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Identified PEPs - What’s Next in Your Audit Trail?

Mar 26, 2024 Niamh Hunter Updated On: March 26, 2024
Identified PEPs - What’s Next in Your Audit Trail?

A Politically Exposed Person (PEP) designation holds significant weight in compliance circles, yet businesses can fall foul to non-compliance without the proper tools and processes in place. 

Learn how can businesses effectively spot these high-risk individuals and maintain compliance across audit trails with Red Flag Alert. 


What is a PEP?

A PEP is a politically exposed person, however, there is no standardised definition across the globe. Instead, the UK, alongside many other countries, base their definitions on the PEP definition from the Financial Action Task Force (FATF).

In the UK, any person in one of the following roles should be considered a potential PEP:

  • Members of Parliament (MPs)
  • Heads of state, heads of government, ministers, and deputy or assistant ministers
  • Members of courts of auditors or the boards of central banks
  • Officers in the armed forces
  • Members of supreme courts, constitutional courts or other high-level judicial bodies 
  • Members of the administrative, management or supervisory bodies of state-owned enterprises

For those who fall under these categories, their family, close business associates and beneficial owners of their properties are also subject to PEP status. 


How to Identify a PEP

Being able to identify a PEP without the support of a data provider and analysis tools requires substantial manual efforts from compliance officers. There should be a risk-based and proportionate approach to individual cases, and businesses should look out for the following situations to spot PEPs as soon as possible: 

  • Receiving funds in the retainer from a government account
  • Receiving communications on official letterhead from the client or a related person
  • News reports suggesting your client is a PEP or is linked to one
  • General conversation with the client or relevant people person linking the person

Whilst there is no standard data businesses must use to identify PEPs, the FATF requires businesses to use information that is available to them, such as:

  • Public domain information, such as parliament and government websites
  • Reliable public registers, such as the Companies House register of companies and people with significant control register
  • Commercial databases that contain lists of PEPs, family members and known close associates

Identified a PEP? Take These Operational Actions For Your Audit Trail

Once a business has identified a PEP, it must follow a series of steps to have an accurate and compliant audit trail, should regulators want to check on their processes. 

This often begins with further discussions with senior leadership teams to discern whether the relationship with the PEP is viable. Once this has been agreed, further diligence checks across the source of wealth and funds must be completed. 

Following approval enhanced ongoing monitoring protocols throughout the relationship will be put into place to ensure compliance and risk is mitigated effectively. These steps will not only fulfil regulatory compliance requirements but also safeguard the integrity of operations and protect the company from unnecessary reputational damage.

PEP Compliance Requirements

Any businesses operating in regulated industries must implement enhanced due diligence measures for Politically Exposed Persons (PEPs), which entail conducting thorough background checks and reporting any suspicious activity they uncover. 

To build a robust PEP compliance program, several strategies can be adopted and improved with Red Flag Alerts standout digital suite of data and tools:

Access Comprehensive PEP Lists

Utilise PEP searches covering global and adverse media lists to ensure the information remains current. Using Red Flag Alert, businesses can easily check these lists in one place, without having to evaluate the number of sources and the frequency of updates. 

Customise List Selection

Tailor list coverage to align with the organisation's risk profile and geographic regions. With Red Flag Alert, this step is consolidated into the search tools, allowing for more accurate and direct information that is always actionable and relevant.

Assess PEPs and Associated Risks

Inclusion on a PEP list doesn't necessarily imply criminal activity and deeper due diligence may validate PEP status without undue risk. Red Flag Alert users receive a full picture of an individual and business, so decisions can be made using complete facts.

Implement Ongoing PEP Checks

Given the dynamic nature of PEP lists, ongoing monitoring simplifies the detection of new PEPs or suspicious activities. At Red Flag Alert, we make this process simple and easy, with automatic monitoring and tailorable alerts across portfolios, keeping users up-to-date with relevant changes, and better alignment of teams with shareable updates. 

Handle Incorrect or Outdated Information

Errors in PEP lists or documentation can lead to false positives and resource-intensive manual reviews. Choose Red Flag Alert to enjoy regularly cleansed and enriched data and automated processes for more efficient screening and compliance procedures.

Secure Your Free Trial of Red Flag Alert PEPs Checks Today

Businesses often encounter scenarios where a standard AML check falls short, necessitating a deeper investigation. This could be due to various factors, such as dealing with partners from high-risk countries or simply a precautionary measure. 

Red Flag Alert's fully digital platform facilitates seamless compliance while safeguarding your business interests and ensuring minimal disruption to operational workflows or customer experiences. 

With features like fully compliant PEPs, sanctions, and adverse media checks coupled with live monitoring, businesses can rest assured of comprehensive risk mitigation. 

Moreover, our platform boasts advanced IDV and document verification technology, ensuring a 98% match rate through multi-bureau analysis. 

By enabling quick and efficient checks that require less than a minute of staff time, Red Flag Alert streamlines the process of sending, tracking, managing, and storing EDD checks all within one platform, empowering businesses to make informed decisions swiftly and confidently.

Get in touch and access a free trial to discover how Red Flag Alert can provide your business with a comprehensive AML service that is low cost, evolves with regulations and allows you to prove your audit trail. 

Published by Niamh Hunter March 26, 2024
Niamh Hunter

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