PEP stands for Politically Exposed Person. It's a classification that identifies people susceptible to criminal behavior like corruption, bribery, money laundering, and more. Of course, not every PEP is involved in nefarious activity, but it would be dangerous not to consider the risks.
In this blog, we'll cover the basics of PEPs and identify the potential risks they carry.
What Makes Someone a PEP?
First things first, how do you identify a PEP? In a broad sense, the categorization applies to any high-profile person in a position of power.
The Financial Action Task Force has set criteria to define a PEP. The list includes government officials and senior executives in government-owned or commercial businesses. Relatives and close associates of those individuals apply as well.
Before you do business with anyone, it's a good idea to perform PEP screening. That way, you understand who you're doing business with and can start to identify the risk factors of PEPs. Visit this website if you need to know about "What are the risk factors of PEPs ?".
What are the Risk Factors of PEPs?
Because someone is a PEP doesn't necessarily mean you shouldn't do business with them. However, assessing various risk factors is crucial.
The most important details to think about are:
* Geographic location
* Their position
* The industry or sector they're a part of
* The overall level of authority they hold
Your organization should also understand the purpose of the account they have with you, its anticipated activity, and the complexity of its needs.
Managing Your Risks
As mentioned earlier, your best course of action is to implement PEP screening measures. You should already have a "Know Your Customer" program in place to gather information about the clients you're working serving. Use that information to perform due diligence.
Put their data through AML and PEP screening services and focus on ongoing account monitoring. Reassess the risks later on and comply with all regulations to protect your organization.
PEPs aren't necessarily planning on any crimes. But, you can never be too careful. Understanding your risks will keep you vigilant and ensure that you're looking for suspicious activity.
Read a similar article about enhanced due diligence here at this page. https://culturebooklet.com/AuthorsHome/Details?postId=90048
