While it is true that being flagged as a PEP does not imply any involvement in criminal activity, it is still vital to recognise the potential risks – regardless of any public recognition.
The notoriety of PEPs has surged since the Russian invasion of Ukraine. A year on, and the screening of oligarchs, who are both ultrahigh-net-worth and politically connected to the Kremlin, has led to the UK designating over 1,600 individuals, including many PEPs, under the Russian sanctions regime.
It is important to pay special attention to PEPs as part of a digital compliance process, as they are considered to be more susceptible to financial crimes due to their high-profile roles in society.
A fair approach
For those working in compliance, identifying well-known PEPs may be relatively straightforward, but unmasking their lesser-known faceless counterparts requires vigilance and innovations in technology.
At the heart of the PEP screening debate lies the need to treat all clients fairly, a task that has recently posed challenges for the banking industry. The use of digital compliance helps the mortgage industry take an unbiased stance on tracking the activities of flagged individuals enabling better informed decisions.
As the managing director of a digital compliance firm, I understand the importance of providing regulated firms with the tools to make these informed decisions. Decisions that also help prevent the blanket ‘sweeping up’ of low-risk PEPs with countless red tape restrictions.
A robust system
It is worth noting that digital compliance solutions go far beyond my endorsement. They are backed by the 2020 Money Laundering and Terrorist Finance Act.
This Act recommends the incorporation of electronic verification (EV) as an integral part of due diligence processes, emphasising its effectiveness in combating compliance risks. To bridge this compliance gap, and minimise the risk of non-compliance, the adoption of robust digital compliance solutions is essential.
By using technology, firms can check a PEP’s status in order to approve a property transaction, and then continue monitoring them as a client via know-your-client.
Embracing digital compliance solutions is not merely a business necessity – it is a strategic choice that safeguards reputations, secures financial interests, and demonstrates a commitment to regulatory compliance.
By proactively investing in these solutions, companies can confidently navigate the complex compliance landscape, ensuring resilience against potential breaches.
