PEP Screening and Sanctions – AML & CTF

The variance of AML, CTF and Financial Crime is growing, and with that compliance has begun to require the mandatory verification and screening for Politically Exposed Persons (PEPs). 

What is "Politically Exposed Persons" (PEPs):

According to the Financial Action Task Force (FATF) Directives, all businesses considered high-risk, must screen their clients at the time of onboarding to check for PEP or Sanctions.  

There are mainly two types of Screenings:

PEP screening: 

 To identify and conduct due diligence on any PEPs or high-risk customers 

Sanction’s screening: 

 To ensure that entities on Sanctions lists are not allowed to make financial transactions.

What is a PEP List?

A  PEP list is a database of politically exposed individuals and entities built from rigorous investigative and research processes due to as PEP persons generally presents a higher risk for potential involvement in bribery and corruption.

The list could include but not limited to personally identifiable information such as  :

• Date of birth 
• Gender 
• Roles 
• Nationality 

Who does PEP list include:

The screening list is wide and varied including the PEP themselves to International Organizations and PEP relations. The following definition list highlights the key PEP’s and has been adapted from the FATF Guidelines.  

To learn more about the governing watchdog FATF click here: 

PEP Sanctions Regulations:

Denoted prior the growth of AML and CTF occurring in the world, financial authorities and regulations have begun to require the implementation of PEP screening measures as part of the over battle against financial crime. 

Although, a PEP status involves or implies criminal activity, it does highlight the heightened risk and the need for compliance towards them. With that the need for the latest software and in-depth analytical reviews to prevent the occurrence of AML/TBML and CTF is needed for you and your clients and to know more about how DX Compliance provides this click here: 

PEP Regulations Region Specific:

In this section, we take a look at how certain regions in the world take control and implement their PEP Screening: 

United Kingdom 

Obligation for PEP screening: Yes
Obligation for Domestic and Foreign PEP screening: Yes
Obligation for international PEP screening: Yes 

With the current status of the UK, as it departs the European Union due to “Brexit”, its requirements and regulations of PEP screening and sanctions remains similar to that set out by the AML Directives in the EU or also known as the 6AMLD. 

However, now in the UK, politically exposed person screening requirements is set out by the Financial Conduct Authority (FCA). 

Europe 

Obligation for PEP screening: Yes
Obligation for Domestic and Foreign PEP screening: Yes
Obligation for international PEP screening: Yes (except Bosnia and Herzegovina) 

As previously mentioned, The EU implements its PEP screening policy across its member states through its own watchdog Anti-Money Laundering Directives. The regulation of PEP screening is implemented under the “risk-based approach” to AML/CFT, and the EU follows FATF in its definition of a PEP and RCA. Some countries in Europe may warrant greater PEP regulation: considered high-risk by FATF. 

Since not all countries in Europe are members of the EU, there is regulatory divergence across the continent.  

Middle East 

Obligation for PEP screening: Yes
Obligation for Domestic and Foreign PEP screening: Varies by country
Obligation for international PEP screening: Varies by country 

The Middle East has and is a diverse AML/CFT region for the PEP environment.  

Most Persian Gulf states, including the UAE, Oman, Yemen, Saudi Arabia and Iraq, require foreign, domestic and international PEP screening, as do Israel, Jordan, Lebanon, Turkmenistan and Afghanistan.  

PEP Breach Examples: 

With the acknowledgment of how different regions and their retrospective bodies handle and regulate PEP screening and sanctions it is important to acknowledge the recent breach in PEP guidelines. 

The FATF has recently “grey-listed” the first EU country – Malta due to its high risk and continuous breaches under AML and CTF. This saw the former chief of staff of ex-Maltese Prime Minister Joseph Muscat, being charged with money laundering, fraud and corruption.