What is a Pep?
There is no single, globally agreed definition of a PEP.
Local or regional regulations may differ in respect of particular elements of the PEP definition. While all holders of public functions are exposed to the possibility of corruption or the abuse of their position to a certain degree, those holding senior, prominent or important positions, with substantial authority over policy, operations or the use or allocation of government-owned resources, have much more influence and normally pose greater risks for an Institutions and should be categorised as PEPs.
Some examples of specific functions that would be likely to give rise to PEP status are:
• Heads of State, heads of government and ministers
• Senior judicial officials who sit on bodies whose decisions are not subject to further appeal
• Heads and other high-ranking officers holding senior positions in the armed forces
• Members of ruling royal families with governing responsibilities
• Senior executives of state-owned enterprises, where the state owned enterprise has genuine economic or political importance
• Senior officials of major political parties
• Heads of supranational bodies, e.g. UN, IMF, WB
• Members of parliament or national legislatures, senior members of the diplomatic corps e.g. ambassadors, chargés d’affaires or members of boards of central banks
• City mayors and governors or leaders of federal regions
What is Pep Screening?
PEP screening is the screening of customer names and associated details against PEP information at certain points during the customer relationship.
While some relevant, competent Platforms like CheckAML have all the PEP lists.
Regulatory requirements usually require FIs to adopt reasonable, risk-based measures to identify PEPs. Where deemed to be an appropriate control, PEP screening should be automated here CheckAML can help you.
Pep Screening should occur in accordance with an FI’s risk appetite applying an RBA and take place at least:
• As part of the onboarding process
• At periodic customer review
• When there is a trigger event which warrants a customer due diligence review.
How can I define “Close Family Members” and “Close Associates” of a PEP?
Close Family: will include a PEP’s direct family members, their spouse, their children and their spouses, parents and the siblings of the PEP.
Close Associate: will include a PEP’s widely- and publicly-known close business colleagues or personal advisors, in particular persons acting in a financial fiduciary capacity.
How do I Identify of a PEP or their “Close Family Member or Close Associates?
You need to apply an RBA to identifying whether a prospect or an existing customer is a PEP. Therefore CheckAML can help you Screening new and prospective customers and key principals of the overall customer relationship against a database of such persons. Despite the reasonable efforts of an Institution , it can be difficult to identify a PEP, particularly if the customer fails to provide important information, provides false/inaccurate details, or their circumstances change during the course of the relationship therefore ongoing monitoring of your customers is necessary.
The difficulties of identifying Close Family Members and Close Associates are typically greater than for identifying PEPs because, unlike the PEP themselves, any political exposure may not be immediately apparent through the due diligence obtained from the customer.
Can I do business with a PEP?
Yes you can. Accounts with a PEP relationship should, using an RBA, be subject to proportionate enhanced monitoring to detect unusual and potentially suspicious activity. Periodic reviews for existing PEP customers is also important: such relationships should be subject to periodic review to ensure that due diligence information remains current and the risk assessment and associated controls remain appropriate. Frequency of periodic reviews should be determined by the risk of the customer and be documented appropriately. If the risk of the PEP has materially changed since the last review/approval.
What is the Minimum data quality standard?
For the Minimum data quality standards required for effective PEP Screening in order to carry out effective and efficient screening, FIs should have complete and accurate electronic customer data records and the PEP database used for screening should contain sufficient unique identifying data.
Without this information, PEP screening will result in irrelevant alerts, which is not only ineffective and inefficient, but inconsistent with an RBA.
The CheckAML data includes the following:
1) Name (all known names and aliases)
2) Date of Birth, and where this isn’t available, Year of Birth
3) Country of political exposure
4) Gender (where available)
5) Politically exposed role(s), and date(s) or year(s) of appointment
6) Date or year that the PEP left their position (where applicable)
The accuracy and completeness of the CheckAML PEP data is subject to regular review by DX Compliance and changes in personal details and political positions are reflected real time.
