Saturday, October 20, 2018


Do you have hidden PEPs in your customer base ? Your client is the brother-in-law of an Ecuadorian General who receives kickbacks for ordering firearms and ammunition from a certain European arms supplier; or she is the grown daughter (therefore different last name) of a senior Haitian government official known to accept bribes from foreign contractors and vendors; or perhaps he is a Colombian businessman who has an opaque shell company that just snagged a $650m contract from the Government of Venezuela.

Politically Exposed Persons, more commonly known as PEPs, are by definition, high risk. They may be moving the proceeds of corruption, or of crime, for their close associates of relatives, who may be dirty government officials, military officers are the take, managers of government-controlled companies, or even presidents of public charities or NGOs. When you bank PEPs, they must be:

(1) Assessed at account opening for risk; you may choose to completely decline their business.
(2) Checked to verify that the anticipated account traffic matches their legitimate business operation, through an Enhanced Due Diligence investigation.
(3) Subject to automatic account monitoring, to insure that suspicious or unusual account activity, or activity inconsistent with their declared trade, business or profession is immediately flagged and investigated forthwith. Decisions must quickly be made as to whether to restrict, or even close, accounts, lest you later receive subpoenas from law enforcement agencies investigating money laundering at, or through, your bank.

What if an individual seeks to conceal his or her PEP status ? That is generally a good indication of their intent to abuse the account for an illegal purpose and/or engage in money laundering. Today, compliance officers, armed with a facial recognition software system using Artificial Intelligence, are able to access social media, social networking sites, YouTube, CCTV, newsreel footage, Internet images, and many other online resources, are able to spot hidden PEPs, where they work, socialize, travel, shop, interact with government officials, and engage in activities that confirm their PEP status.

Exposing hidden PEPs at account opening is now an accepted means of risk reduction on the part of compliance officers, and those working under their supervision, but there is more to be done. It is suggested that, to truly reduce client risk, that all high-volume bank customers who are foreign nationals from jurisdictions where corruption and crime are rampant,  you conduct a historical look back on those existing bank clients, using your facial recognition software system to access social media resources. You may uncover evidence that some of your "private businessmen" are, in truth and in fact, PEPs who have artfully sought to conceal that fact from you and your bank. 

Facial recognition software systems are not only for new accounts, but to reduce risk levels on existing accounts. You may want to do this before a regulatory agency, as part of a consent order, requires you, or a third party, to conduct a historical look back, due to your AML failures.  

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