to clarify "their representation in the legislature" (which significantly narrows this category of persons), and there is zero regulation of such status for persons holding the positions of ambassadors, chargé d'affaires, representatives of the judiciary, members of collegial bodies, executive bodies, and state bodies (Shevchenko, 2019, p. 259). While there is a certain diversity in the regulatory models for PEPs, the approaches to "covering" both the "current" legal status of a person ("while in office", "performing significant public functions") and the "ex-acting" analogue (albeit with different approaches Baltic Journal of Economic Studies 116 Vol. 9 No. 5, 2023 to "perpetuity" ("lifetime", "lifetime") or "time-limited" (with different periods of such a limit) are unified. Moreover, national models regarding the "elements" of the PEPs definition also vary – the "three- element" definition ("national politician", "foreign politician", "international organisation official") is undoubtedly dominant and characteristic, for example, of the UK and Ukraine. At the same time, there is also a "simplified" (one-element, two- element) model, which is accepted, for example, in Canada. Given the content of the state financial monitoring, it can be argued that a clear regulation of the definition of PEPs is the "basis" for the effective use of its resources, ensuring the achievement of its target orientation and leaving out of sight "potential" persons who may well be involved in relations with "dirty money", its legalisation, posing a threat to the national economy and "risks" ("reputational risks") for the world economy as a whole. Given the potential for the involvement of "indirect" or "additional" PEPs in the above relations, it is important to ensure their "qualitative" regulation in the national legislation of the countries. The analysis of the latter shows a variety of approaches to addressing this issue and defining such persons as: "close relatives", "close associates" (US), "family members", "known close associates" (UK), "persons related by family ties, personal and business relations" (Switzerland), "close relatives" (Canada), "family members and related persons" (Ukraine), etc. However, it should be noted that, unlike a certain criterion in the definition of the "main PEP" (position, functions), there is no such approach to "additional PEPs", which is largely due to national peculiarities, "socio-economic and cultural characteristics of the countries of origin of persons" (Carr, 2018, p. 29). The basis for the definition of "additional PEPs" is their "trust" and "influence" in relations with the "main PEPs". That is why in national regulatory models, all "additional PEPs" are conditionally divided into: a) those related by kinship; b) those linked by other relationships. The former may be presented, depending on national traditions, in the so-called "standard" ("minimum") variation, which is consistent with international and European legal standards for preventing and combating the legalisation of "dirty money" ("husband/wife (partner), children and their husband/wife (partner), parents") or "extended" variation (additionally "...relatives, cousins, grandparents, grandchildren... village residents)" (Carr, 2018, p. 29). At the same time, attention should be paid to the variety of concepts used to refer to them ("close persons", "close relatives", "persons from a close family environment", "persons related by kinship", etc.) Despite the understanding of the "basic" approach to distinguishing these persons as "additional PEPs", the above-mentioned multi variability of the conceptual apparatus should still be considered a "defect", since there are still different persons who are considered "family members" and "close relatives", which ultimately forms a pool of persons subject to state financial monitoring with different quantitative and qualitative characteristics. This, on the one hand, may lead to a situation where the state may well leave "out of sight" persons "related to the main PEPs", and therefore who may well be involved in relations with "dirty money". On the other hand, given the "ex-official" status of PEPs, certain persons may not "feel the increased attention of the state for a long time". Undoubtedly, it is important to take into account the family relations of the "main PEP" to eliminate the preconditions for the misuse of his/her "influence" by involving persons whom he/she "trusts and influences" for laundering "dirty money". However, such relations are different, the degree of kinship and their species diversity is also different, and therefore, the regulation of the list of such persons should also be justified. For example, in Ukraine, such persons include "...family members, who are: husband/wife or persons equated to them, son, daughter, stepson, stepdaughter, adopted person, person under guardianship or custody, son-in-law and daughter-in-law and persons equated to them, father, mother, stepfather, stepmother, adoptive parents, guardians or trustees" (The Law of Ukraine “On Prevention and Counteraction to Legalisation (Laundering) of Criminal Proceeds, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction”), while simultaneously distinguishing them from "close persons". In contrast, US law, for example, defines "close relatives" as "parents, brothers, sisters, spouse, children" (Bysah, 2017, p. 69). Similar provisions are also enshrined in Canadian law, and Swiss law recognises such persons as "close associates", which significantly expands the range of such persons for financial monitoring. Nevertheless, the "basic" approach – family ties to the "main PEP" – still applies (albeit in different variations). In order to ensure unification of law enforcement practice, it is still important to standardise the list of such persons (absolute certainty, a "closed" list) and correlate this list (content) with the term (form) for their designation. Any