Suspicious Transaction Detection with PEP Screening

Blog / Suspicious Transaction Detection with PEP Screening

Identifying Politically Exposed Persons (PEPs) is crucial for financial institutions as they pose a high risk of being involved in corruption, bribery, and money laundering. International and local regulators have set various criteria to classify PEPs, making it a challenging task. In response to the growing need for accurate PEP identification, international bodies like FATF and the European Union regularly release updated guidelines on maintaining and referencing the politically exposed person list, which greatly assists financial institutions in their efforts to prevent financial crimes. PEPs are typically individuals in positions of power and influence, making them more susceptible to committing corruption and bribery crimes.

To prevent financial crimes such as money laundering, terrorist financing, corruption, and bribery, it is essential for organizations to implement Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. These regulations are mandatory for organizations at risk, and companies must identify new customers and screen their existing ones for PEPs. Regulators impose fines on organizations that fail to carry out PEP aml controls. Regulators impose fines on organizations that fail to carry out PEP controls. Financial institutions that failed to comply with PEP screening and sanction check obligations between 2008 and 2018 were fined a staggering $27 billion.

PEP Screening on Customer Onboarding

PEP screening is a critical component of the customer onboarding process, as it enables businesses to identify and manage potential risks associated with Politically Exposed Persons. PEPs are individuals who hold or have held prominent public positions, such as government officials, diplomats, or senior executives at state-owned enterprises. Due to their access to public funds and the potential for corrupt practices, PEPs are considered high-risk customers by financial institutions and other businesses.

During the customer onboarding process, businesses typically perform Know Your Customer (KYC) procedures to verify the identity of the customer and determine their risk level. As part of this process, businesses should conduct a PEP screening to identify whether the customer is a PEP or has any associations with PEPs. Incorporating a regularly updated politically exposed person list into their PEP screening process is essential for businesses to maintain the accuracy and effectiveness of their risk management measures during both customer onboarding and ongoing monitoring procedures.

PEP screening involves conducting a thorough search of public records, databases, and other sources of information to identify any connections between the customer and PEPs. This can include identifying family members or associates who may have PEP connections or conducting enhanced due diligence on transactions involving the customer.

Once a customer has been identified as a PEP, the business must implement appropriate controls and monitoring procedures to manage the risks associated with that individual. This may include conducting additional due diligence on the customer's transactions, implementing enhanced transaction monitoring, and conducting ongoing monitoring of the customer's account.

In addition to identifying PEPs during the customer onboarding process, businesses must also ensure that they have adequate measures in place to identify and manage ongoing PEP relationships. This may involve conducting regular reviews of customer accounts and transactions to identify any changes in the customer's risk profile.

Effective PEP aml processes are essential for financial institutions and other businesses to minimize the risks associated with PEPs and comply with anti-money laundering regulations.

screening peps can decrease the risks of financial crime for companies

PEP Screening On Customer Transactions

Financial institutions must conduct PEP scans on both buyers and senders in financial transactions to identify potential risks associated with PEPs. Transactions involving PEPs should be closely monitored, as their high transaction volume is often indicative of suspicious activity.

Financial institutions must also maintain records of any suspicious transactions and report them to authorized units, such as financial intelligence units or law enforcement agencies. These reports are called suspicious activity reports and are an essential tool in combating financial crime and preventing the abuse of power by PEPs.

The detection of suspicious transactions involving PEPs is crucial to preventing bribery and other financial crimes and protecting the integrity of the financial system. Financial institutions must conduct thorough due diligence on their customers, including PEP screening, to ensure that they are not facilitating illicit activities.

In addition to PEP screening, financial institutions must also implement robust transaction monitoring and reporting mechanisms, incorporating effective pep aml processes, to detect and report suspicious activity promptly. This includes ongoing monitoring of customer accounts, transaction patterns, and unusual activity.

Detailed report on transaction and customer screening tool providing by sanction scanner

PEP Screening with Sanction Scanner

Sanction Scanner offers a cutting-edge PEP Screening Solution, designed to facilitate fast and secure PEP scans for organizations with compliance obligations. Sanction Scanner's PEP Screening Solution incorporates an up-to-date and comprehensive politically exposed person list from 200 countries, ensuring organizations have access to the most accurate and globally relevant PEP data for their compliance needs.

With Sanction Scanner's robust API support, organizations can automate their PEP control processes, significantly reducing their workload. Our solution enables seamless scanning of customers against structured and enriched global AML data, ensuring compliance with regulatory requirements.

To experience the benefits of accelerated AML compliance processes at affordable costs, request a demo. Sanction Scanner is dedicated to empowering organizations with efficient PEP screening capabilities while maintaining the highest levels of data security and accuracy.

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