If you want to avoid regulatory and reputational damages, you want to be sure that your organization understands how a PEP (politically exposed person) is recognized, together with associates. This is not as easy to do as you might think.
To put it as simple as possible, you check to see if a person is a PEP by checking databases of individuals. Usually, these are wealthy individuals that are documented in order to expose a potentially damaging association with someone else involved in politics. Identifying people that are PEP is really important as it helps avoid numerous risks.
The PEP is defined by the FATF (Financial Action Task Force). It is an individual that has a public function. Because of the influence of the position, it is possible that the PEP can be abused in order to commit ML (money laundering) offenses, together with other offenses like bribery or corruption.
Due to the extra risks associated with PEPs, extra anti-money laundering and counter-terrorist financing measures have to be employed by businesses. This is done in a relationship with a PEP. PEP red flags can easily lead to huge problems whenever they are not respected.
There are different PEP categories that exist. Some are relevant for most businesses while others are not. It is important for a business to properly assess the risks of working with a PEP. This starts by knowing what type of PEPs exist. What is particularly important is knowing the high-level PEPs, … Read More . . .