Question: What are some of the resources we might use to help us identify Politically Exposed Persons (PEPs)?
PEPs, generally understood to include senior foreign political figures, their immediate family members, and their close associates, can present unique risks to banks because they may be involved in foreign corruption, money laundering or terrorist financing, and could use accounts at a bank to further those illegal pursuits, exposing the bank to increased regulatory scrutiny and possible supervisory action. Identifying such persons and transactions that might be related to illegal activity is critical.
There is a valuable discussion of Politically Exposed Persons in the Expanded Examination Overview and Procedures of Persons and Entities section of the Federal Financial Institutions Examination Council's 2007 Bank Secrecy Act/Anti-Money Laundering Examination Manual.
Determining which customers are, and which are likely not, PEPs can be difficult. There is no "official" or government database that purports to include all persons fitting the PEP description. Your bank's identification efforts can range from stepped questions posed in your new account interview to wider ranging use of selected data sources such as the CIA's annual World Factbook (http://www.cia.gov/cia/publications/factbook/index.html) and information published by Transparency International (http://transparency.org/), along with other sources mentioned in the 2001 interagency Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Official Corruption (http://www.fdic.gov/news/news/financial/2001/fil0106a.html).
Institutions doing business internationally can find themselves at greater risk of involvement with PEPs. Such firms often determine that subscribing to third-party global risk databases can serve several purposes, such as identity verification or uncovering multiple types of hidden risks-criminal history, fraud, corruption, etc. These sources can be a cost-effective method to address the challenge of identifying Politically Exposed Persons if the databases contain a wealth of information about the subjects so that your business decisions can be made almost immediately. The resulting efficiency can enable a bank to focus on true risks and ongoing monitoring efforts on accounts of those persons most likely to pose increased risk of suspect activity. For more information, contact Kristine Regele at firstname.lastname@example.org.
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