What Proactive Steps Must I Take to Identify PEPs?

Many resources are available that give guidance on how to properly implement a Politically Exposed Person (PEP) due diligence programme. A good place to start is to take an internal risk assessment on what constitutes as “politically exposed” and what does not, in accordance with regulations and your own company’s policy.

Other factors can include developing a PEP due diligence policy which may include questionnaires, staff training, and obtaining a commercial PEP database for screening.

Some companies have asked customers to self-identify as PEPs as part of the standard account-opening procedure, while others have relied on commercial PEP databases to do the due diligence (though the first method relies on the person telling the truth or even knowing that they are a PEP). Whichever method is used, the important thing is to ensure that PEP policy is always followed.

It is important to note that solely relying on a commercial PEP database is often not sufficient to comply with the Financial Action Task Force’s (FATF) requirements, which is often the guideline adopted by the client’s own FIU or Financial Intelligence Unit (also known as the regulator).

A commercial PEP database is just one part of many in a system that a bank must adopt in order to be compliant with its regulator’s PEP requirements.