Sometimes its tough to evaluate the risk associated with PEPs. In fact, most compliance professionals seem to have a difficult time deciding if someone is a PEP or not. There are few resources to go on. The Central Intelligence Agency publishes some information in their World Leaders publication and in the World Fact Book. But aside from that, there is no real official list of PEPs. In addition to national regulatory bodies publishing guidance, the Financial Action Task Force has published a useful guideline, which is the international reference on PEP evaluation. By these guidelines, there are certainly a large number of PEPs out there: Foreign PEPs, Domestic PEPs, International PEPs, and their families and close associates. Basically anyone who is elected or appointed by an elected official can be considered a PEP.
Once the PEP decision has been made, which can be easily accomplished with KYC3 Instant KYC Reports, the risk needs to be evaluated. Rather than a simple tick the box exercise, the judgement is subjective and needs to take into account the individual and their associates in order to judge the risk that these people might be involved in an illicit financial transaction. Likewise, the countries and jurisdictions involved need to be reviewed for the risk they present. Are they offshore tax-havens? Where are they on the Transparency International Corruption Perceptions Index? The proposed relationship needs to be considered. Is the PEP proposing a current account to pay the expenses of their child in university in your country … or are they procuring a yacht? And finally the risk tolerance of the financial institution and its relationship with the regulator need to be considered.
Conducting a first level screening to determine the degree of political exposure is critical. Following up on all positive results with a comprehensive risk based assessment is the best way to properly manage PEP risk.
KYC3 - Know Your Customer, Counterpaty and Competitor 