Thursday, January 22, 2015


When I see that a group of individuals not previously classified as Politically Exposed Persons,
more commonly referred to as PEPs, are now included in that classification, I shake my head, and I do not laugh. Inasmuch as the textbook definition of PEP has never been uniformly agreed upon, who is to see if this group of individuals are truly PEPs ? And why weren't they PEPs yesterday ?

Do not blindly follow the pronouncements of commercial-off-the-shelf databases, whose staff is generally not composed of attorneys with sufficient governmental experience to opine accurately whether a certain individual has access to public funds, can sign lucrative contracts with the private sector, can sign checks, or in some other way can obtain money by virtue of his position, or is closely linked to someone who is. He may be a junior bureaucrat, but he could still be a PEP.

You need to review the personal information on your prospective customer, and make an educated decision on whether to categorize him as a PEP, meaning that you will monitor his account activity accordingly, and set alerts for suspicious activity. If you fail to identify him as a PEP, and as a result he moves millions of dollars in bribes, kickbacks, government funds, or other criminal proceeds through your bank, the responsibility for compliance malpractice fall upon you, and you alone, not the database provider, who thought the individual was too low on the totem pile to be named as a PEP.

Forget about the blind obedience to what you read; you as a compliance officer are the ultimate person to decide whether your new client is a PEP or not. Make the decision yourself.  

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