Saturday, February 20, 2016


Compliance officers know that the toughest Customer Identification Program challenge is proving that affluent new Chinese bank clients are PEPs. Individuals claiming to be wealthy businessmen, with large amounts of cash could very well be military officers, government officials, or officers at government-controlled companies, all hiding their status as Politically Exposed Persons, as they masquerade as private citizens of the Peoples' Republic.

Most compliance officers rely upon Western news sources, or commercial off-the-shelf databases to determine whether a prospective client is a PEP, aware of Chinese internal censorship rules. Unfortunately, even the use of Western sources is about to become a potential problem, with the full truth hidden, and deleted.

China's State Administration of Press, Publication, radio,Film and Television has announced new regulations that require even joint ventures of Chinese and Western media outlets to submit all material intended to be published online in China, to meet Government censorship & approval. This means that the footnotes and references that you are reading, in a your commercial database, containing Western news articles and resources, may have been censored by the joint venture, for domestic Chinese consumption.

You are trusting its accuracy, for being a Western source, but in truth and in fact, it has been censored, and since the resource will not take the time and trouble to run two versions of its news stories, you get the redacted version, with the information you need to prove an individual is a PEP, deleted. Not good for either the Western compliance officer, nor his bank, which has now accepted the PEP as a non-PEP, and allowed him to move freely move money, without the special monitoring that PEPs require.

It is hard enough now to identify Chinese PEPs; with these new Chinese rules, it has just become a lot more difficult to make a Chinese PEP.

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