The term “PEP” (or Politically Exposed Person) was coined in the 1990s, and essentially refers to anyone in a prominent position in public life, whether that be in the government, in law enforcement or in publicly-owned corporations.
It’s crucial to identify and pay special attention to PEPs during your AML checks, as they’re generally considered to be more susceptible to bribery and other financial crimes due to their high profile roles, wealth and influence. This means they present a greater money laundering risk to your firm; if you do decide to go into business with a PEP, you’ll need to carry out Enhanced Due Diligence, and they’ll require more ongoing monitoring than other potential clients or customers.
Who qualifies as a Political Exposed Person?
There’s no universally observed definition for PEPs, but most organisations use guidance set out by the Financial Action Task Force. The FATF defines PEPs as ‘individuals who are or have been entrusted domestically with prominent public functions.’ Some examples of positions which qualify as PEPs are as follows:
- Senior executives in government-owned businesses, like the BBC
- Government officials
- Leaders of political parties
- Senior members of religious groups
- High-ranking military officials
- Consuls and ambassadors
- Members of the House of Lords
- Members of parliament
- Close friends or relations of any of the above
While some organisations might filter these roles into different categories to determine the level of risk, SmartSearch treats every match with equal importance. Our cutting-edge automated PEP screening software can even identify Politically Exposed Persons who are logged under nicknames, aliases and abbreviations, so a thorough search is guaranteed.
How long is a PEP considered a PEP?
In Recommendation 12 of the FATF guidance, it states that ‘the handling of a client who is no longer entrusted with a prominent public function should be based on an assessment of risk and not on prescribed time limits.’
In other words, this is usually subject to interpretation. Anyone who has been a PEP in the past might still qualify as a PEP years after they leave the high profile position they occupied, if they’re still relatively well-known within their field. Once a past or present PEP has been identified, deciding how to proceed is at your discretion, but vigilant ongoing monitoring will enable you to manage the risks involved.
What is a PEFP?
The FATF guidance makes the specific distinction between PEPs in the UK and PEPs overseas, who must also be considered during your AML checks. A PEFP, or Politically Exposed Foreign Person, is defined by the FATF as any ‘individuals who are or have been entrusted with prominent public functions by a foreign country.’
SmartSearch operates on a global scale, and our sophisticated screening software enables us to identify PEFPs just as easily as PEPs, so you can be sure we’ll never miss a beat.
What do you need to do about PEPs?
Identifying PEPs amongst your potential clients and customers is half the battle – it’s crucial that you’re able to spot PEPs when carrying out your AML checks, as they drastically increase the money laundering risk to your business.
Once you’ve identified a PEP you’ll need to investigate further, building a solid profile around their public role, and establishing how they might make your company more vulnerable. These details will allow you to make an informed decision about whether or not to have dealings with them.
If you do decide to work with a PEP, they will require more intensive ongoing monitoring than a normal client or customer. As well as Enhanced Due Diligence, your ongoing monitoring process should involve measures like keeping a close eye on all future transactions, frequently reviewing their PEP status, and setting clear business boundaries.
How can SmartSearch help?
Our complete AML solution is a comprehensive platform that can easily identify PEPs and PEFPs, using unparalleled resources like the Dow Jones WatchList, which is updated daily.
Carry out all your AML checks in one place, from initial checks to sanctions screening and ongoing monitoring – AML compliance has never been easier. Our automated system allows you to ensure that no stone goes unturned, so you’ll always get all the information available about your potential client or customer.