Politically Exposed Persons (PEPs)

Politically Exposed Persons (PEPs) are individuals entrusted with prominent public functions in a government or international organisation. This includes heads of state, government ministers, senior military officials, members of parliament, and judges. The definition also extends to individuals who are close family members or associates of PEPs. Due to their access to public funds and potential influence, PEPs are considered to be at higher risk for involvement in money laundering and corruption.

Money Laundering Risks Associated with PEPs

• Abuse of Power: PEPs may exploit their positions to embezzle public funds or manipulate contracts for personal gain. The laundered proceeds from these crimes then need to be integrated into the financial system.
• Influence Peddling: PEPs may leverage their influence to pressure businesses into illicit activities, such as accepting bribes in exchange for preferential treatment. These bribes then require laundering.
• Family and Associates: Close family members and associates of PEPs can also be involved in money laundering activities on behalf of the PEP.

Why is Due Diligence on PEPs Important?

• Regulatory Requirements: Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulations mandate financial institutions to implement stricter measures for PEPs.
• Reputational Risk: Failing to adequately assess PEP risk can lead to significant regulatory fines and reputational damage for non-compliant institutions.

Enhanced Due Diligence on PEPs

When dealing with PEPs, financial institutions should implement enhanced due diligence procedures, which may include:

• Obtaining additional identification documents.
• Verifying the source of wealth and funds.
• Investigating the purpose and nature of transactions.
• Screening against sanctions lists and PEP databases.
• Conducting ongoing monitoring of customer activity.

Smile ID and PEPs

Smile ID's AML Check solution is designed to help businesses effectively manage the risks associated with PEPs by providing comprehensive screening and verification services. Our solution:

• Automated Screening: Checks individuals against over 1100 global and African sanctions, PEP, and adverse media watchlists.
• Efficient Verification: Quickly verifies identities and assesses the risk profile of users, ensuring compliance with AML/CFT regulations.
• Seamless Integration: Our APIs and SDKs are easy to integrate with existing systems, providing a smooth and efficient workflow for compliance teams.

Conclusion

Politically Exposed Persons (PEPs) pose a significant risk for money laundering due to their access to public funds and potential influence. Understanding this risk and implementing appropriate due diligence procedures is essential for financial institutions and other regulated entities. Smile ID can be a partner in strengthening your KYC/CDD processes to better identify potential PEPs and ensure compliance with AML/CFT regulations. We have compliance experts well versed in the African market who can provide proper counsel on how to conduct your enhanced due diligence procedures. With on-ground experts across Africa, we easily deal with regulatory complexities and keep tabs on the ever-changing requirements, ensuring you are compliant at every step.

Book a free demo today to get started.