The Political Exposed People (PEP) represent politicians, directors of international organizations, bureaucrats, directors of international organizations, large foundations, associations, and trade unions, who have achieved prominent societal positions. In addition, individuals in the PEP family and their close partners are also classified as PEP. PEPs are classified as Foreign, Domestic, and International by the Financial Action Task Force (FATF) according to their risk level.
Trillion dollars in bribes are given every year globally, and this is a severe problem for countries. Therefore, PEP should be viewed as high risk by financial institutions due to their potential to be involved in bribery and corruption. Of course, it is not forbidden for financial institutions to open accounts for PEPs. AML regulators have financial institutions necessary to identify PEPs due to the potential of high-risk crimes.
Some of the basics of AML regulations are "Know Your Customer (KYC)" and "Customer Due Diligence (CDD)" procedures. These procedures are applied during the recruitment process, and the customer's risk level is determined. Detection of PEPs is also included in CDD procedures. Therefore, companies have to perform PEP screening during the customer onboarding process according to AML regulations. However, this PEP Screening compliance may show some differences according to countries.
There are many regulations in the world to define and scan Political Exposed Person (PEP), some of which we have compiled below for you.
United Kingdom PEP Regulations
In the United Kingdom, in customer recruitment processes, it is recommended that institutions identify the customer and perform these transactions automatically. Under the PEP Screening regulations, luxury goods traders such as financial institutions, virtual money providers, and art traders in the UK, tax experts are among the organizations responsible for PEP and sanction screening. These institutions are obliged to scan foreign PEP, domestic PEP, and Internation PEP in accordance with the Financial Conduct Authority (FCA) regulations.
Europe PEP Regulations
During the customer's first participation in Europe, PEP, Investment, High-Risk Countries, and Ultimate Beneficial Ownership (UBO) Screening must be carried out within the scope of Know Your Customer (KYC). If any customer PEP or one of the risky third countries during this screening, Enhanced Due Diligence (EDD) procedures are performed for these high-risk persons. In other words, PEP screening in the EU is applied as part of the risk-based approach for AML / CTF.
In addition, the PEP and Sanction Screening includes controls for EU sanctioned countries and high-risk countries that the EU thinks are lacking in AML / CTF regimes. For example, further PEP reviews are required for Albania and Bosnia and Herzegovina countries that are considered high risk by the FATF and the EU.
Albania PEP Regulations
Since Albania is an EU member, it does not have to comply with EU directives. But Albania should carry out PEP scans for foreign, domestic, and international PEPs. According to FATF, institutions should carry out PEP Scanning due to Albania being seen as a high-risk country. . The Albanian PEP screening regulations are set in the General Directorate of Anti-Money Laundering (GDPML) and are implemented by the Albanian Financial Services Authority (AMF).
Turkey PEP Regulations
There is no screening requirement for PEPs in Turkey. Although Turkey is not directly obliged to comply with EU anti-money laundering software as it has not yet entered the European Union, it has adapted its AML laws to comply with the EU's fourth anti-money laundering regulations. Political Exposed Person determination and PEP screening obligations in Turkey are determined by the Turkish Financial Crimes Investigation Board (Masak) and supervised by the Banking Regulations and Supervision Agency (BRSA).
Africa PEP Regulations
Many African states, including South Africa, are members of the FATF and these countries have regulations that require firms to screen foreign, local, and international PEPs. However, many jurisdictions in Africa are significantly separated, and some states struggle with high corruption and financial crime levels. In addition, Botswana, Uganda, Zimbabwe, Ghana, and Botswana have been identified as high-risk countries by FATF in Africa.
While most African countries implement screening requirements for all PEP categories, there are significant variations across the continent. Firms in Egypt, Mauritania, Eritrea, Guinea, Sierra Leone, Somalia, Malawi, Namibia, and Eswatini should screen foreign and domestic PEPs. Angola implements the PEP screening requirements for foreign and international PEPs but does not require local screening. In contrast, screening is only required for foreign KEPs in Algeria, South Sudan, and Tanzania.
In addition, the requirement for PEP screening in South Africa came with the 2009 FATF assessment.
Middle East Regulations
Many countries in the Middle East and their PEP screening regulation requirements are not the same. For example, countries such as Oman, Yemen, United Arab Emirates, Saudi Arabia, Iraq, Jordan, Israel, Lebanon, Turkmenistan, and Afghanistan need foreign, local, and international PEP screening.
While Iran requires incumbent organizations to screen foreign and international PEPs, Syria requires only foreign and local PEPs. Apart from these, Armenia and Azerbaijan only need foreign PEP screening.
The Middle Eastern countries associated with Iran being on the FATF blacklist represent high-risk AML / CFT jurisdictions thanks to their high level of government corruption. Therefore the PEP screening should reflect this high risk.
Asia is an incredibly wide geography, and in this geography, REP scanning requirements can be different from each other. Politically exposed people in the Philippines are required to screen foreign, local, and international PEPs. Cambodia only needs foreign and international PEP screening, while China, New Zealand, Vietnam, Japan, South Korea, and India only need foreign PEP screening. In contrast, Uzbekistan does not have any requirement for PEP screening.
PEPs are a major AML issue in many Asian countries due to high levels of government and institutional corruption. Firms should be prepared for the high risk of money laundering offered by certain countries: Myanmar, Cambodia, and Pakistan are currently subject to further monitoring by the FATF, while North Korea is on the FATF blacklist.
United States of America
In the United States, PEP screening must be part of a firm's risk-based Anti-Money Laundering (AML)-Counter-Terrorism Financing (CTF) program. Detection of PEPs can be noticed with Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures at the first participation of the customer, and then Enhanced Due Diligence (EDD) procedures are applied for high-risk customers such as PEP and Sanction. In Us, when a firm detects or doubts that a PEP may be involved in money laundering activities, it must submit a suspicious activity report (SAR) to FinCEN.
In Canada, PEP screening is also part of the AML / CTF program, but Canada's Proceeds of Crime and the Terrorist Financing Act (PCMLTFA) lay down specific requirements for local PEP screening; for example, foreign PEPs in Canada are always While considered high risk, the risk presented by local PEPs should be identified and monitored at the time of recruitment. A permanent foundation.
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