PEP Screening

Politically Exposed Persons (PEP) and Relatives and Close Associates (RCA)

Identifying and scrutinising Politically Exposed Persons (PEPs) is crucial for your financial institution in the fight against financial crime. Here's how Trapets can help you.

What is a Politically Exposed Person (PEP)?

A Politically Exposed Person (PEP) is someone who holds a prominent public position or function, making them potential targets for corruption and bribery due to their power and influence. 

This category doesn't only encompass the individuals in these roles but also their relatives and close associates (RCA), as these connections can also be exploited for illicit purposes, posing significant risks to your businesses.

What are the different types of Politically Exposed Persons (PEP)?

PEPs can be categorised into various groups based on their roles and jurisdictions. These categories include, but are not limited to:

1. Domestic and foreign PEPs.

Domestic PEPs are individuals who are or have been entrusted with prominent public functions, while foreign PEPs have been entrusted with functions by a foreign country.

Examples of domestic and foreign PEPs include:

  • Heads of state.
  • Heads of government.
  • Senior politicians.
  • Senior government.
  • Judicial or military officials.
  • Senior executives of state-owned corporations.

It also includes important political party officials.

2. Persons entrusted with a prominent function by a state-owned enterprise or an international organisation.

This term refers to senior management members, such as:

  • Directors.
  • Deputy directors.
  • And members of the board or equivalent functions.

Requirements for PEPs also apply to:

  • Relatives or close associates of the PEP.
  • Any individual known to be a close personal or professional associate of a PEP.

What are Relatives and Close Associates? 

A relative or a family member of a Politically Exposed Person (PEP) includes their spouse, registered partner, common-law spouse, children, their spouse, registered partner, common-law spouse, and parents.

A Close Associate is a person who:

  • Jointly with a PEP, owns or exercises controlling influence over a company.
  • A person who has or had a close relationship with a PEP, which does not necessarily have to be a commercial relationship.
  • Or a person who alone owns or exercises influence over a company that has been formed for the benefit of a PEP in reality.

How to identify PEPs

Identifying a Politically Exposed Person (PEP) is crucial for your business to fulfil its Anti-Money Laundering AML obligations and mitigate risks associated with such individuals.

However, identifying a PEP is not merely about spotting a name on a list; it is a nuanced process that requires a comprehensive and ongoing approach.

To identify a PEP, you should conduct a thorough screening process. This process involves utilising data sources that cover sanctions lists, PEP and RCA (Relatives and Close Associates) lists, and Ultimate Beneficial Owner (UBO) information.

Our automated technologies and screening lists can efficiently help you identify individuals who meet the PEP criteria.

In addition to comprehensive screening and ongoing monitoring, adverse media checks are crucial to PEP identification. 

These checks involve screening for adverse media mentions, which can provide additional context about a PEP and reveal any potentially risky behaviours or associations that may not be captured in standard databases.

This thorough approach helps to ensure that no potential risks are overlooked.

Remembering that the requirements for identifying a PEP are preventive, not criminal, should not mean that all PEPs are involved in criminal activity. 

Therefore, it's crucial to maintain a fair and unbiased approach while identifying and monitoring PEPs. 

By following these steps, your businesses can efficiently and effectively identify PEPs and mitigate the associated risks.

The importance of PEP screening in your AML work

PEP screening plays a crucial role in maintaining a robust AML programme. It goes beyond mere compliance and helps identify PEPs before onboarding them or during regular transactions.

Identifying PEPs helps you manage and mitigate the risks of unwittingly becoming involved in financial crime schemes. Vigilance is key for effective PEP screening.

Proactive PEP screening also demonstrates your organisation's commitment to governance and ethical operations.

Local and international regulations require a sophisticated approach to PEP screening, which is not uniformly regulated across jurisdictions.

Therefore, identifying and monitoring PEPs not only complies with varying mandates but also contributes to a global effort against corruption and financial crimes, underscoring the organisation's role as a pillar of a transparent, accountable financial system.

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