The political entities are the prominent influencers and facilitators of the major country-wide economic decisions. Although these entities are respected due to their political position, they are often involved in international money laundering practices.
Due to the involvement of these entities in offshore money laundering scams, an overall risk index of 7.09 was recorded in Panama in 2016. The politically exposed persons and their close associates are the critical entities found guilty in the revolutionary Panama Leaks. Therefore, the implementation of an effective PEP check is necessary to understand the role of such entities in high-profile activities.
What is the Concept of AML PEP Check? A Quick Overview
A politically exposed person is someone who is entrusted by the legal authorities for the formulation of country-wide economic activities. Oftentimes, these PEPs misuse and exploit their power to facilitate unauthorized and illicit activities. For these reasons, regulatory bodies have implemented strict PEP screening checks to identify their financial and trading activities. A PEP check involves the detailed assessment of all the political and high-profile entities against the global databases.
A detailed PEP check must be conducted when a parliament member or their relatives apply for a loan from a financial institution. Before proceeding with the loan application documentation, businesses are required to screen their previous transactional patterns and risk profiles. This screening practice reduces the occurrence of money laundering and cyberattacks in real-time.
A Guide to the Process of International PEP Check Requirements
A PEP check is an essential and critical component of the enhanced due diligence process. The integration of this identity screening measure is important to minimize the intensity of money laundering operations. Some of the most crucial operations during this process are:
- PEP checks must begin with the identity assessment of all the political entities in terms of their association as an organization’s UBO and shareholders.
- Once the entity’s positions are defined, the next step is to screen their ID credentials and transactional activities against the KYC protocols.
- The PEPs must pass the sanction database screening to protect the financial operations from high-profile sanctioned entities and organizations.
- Additionally, all the previous investments and transactional activities of PEPs across international borders must be screened under the enhanced due diligence checks.
- Finally, all unauthorized and non-regulated activities must be reported to the suspicious activity reporting department to reduce the volume of money laundering activities.
Role of PEP Check AML in Identifying RCA Profiles
RCAs are the relatives and close associates of the PEPs who are not directly in political power but maintain a family and friendly bond with the political entities. The implementation of an effective PEP check is necessary to identify the involvement of RCAs in unauthorized financial activities.
A PEP check involves the integration of commercial database lists to screen RCAs in order to swiftly identify risky entities. This is efficiently done through blockchain screening measures and encrypted monitoring protocols. The continuous assessment of their transactional activities provides a detailed analysis of their financial operations. Furthermore, outsourcing screening through media outlets is also an effective strategy to identify the presence of illicit RCAs during the PEP checks.
Key Benefits of PEP Screening in AML
The automated PEP screening measures that are powered by the machine learning modules provide the real-time assessment of high-risk political entities. The thorough analysis of the client’s organizational activities ensures the protection of the overall economic framework from money laundering and drug trafficking activities.
Furthermore, automated PEP checks emphasize precise and accurate investigation while reducing the extraction of false positive results. The user-friendly interface during the PEP screening measures promotes efficiency and effectiveness in the financial identification operations.
Industries Mandated to Efficient OFAC PEP List
The Office of Foreign Asset Control (OFAC) PEP list prompts several industries and sectors to incorporate effective PEP checks during the onboarding process. The financial institutions are the central hub of all the illicit scams and cybercriminal threats due to their excessive involvement in monetary operations.
These institutions are assisted in implementing strict PEP screening checks that comply with the AML regulatory guidelines. Additionally, the real estate industry is also required to assess the identity and transactional patterns of all the investors and retailers to evaluate their risk profiles. This allows them to limit contractual agreements with high-risk and sanctioned entities, which is necessary to stimulate economic efficiency in the long run.
Wrapping It Up
A PEP check is an essential component of the enhanced anti-money laundering (AML) measures. It deals with the identification of all the illicit and high-risk political figures who are often involved in money laundering operations. According to the Panama leaks, political entities were the biggest contributors to the unauthorized transactional activities that exploited the global economic structure. Therefore, PEP screening measures are crucial to effectively stimulate the authenticity of global organizational operations.