What is PEP ?| Corruption & Bribery | Politically Exposed Person's ? | Financial Crime - 2

Описание: What is a Politically Exposed Person (PEP)?

Politically Exposed Persons (PEP) are high-risk clients with more opportunities than ordinary nationals to gain assets through illegal means like bribe-taking and money laundering. Classifying a potential client as a PEP doesn't mean that a corporation can't work with them. PEP control is only part of the process that allows financial institutions to conduct a complete risk assessment, and awareness of red flags is essential in this assessment. Sometimes matching just one of these politically exposed person indicators might be linked with financial abuse.

The PEP Definition According to FATF

Senior government official executive bodies, diplomatic roles, legislative bodies, judiciary bodies

Close family members are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of partnership.

Organizations and Institutions a senior executive of a government-owned commercial enterprise.

Close associates are individuals who are closely connected to a Political Exposed Person, either socially or professionally.

A senior official of a major political party.



Different 3 Types of PEPs as defined By FATF

1. Foreign PEPs :
2. Domestic PEPs :
3. International organization PEPs :


PEP Risk Levels Based on FATF Guidelines of Red Flags

Every regulated corporation must fit the guidelines while working with a politically exposed person. After the client is uncovered as a PEP, corporations are responsible for ongoing due diligence checking the status. Financial Action Task Force is an intergovernmental AML/CFT institution regulating financial crimes. It is also a fundamental reference for any other regulatory action.e

FATF rules perform our PEP scans. Political Exposed Person risk categories:

Low-level risk includes supranational or international business officials, senior functionaries and mayors, and local, state district, and urban assemblies members.   

Medium-level risk includes head officials of judiciaries, banks, military, law enforcement, senior members of state agencies, high-ranked civil servants and religious organizations, commissioners, consuls, and ambassadors.

High-level risk includes heads and government members, parliament members, head officials of judiciaries, banks, law enforcement, military and religious organizations, and prominent political party members.



What are Red Flags to Watch Out for :


According to the FATF, the measures that will enable companies to detect and control these people:

1. Identity Shielding: As PEPs are aware of their status, sometimes they try and hide their identity or avoid being in the spotlight. For example:

Assigning legal ownership to somebody;

Abnormally or constantly interacting with intermediaries;

Using corporate vehicles without valid business reasons or for confusing involved ownership and industries.

2. Suspicious Behavior:

Being secretive or uncomfortable about the source of funds and wealth.

Providing false, inaccurate, or insufficient information.

The information doesn't match with publicly available data.

Eagerness to explain the reason behind their business in the country's DNFBP or financial institution.

3. PEP has been denied an entry visa.

4. Funds belonging to PEP move from one country to another.

5. A steady flow of wire transfers or cash out

6. No credible explanations or details for certain business relationships, transactions

7. Position in the Company: Position can become a reason for concern.

8.Access, authority, and control over the corporation's funds, operations, and policies.

9. Informal/formal ability to control mechanisms against TF/ML.

10. Influence/control over government or corporate accounts.

11. Having control or owning over DNFBP for financial institutions. 


List of Higher risk industries which are

Banking and finance.

Military and defense.

Businesses that work with the government or state agencies.

Construction; Mining and extraction.

Public goods provision.

Transactions: The way receives or uses money might expose a lot about them:

The account shows ongoing activity in a short period of time after a long period.

Private banking;

Wire transfers without economic explanation or lacking beneficiary information.

Anonymous payments or transactions received from an unknown third party.

Funds are moved constantly from one account to another or between financial institutions without a business rationale.

Steady cashflows, massive global funds transfers, or wire transfers.

Having and using multiple bank accounts without a clear reason

Services and Products: FATF deemed some of the products and services are prone to risk and vulnerable to being used;

Businesses are catering to foreign clients.

Service and trust providers.

Concentration/correspondent accounts.


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