If you own or work for a business that must comply with “know your customer” (KYC) and anti-money laundering (AML) regulations, then odds are you’ve heard of another three-letter acronym: PEP or “politically exposed person.” While the definition of a PEP is continuously changing to reflect new legislation, in general, a PEP refers to a person or a close associate who has been trusted to fulfill a public role, such as an elected official, and who is also at high risk of bribery or some form of corruption. While it’s commonplace for federally regulated companies like financial institutions to perform identity verifications as part of their onboarding processes, PEP checks are part of “enhanced due diligence” (EDD) required before the company forms a business relationship with the PEP.
PEPs are separated into several categories, including domestic and foreign PEPs. These distinctions reflect the variations in regulations across different jurisdictions. KYC laws are continually changing, and it’s up to regulated companies to update their PEP checks so that they’re compliant. Failing to comply not only subjects the organization to hefty fines but also jeopardizes its reputation and financial integrity. So, regulated industries must conduct PEP scans before and throughout their business relationship to maintain compliance and reduce fraud.
Because PEPs are often business-minded individuals who typically have privileged access and affiliations with private companies, KYC laws often require sanction checks. These sanction screens check whether an organization has been sanctioned for violating KYC policies and help a regulated company uncover the nature of the PEP’s relationship with the organization. Together, PEP checks and sanction screens reduce a company’s exposure to hefty fines or reputation damage.
Because KYC laws and AML data are always shifting, it is genuinely impossible to manage the risks associated with handling millions of customers’ sensitive data. So rather than regularly scanning and rescanning millions of customers by hand, save your time, your money and your limited resources by integrating smart technology that does it for you. There are many solutions out there, but the right software is going to streamline your operation, reduce costs and keep your business compliant as it navigates regulation changes for you.
Read a similar article about PEP screening tactics here at this page.
