A politically exposed person includes Heads of State or government, senior politicians, judicial or military officials, and close associates/family members of the Politically Exposed Person.
Governing bodies like the Financial Action Task Force (FATF) have set out AML guidance setting out the following 3 classifications of a Politically Exposed Person (PEP)
PEP screening is a process used by banks and other financial institutions during client onboarding as part of their Identity Verification and Know Your Customer (KYC) initiatives.
You can find out more about what is Identity Verification here.
Since there are potential risks in doing business with politically exposed persons, financial organisations must have a system in place to assess and mitigate those risks. This is where Customer Due Diligence (CDD) comes into play. CDD or KYC policies are essential in building an effective Anti-Money Laundering (AML) program. By properly assessing a customer’s risk prior to onboarding, financial organisations can apply the preventive measures necessary to protect the organisation and politically exposed persons business relationship.
We have an article dedicated to What is Anti Money Laundering here.
The CDD Rule has four core requirements as outlined by the Financial Crimes Enforcement Network (FCEN). It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to:
You can find out about what is Customer Due Diligence (CDD) here.
To avoid violations and costly fines and penalties, you need to have a comprehensive view of compliance across your enterprise. Melissa’s Identity Verification service, provides PEP (Politically Exposed Person) and watchlist tools to consolidate screening and easily integrate with your existing technology infrastructure. This allows you to choose from our proprietary AML Data Feed which includes comprehensive sanctions lists (OFAC, UK, UN, EU) PEP and other government and international restricted party watch lists.