My Bank does not open accounts either for known PEPs or for resident or non-resident aliens and does not offer private banking accounts.

Is there any reason [rational or otherwise] why the Bank should have to scan its customer database against a PEP list?

The request letter items on page H-17 in Appendix H of the Exam manual lists some things that you might be asked for by the regulators in connection with PEPs. Note that this is separate from the Private banking items that appear on pages H-14 and H-15.

It is possible to have a PEP who is not a resident or nonresident alien. In addition to foreign political leaders, the term also applies to their family members or close associates who could conceivably be US citizens.

The problem will be that it would be very difficult to find a commercially available list that will have such folks listed. PEP lists are not like an OFAC list where there is a definitive event that would place a person's name on the list. The list is always going to be a moving target as elections and military coups take place, friendships are forged then broken, etc.

A commercially available list would really only be a first pass. You can think about having a question on an account opening inteview regarding a person's relationship with a foreign official.

And really, it's one thing to screen your obvious risks - i.e. the non-resident alien referred to you by the embassy office, but its a whole other thing to expect to have some sort of crystal ball feature at your new accounts desk that would let you know the 20-something opening an account and setting up direct deposit of payroll has a cousin who is dating the crown prince of Moldavia.

Bonnie: It's true that there is no PEP list, but there are software programs that can be used to find foreign officials and people with relationships to them.

Regs R Us: Withoug making any recommendations, could you identify any good software programs that can be used to find foreign officials and people with relationships to them?

I know there are software programs that can identify foreign officials - afterall the State Department has a list. And it may not be too difficult to figure out a spouse of a foreign official, but when you get to brothers, sisters, cousins, and consorts, you are most likely going to end up with a program that will spit out all kinds of false positives. This leaves you with the unenviable task of reviewing all of those, making further inquiries and investigations, etc.

Again, this is where RISK BASED programs are the key - is your risk of having a PEP greater with non-resident alien customers or with U.S. Citizens? Then again, you can have someone who is the brother of the Prime Minister of Farfetchia, and if that person maintains a low 4 average balance with typical "retail" type of transactions, what is your risk?

I hate to think that we will get dragged into a PEPS for PEPS sake kind of mentality. The first thing you should be paying attention to are those accounts that have $$$$ in wires, especially wires involving foreign geographies, and accounts that have $$$ in foreign ATM and other high risk transaction activity. Check if THOSE people are PEPS, and even if they are not, you need to vet those transactions.

The banks that have had PEP problems didn't get their because they had a few accounts that they didn't realize were related to some foreign head honcho, they got into trouble because they either willfully ignored high risk transactions, or worse, they were complicit in facilitating the transactions.

Bonnie:
My belief is that rationality and common sense should guide ones action as regards PEPs. However, I asked the question because I've learned that, in recent exams, regulators have been inquiring if financial institutions are running the PEP list against their customer data base. This would seem to indicate a new regulatory initiative, even for those who do not and have not had any PEPs and whose policy specifically prohibit the opening of accounts for PEPs.

Bill

Well - I suppose that is good news for vendors. ((shrugs))