
5 Things Businesses Should Know about PEP Screening

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Regulators levy penalties when compliance programs fail or companies have insufficient compliance measures. Anti-Money Laundering (AML) fines surged by 50% in 2022. As a result, industries must implement an efficient risk-based approach to enhance their AML programs. For this, one of the most critical parts of an effective AML/KYC compliance program, PEP screening shouldn’t be neglected.
A PEP (Politically Exposed Person) is an individual who has or had a major role in the public sector. Heads of state, government officials, governors, high-ranking judges, and military officers are common examples.
High-ranking officials may often be profiled as high risk due to their possible involvement in money laundering, corruption, bribery or other financial crimes. Financial firms and other industries should implement PEP screening procedures to safeguard businesses from illicit activities. The process checks whether an individual is a PEP or not, helping companies stay ahead of criminals.
Financial Action Task Force’s (FATF) Recommendation 12 defines PEPS as those who have been (but might no longer be) designated with a prominent public role.
The financial firms must assess the Money Laundering and Terrorism Financing (ML/TF) risk of a PEP who doesn’t have a major role in the public sector and take a proactive approach to mitigate this risk.
Some possible risk factors include:
The FATF’s 40 Recommendations on Money Laundering states that all financial institutions should:
PEP screening is a must for any financial firm before establishing relationships with other businesses. It monitors existing clientele in real-time to ensure that funds being managed on their behalf are not derived from corrupt sources.
Individuals considered as PEPs:
It is important to understand the interpretation of these PEPs layers varies by country and the expectations of a firm doing business with them are universally similar.
A number of controls may be considered to identify and manage PEP relationships. However, all are not appropriate to apply across an institution’s full range of business. For instance, in retail banking, a different range of controls might be relevant in retail banking compared to those considered ideal within a private banking or wealth management sector.
Such relationships must be subject to ongoing monitoring to ensure that the information about the due diligence remains current and that the associated controls remain suitable. Senior management must approve these reviews.
It is critical to apprehend that not all AML solutions are created equal. Businesses must consider the quality and expertise of developers alongside their needs before investing in any AML solution.
Compliance professionals who want to do PEP screening must consider the following things while choosing an AML solution:
From initial identity checks to sanctions screening and real-time monitoring – AML compliance has never been easy. But Shufti Pro has you covered.
Shufti Pro’s automated AML solution helps businesses screen customers against 1700+ watchlists and comply with global regulations. The efficient AML solution can identify PEPs in less than a second to prevent money laundering across all channels. Available in 230+ countries and territories, Shufti Pro is a globally trusted AML solution provider that eliminates synthetic ID usage by identifying bad actors with 99+% accuracy.
Shufti Pro organises sanctions and PEP screening lists by region, country and regulation. Want to learn more?