Monday, July 10, 2023



Those articles detailing how major banks in the UK have lately blackballed ALL Politically Exposed persons (PEPs), and either denied them a bank account, or closed out existing account relationships, totally miss the point. Risk management doesn't mean that you exclude all PEPs as probable high-risk clients; it means you make a value judgment regarding whether each specific PEP represents a significant threat which you are not interested in assuming.

In truth and in fact, most PEPs don't have access to government funds, or have large budgets to disburse, or are purchasing agents. Most are minor government functionaries, or their immediate relatives, or private individuals who happen to be closely linked to one or more PEPs. Thus fantasy that PEPs run around with checkbooks on multi-million dollar government accounts that they are authorized signatories on is nonsense. 

 The correct way to mitigate your PEP risk is simple:

(1) What is your PEP's specific position in government, or with a nonprofit or NGO, or charity?

(2) Pursuant to that position, does he or she have ready and unquestioned sole access to draw funds?

(3) If the answer to (2) is yes, is there an established (and uncorrupt) approval process in place for that money?

(4) What is your PEPs history with funds movement he to she has access to? 

(5) Is your PEP in any legal, administrative or ethical trouble, actual or threatened?

Using these guidelines, it is relative easy to separate chronic risks from individuals who are unable to access any funds, free of restraints or checks and balances.  Do not lump all PEPs into the clear and present danger category; just accept the low-risk ones, and institute permanent transaction monitoring upon their accounts, just in case your conclusions, taking into account the list above, are incorrect. 

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