Considering the highly dynamic nature of world politics and AML regulations pertaining to PEP screening and dealing with them PEP checks are becoming more of a challenging task rather than simply being a regulatory requirement to ensure business safety and security against the risks of money laundering, corruption and other crimes of similar nature. 

Seeing this increasing nature of interconnectedness among business organizations and compliance teams are faced with a challenge of increased regulatory scrutiny and compliance requirements. 

One crucial aspect of these compliance challenges  is concerned with  conducting Politically Exposed Person (PEP) screening checks.

“This blog will talk about developing the understanding about PEPs checks and then hopping onto common reasons to conduct PEP screening checks for your business.”

Question Remains! 

Why to Screen PEP in First Place? 

As commonly said “PEP risk screening checks are a vital component of anti-money laundering (AML).” These screening checks involve assessing and screening whether individuals have a politically exposed status due to their positions of influence or authority. 

Having the liberty to work on these high ranked positions, these individuals pose a higher risk of involvement in illicit financial activities, making it crucial for organizations to perform PEP screening services to cancel out the risks and meet the regulatory requirements as mandated in their particular jurisdiction.

Essential Basics of PEP Screening to Know

“PEPs, also commonly known and Politically Exposed Persons are individuals working on renowned public positions in government, judiciary, military, or state-owned enterprises, as well as their immediate family members and close associates. Screening these individuals is essential to mitigate the risk of financial crimes such as bribery, embezzlement, and money laundering.”

The question remains, should we identify PEPs as PEP throughout life? There might not be a clear answer to this as regulations around this, and regulatory duration differ for each region. 

According to FATF Recommendation 12 “ there is no set limit for classifying a person as PEP, rather the time limit should be applied as per the nature of the case.” Having that said, a risk based approach combined with ongoing monitoring can help get you better and clear insights on PEP risks as long as they might have a chance to foster corruption and money laundering.

Common Reasons “Why PEP Screening Checks are Important!”

Here is what you need to know about it. 

1. Protection against financial crimes  

The entire purpose of PEP screening goes to waste if  the core purpose of mitigating financial crimes is not met. Businesses need to stay updated with recent updates and broader coverage of databases that may cover all the aspects of screening requirements to make sure no risks are left unchecked. 

“AML Watcher with a repository of 60,000+ data sources serves as the industry leading, consolidated database meeting  PEP check requirements in real time to reduce the business exposure rate due to dynamic changes in risk status.”

2. Reputation Protection 

As the global nature of data is becoming highly dynamic, one cannot rely on data that is years older or even days later or anything that is readily available online. Rather adverse media sources backed by credible sources can help in quick detection of risks without worrying about falsely accusing a person of the crime he didn't do. 

“By using AML Watcher for their real time PEP screening, businesses are immediately notified of any updates or additions to PEP lists along with the risk status they are assigned with ranging from level 1 to 4, enabling timely and accurate risk mitigation.”

3. Risk Mitigation

Using a risk-based approach to PEP can help businesses in identifying and then assessing the level of risk posed by PEP to combat the risk as soon as it emerges and prioritize screening efforts to onboard PEPs that align with the risk appetite of the business rather than debanking credible customers. 

4. Regulatory Compliance 

As the name suggests, The main reasoning behind being consistent with PEP checks is to abide by the regulatory requirements, thus keeping a consistent eye out for risk can help not only in detecting the risks, but offer timely insights in devising the dealing strategy to combat risks that may emerge later in the way.

Conclusion:

In short, it is undeniable to screen Politically Exposed Persons (PEPs) as the major part of corruption and money laundering is fostered from their end. By investing in a right PEP screening solutons business can rightfully conduct thorough PEP screenings, prioritizing potential clients falling with the unique risk appetite of the business. 

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