Politically Exposed Person (PEP) Screening
by John Smiles

Politically Exposed Person (PEP) Screening

A Politically Exposed Person (PEP) is an individual who is or has been entrusted with a prominent public function.

Many Politically Exposed Persons hold positions of influence and as a result carry a greater risk, if their influence is abused for the purpose of money laundering, corruption or bribery.

In addition to that, any close business associates or family member of PEPs may also be deemed as being a risk and therefore could also be added to the PEP list.

Examples of PEPs are:

  • Senior official of a major political party
  • Senior official in the executive, legislative, administrative, military, or judicial branch of a government
  • Senior executive of a government owned commercial enterprise or corporation.
  • Any individual known to be a personal or professional associate of a PEP
  • An immediate family member of a PEP; e.g. spouse, parents, siblings, children.

The 4th Anti Money Laundering Directive (AMLD4) was transposed into Irish law on the 26th June 2017 in order to combat money laundering and terrorist financing. AMLD4 has broadened the scope to include domestic PEPs, rather than just foreign PEPs.

The directive also imposed enhanced vigilance, obliging financial brokers to review their customer registers to determine if Enhanced Due Diligence needs to be applied, i.e. reviewing the source of customers’ wealth and funds. These enhanced measures also apply when taking on new customers.

New and existing customers may not initially meet the definition of a PEP, but may subsequently become one during the course of a business relationship with the broker.

Financial brokers have an obligation to undertake regular and on-going screening of their customer base and of the customers’ beneficial owners (where relevant), to ensure that they have identified all PEPs.

The frequency of PEP screening must be determined by the financial broker in line with their Business Risk Assessment.

AML checks are essential in assisting financial services and other regulated firms to safeguard against white-collar crime such as money laundering, corruption or fraud. If these activities are not identified there can be serious consequences both for  the business in question and Irish society.