...there is no such animal...
Randy, I don't disagree with you that internal policies are
currently defining this and some of this is an impossible task, but I'm not sure the animal doesn't exist. I think the reason banks are defining PEPs to include
domestic politically exposed persons is because FATF changed the definition in 2012 to include domestic individuals into the definition of a PEP, which aligned FATF rules with Article 52 of the United Nations Convention against Corruption (UNCAC).
FinCEN even mentions this on their website here:
https://www.fincen.gov/resources/international/financial-action-task-force"The definition of politically exposed persons (PEPs) has been broadened to include domestic PEPs and PEPs from international organizations."While FinCEN has not yet given guidance regarding expectations for domestic PEPs and the Exam Manual still references "Senior Foreign" political figures, I believe it is only a matter of time before FinCEN incorporates domestic PEPs. Just like BO rules had been with FATF some time before it made it to FinCEN rules, it may take a while but I believe the animal is coming.
For reference on what may be coming, here is what FATF says about domestic PEPS:
"5. For domestic PEPs and international organisation PEPs, financial institutions must take reasonable measures to determine whether a customer or beneficial owner is a domestic/international organisation PEP, and then assess the risk of the business relationship. For higher risk business relationships with domestic PEPs and international organisation PEPs, financial institutions should take additional measures consistent with those applicable to foreign PEPs."