By A politically exposed person is people at risk of engaging in illegal activities such as bribery and money laundering. Having a PEP does not indicate that a person is guilty but indicates that attention should be paid.
PEPs are people who hold government agencies or an important public positions. Close family members or relatives of these people are also considered a PEP.
Because PEPs are powerful and influential people, they are at risk of corruption and bribery attempts and, as a result, of money laundering or terrorist financing. Therefore, financial institutions need to implement AML / CTF measures to manage these risks.
According to the guideline published by FATF; Government officials, political party officials, senior executives, and their relatives and partners are considered PEP.
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Types of PEP’s
There are three different types of Pep.
- Domestic PEP: People working in the state administration, government officials, senior executives, military officials, officials of state-owned companies, members of political parties and such government employees.
- Foreign PEP: People working in a state institution of a country other than the country where they are located.
- International Organization PEP: People who working in the United Nations (UN), the World Trade Organization (WTO) or the North Atlantic Treaty.
A Pep person is not considered a PEP after leaving their high-profile position, but is still high risk. When you consider a former PEP person a high-risk customer, you must apply advanced customer due diligence.
What is PEP screening?
PEP among your customers and failure to comply with regulations can seriously damage a financial institution’s reputation and result in fines. This does not mean that you do not trade with these customers, only extra precautions are required for these customers to prevent financial crime.
PEP scanning allows you to be aware of high-risk customers in your organization, so you can perform customer due diligence. These scans are an important step in AML and KYC compatibility.
There are some controls that should be applied after detecting these people. These controls are called transaction monitoring. PEP’s transactions must be constantly controlled.