deviations from such correlation cause "defects" in such regulation and "risks" for the effectiveness of state financial monitoring. Of "lesser quality" are the normative models of defining other types of "additional PEPs" as "persons connected by other relations with the main PEP". These include "related persons" (Ukraine), "close associates" (US), "known close associates" (UK), etc. For this category of persons, there is no clear criterion Baltic Journal of Economic Studies 117 Vol. 9 No. 5, 2023 for their identification, and therefore the relationship of "trust and influence" is evaluative and "risky" for financial monitoring. The national regulatory models for establishing this type of "additional PEPs" are full of content, with an emphasis on possible grounds for the relationship of "trust and influence", such as: "a person who has an extremely close relationship with the PEP" (US), "persons connected by personal and business relations" (Switzerland), "a person who is the sole beneficial owner of a legal entity established for the benefit of the PEP" (UK), etc. In fact, it is worth talking about several "basic" approaches to defining this category of persons, with an emphasis on: "beneficiary relations", "other close business relations", "close social ties" (e.g., the experience of the USA, Switzerland). As such relationships, it should be mentioned: "sexual relationships outside the family" (FATF Guidelines on Public Officials), "business partnerships" (FATF Guidelines on Public Officials), etc. It is this component of the regulated definition of PEPs that is the most "risky", as it provides for wide opportunities for involving different persons and grounds for different interpretations of "business relationships", "close relationships", "close associates", etc. That is why the "quality defects" of the definitions of PEPs in the national legislation in terms of "additional" ones, which are related to "other than family relations", are due to the overabundance of their evaluative provisions and the lack of lists of such persons. It is the specification of regulatory provisions by fixing the list of such persons that will contribute to the certainty of regulatory grounds for the state financial monitoring relations in relation not only to "main PEPs", but also to "additional PEPs", which is quite logical, given the "reputational risk" of relations with the latter. 4. Conclusions The "quality" of the regulatory definition of PEPs includes the following: a) consideration of international legal and European standards for preventing and combating the legalisation of "dirty money" as a "basis" for national rulemaking; b) a regulatory distinction between the "main PEP", with criteria that allow determining the "uniqueness" of its legal status, and "additional PEPs" (persons who do not have the main characteristics of PEPs, but may potentially be involved in relations with it); c) the "criterionality" of the "main PEPs" is directly related to the "influential" position and significant public functions performed by the person (it is mandatory to have these positions enshrined in law, with the corresponding correlation of functions); d) differentiation of "additional PEPs", with the identification of those persons who are "related" by kinship and other relations to the "main PEP". For each category of such persons, the guideline is to standardise their list, which makes it impossible to vary the interpretation of the relevant provisions and diversify law enforcement practice. References: International standards for combating money laundering, terrorist financing and proliferation of weapons of mass destruction: FATF Recommendations, approved by the FATF Plenary in February 2012. Available at: http://www.sdfm.gov.ua/content/file/Site_docs/2018/20181221/BOOK/FATF%20Recommendations_ UKR_17_12_2018.pdf United Nations Convention against Corruption. Bulletin of the Verkhovna Rada (BVR), 2007, no. 49. Available at: https://zakon.rada.gov.ua/laws/show/995_c16#Text The Use of the FATF Recommendations to Combat Corruption: FATF Best Practices Paper of October 2013. 31 p. Available at: http://www.fatf-gafi.org/media/fatf/documents/recommendations/BPP-Use-of-FATF-Recs- Corruption.pdf Chaikin, D., & Sharman, J. C. (2009). 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The Review of Banking & Financial Services, vol. 27, no. 10, pp. 119–130. Available at: https://www.lw.com/ thoughtLeadership/bank-programs-interdict-corruption-related-laundering Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/ Baltic Journal of Economic Studies 118 Vol. 9 No. 5, 2023 EC of the European Parliament and of the Council and Commission Directive 2006/70/EC. Available at: http://www.sdfm.gov.ua/content/file/Site_docs/2016/20160516/DIRECTIVE%20(EU Bysaha, K. V. (2017). Politically exposed persons: detection and identification (international experience and Ukrainian realities): scientific and practical recommendations for the national system of prevention and counteraction to legalisation (laundering) of proceeds of crime, terrorist financing and financing of proliferation of weapons of mass destruction. Kyiv: Borys Grinchenko Kyiv University, 200 p. Carr, I. (2018). Corruption, Development, Financial Institutions and Politically Exposed Persons. White Collar Crime and Risk:edited by N. Ryder. London: Palgrave Macmillan, pp. 7–42. The Law of Ukraine "On Prevention and Counteraction to Legalisation (Laundering) of Criminal Proceeds, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction" of 06.12.2019. Bulletin of the Verkhovna Rada of Ukraine (BVR), 2020, no. 25, аrt. 171. Available at: https://zakon.rada.gov.ua/laws/show/ 361-20#Text FATF Guidelines on Public Officials (Recommendations 12 and 22) (2013). Available at: https://eurasiangroup.org/ files/FATF_docs/Guidance-PEP-Rec12-22.pdf Received on: 12th of October, 2023 Accepted on: 27th of November, 2023 Published on: 28th of December, 2023