It is important to understand the term PEP and its categories. A PEP is an individual entrusted with a prominent public function, has power over, or can influence government spending.
Individuals holding the following positions would be construed as PEP: Head of Government of any nation, Senior politician, Senior Government official or Senior official of a political party, Judicial & Military serving or retired official, and Senior Executive of Government corporation.
The term “PEP” also covers the immediate family members, spouse & kids, and close business associates, treating these persons as “Associated PEP.”
With understanding of who would be considered as PEP, it is pertinent to understand the three categories of PEP: domestic PEP, foreign PEP & head of international organizations. Domestic PEPs are persons holding any prominent public function in the country itself. Foreign PEPs are individuals holding any prominent public position in a foreign country. While the head of international organizations is the person who holds a prominent position at any international or reputed organization working for the world, such as the United Nations.
Not all #PEPs, by default, be construed as being involved in financial crime merely basis their holding of public functions or influencing the government funds. It is important to consider the following parameters before concluding a PEP or Associated PEP as a “high-risk”: 1. PEP should be a natural person & not an organization. 2. PEP should be entrusted with a prominent public function to have influence or power over public funds and policy making. 3. Once a person ceases to hold any prominent public function, his or her status as PEP depends on their existing power or influence over the government‘s decision-making.
Now that we have understood the basics about PEP, we are now going to discuss how to manage the ML/FT risk while dealing with a PEP or associated PEP. Given the connection between the PEP and access to government funding, it is recommended to consider all PEP or Associated PEP as high-risk and perform #EnhancedDueDiligence, along with the standard “KYC” process.
As part of #KYC, verify the PEP's identity and establish the identity documents' legitimacy. Besides this, #EDD measures shall include the following, 1. Seek details about source of funds and wealth and check its legitimacy. 2. Inquire about purpose of the business relationship. 3. Verify professional or financial background of PEP. 4. Look out for adverse media using reliable, independent sources 5. Insist first payment towards the transaction from the customer’s own bank account 6. Obtain approval from senior management.
Once a business relationship has been established with a PEP, the Company shall enhance the frequency of ongoing monitoring of such relationship and transaction executed with PEP.
Trust that the insights on PEP would help mitigate the risk arising from PEP customers. Stay tuned for more videos on AML/CFT framework. Thank you!
Timestamps:
0:00 PEP Introduction
0:25 Who is PEP?
0:44 associated PEP
0:54 3 categories of PEP
1:06 Domestic PEP
1:12 Foreign PEP
1:18 Head of International Organization
1:29 High risk
1:38 Factors considered while determining PEP
2:11 MLFT Risk with associated PEP
2:34 KYC & EDD
2:41 Treated as High risk
3:15 Regarding PEP
#AMLUAE #politicallyexposedpersons #pepscreening #UAE #AML #AntiMoneyLaundering #AMLCompliance
