PEP Screening and Due Diligence

During Client Onboarding, Periodic Screening, Events Driven Review (EDR), KYC Refresh and other reviews, the parties are screened against Domenstic PEP and International PEP lists.

• Client
• Directors / Partners / Shareholders / UBOs/Authorised Signatories / Authorised Users / Account Managers

Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.

International organisation PEPs: persons who are or have been entrusted with a prominent function by an international organisation, refers to members of senior management or individuals who have been entrusted with equivalent functions, i.e. directors, deputy directors and members of the board or equivalent functions.

Family members are individuals who are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of partnership.

Close associates are individuals who are closely connected to a PEP, either socially or professionally.

Categories of PEP

The term “PEP” relates to senior officials and does not include those performing middle or junior ranking roles. Prominent public functions include (but are not limited to) the following: 

• Heads of State or Heads of Government, ministers and deputy or assistant ministers

• Members of Parliament

• Members of supreme courts, of constitutional courts or of other high level judicial bodies whose decisions are not generally subject to further appeal, except in exceptional circumstances.

• Members of courts of auditors or the boards of central banks

• Ambassadors, Charges d’affaires and high-ranking officers in the armed forces;

• Members of the administrative, management or supervisory boards of state-owned companies

• Directors, deputy directors, and members of the board or equivalent function of an international organisation

Immediate family members of a PEP:

• A spouse;

• A partner (incl. a person who is considered by his national law as equivalent to a spouse);

• Children and their spouses or partners; and

• Parents.

Close associates:

• An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relations with a politically exposed person.

• An individual who has sole beneficial ownership of a legal entity or a legal arrangement which is known to have been set up for the benefit of a politically exposed person.

Factors to consider when declassifying a PEP

It's been over a minimum number of years (three for domestic and five for foreign PEPs or prominent persons) since the person ceased to be entrusted with a prominent public function. When determining if there is a reason to continue to treat the person as a PEP, and whether the person presents a higher risk of money laundering, entity may consider the following factors:

Link to relationship / transaction

• What is their involvement in the business relationship (relationship) / one-off transaction (transaction)?

• Have funds been / will funds be received from the person?

• Do they have any control over the relationship?

Position held

• How long did they hold the position?

• What level of influence did they have?

• Was the position susceptible to corruption or misappropriation of state funds / assets?

• Were they a key decision maker?

• Were they involved in financial transactions / dealings?

Continued connections

• Is the person who held the position still alive?

• Are they still linked in any way to the past position?

• Are they close to the person who took over the position?

• How likely is it that they will hold a position again in future?

• Do they still deal with any substantive matters?

• Do they have business interests related to the public functions?

• If you are dealing with an immediate family member or close associate of the person who held the position, what is the connection and how close were / are they?

Country

• Is the country vulnerable to corruption (for example, those with poor ratings on Transparency International's Corruption Perception Index)?

• Is the country politically unstable (for example, those highlighted as a concern by the Worldwide Governance Indicators)?

• Is the country's government ineffective (for example, those considered to be a "failed state" in the Failed State Index)?

• Has FATF identified the country as having strategic deficiencies in their AML / CFT regimes?

Industry

• Does the person have links to industries vulnerable to corruption (for example, extractive industries like oil, gas and mining)?

Source of funds

• What activity/ies generated the funds being used in the relationship / transaction?

• Is it linked to the position held?

• Could it have been tainted by corruption?

Source of wealth

• What is the source of their wealth?

• Was it acquired while they held the position?

• Could it have been tainted by corruption?

• How plausible is the customers net worth based on their profile?

Behavioural indicators

• Has the person been transparent when providing information?

• What is their reputation like from available sources?

• Is there any relevant adverse media involving the person?

• Does the purpose and intended nature of the relationship / transaction make sense?

An entity must ensure that the rationale is well-documented as to why declassification is appropriate, obtain MLRO approval and maintain adequate records on the customer file.