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Media

Who Are Politically Exposed Persons?

Matthew Warner | August 2020

A Politically Exposed Person (PEP) is an individual who is identified to be at a higher potential risk of involvement with money laundering, bribery and corruption, either through their work personally or through close association with another whose work makes them a higher risk. This is of particular concern where financial services (and some other industries) exist and warrants extra scrutiny to ensure that security measures are met adequately. The most obvious person to be designated as a PEP is one who has (as the name suggests) an important political position.

People who fall under the category of PEP can include both domestic and foreign Heads of State, government or other political officials, judicial or military officials and senior executives of state owned corporations. Outside of this, important members of international organizations such as senior management or directors also qualify as PEPs, as do family members and close associates of existing PEPs. There are also different classifications of PEPs, from the highest risk (such as Heads of State and government) to the lower risk (such as local mayors or senior officials of international organisations). 

To combat the potentially higher chance of fraudulent or illicit activity for people who are classified as PEPs,the Financial Action Task Force (FATF) has created extra measures which are to be put in place when PEPs are dealing with financial services. These come in the form of identifying customers who are PEPs and then undertaking Enhanced Due Diligence (EDD) and enhanced ongoing monitoring. 

Despite these measures, the FATF makes it clear in its guidelines that there is no preconception that PEPs are involved with illicit activities, simply that the risk for them is higher, and that they should not be denied services simply by virtue of being on a PEP list. 

Should a person’s name match that of a PEP, additional checks will be carried out to determine whether they are a PEP themselves or simply share a name with a PEP, though determining this can be an issue if certain data is not available. Those that are identified as being a PEP will require extra security measures. This could include establishing where their wealth and funding comes from, performing additional checks such as adverse media checks, or asking additional questions about the nature of the business they intend to conduct. Should the person pass these checks, they still have to remain subject to enhanced ongoing monitoring. 

Whilst important to combat the higher potential risk of fraud, money laundering, terrorism financing or other illicit activity, these checks can cause delays and extra work for companies as they ensure they remain compliant. 

Blockpass aims to remove as much of the burden of KYC and AML as possible and as such, checking PEPs are a part of the services we provide. Through Blockpass’ KYC Connect Mobile App, users can upload information and evidence to provide the required details and there is the possibility for merchants to contact users to request more or further information, perfect for accommodating extra PEP requirements. In addition, Blockpass’s app enables ongoing monitoring in a quick and easy manner – uploading the required information onto one app which allows the user to share it with any service provider that needs it. 

The Blockpass platform is fully automated and hosted in the cloud, with no integration or setup fee. Businesses can sign up to the KYC Connect console in a matter of minutes, test out the service, and start conducting identity documents verification, KYC and AML checks. Sign up for FREE at console.blockpass.org.