PEP Screening – Building Blocks for Seamless Business Onboarding

The international cost of corruption has increased to $3.6 trillion in bribes and stolen money. Corruption and money laundering are not only reciprocally used but related as well. PEPs (Politically Exposed Persons) are the main source of beneficiaries for these funds, depicting inefficient or complete lack of PEP Screening

This doesn’t necessitate every PEP as corrupt but their rank, position, and influence give them the exposure and power to exploit the influence making them a high-risk customer for every business entity. 

PEPs have illicitly gathered enormous amounts of funds due to their power to exploit their designation and use it to enable transactions from one jurisdiction to others resulting in a $1.1 trillion transfer of funds annually. 

The international community of regulatory bodies in response to the emerging rate of financial crimes, has established standards for detecting, evaluating and screening PEPs to ensure a seamless onboarding experience while maintaining reputation assurance. 

Importance of AML Checks for Politically Exposed Persons

Regardless of the nature of the country or business, the risk of falling prey to ill deeds of PEP is consistent. Thus, PEP screening solutions are crucial to maintaining the integrity of the financial system while keeping measures of due diligence intact. 

Based on significant findings from a study, 53% of respondents voted in favor of PEP checks are ineffective, while 47% declared to be satisfied with the screening process. 

Building Blocks of Accurate PEP Screening Measures  

Achieving the full potential of PEP screening measures is a consistent challenge in the field of compliance. 

Resultantly, it is important to develop a PEP compliance program that not only enables precise monitoring but also facilitates PEP screening at national, international, and regional levels as well. 

Here are the most common challenges to avoid while integrating PEP screening software for seamless business onboarding:

  1. Name Screening

Screening names of individuals across borders, especially PEPs who relocate to regions with different language accents,  screening involves a great deal of complexities with name matching. 

For Example:  Among numerous name variations of  Muhammad Omer, Mohammad Umer, and Mohamad Omar, Screening for the right individual among them is usually disrupted by cultural differences in spelling and pronunciation. 

In many cultures, it’s a customary practice to use their cast or religious affiliation in their name which might not match with their official documents, making it difficult to enable precise screening of individuals. 

  • Solution: 

A combination of advanced searching algorithms of cultural name matching, fuzzy matching, and phonetic and proximal name matching contributes to efficient AML compliance without accounting for cross-border limitations. 

  1. Costly Data Sets 

Many financial institutions get across the challenge of expensive datasets, highlighting their need to save money while keeping with regulatory requirements. While I may agree this is possible, but highly compromising on the quality of data as well.

While keeping with low costs of data sets, financial institutions fail to maintain authenticity and comprehensive coverage of peps at regional, national, and international levels. 

  • Solution: 

Effective PEP Screening and business onboarding begin with the perfect balance of cost-effectiveness and quality of the database. The use of the right AML software, may not only offer raw datasets but organized and structured information in a matter of seconds. 

  1. Halo Effect 

The financial institutions in both developing and developed nations are influenced by higher management in some way or another. Screening PEPs on an ongoing AML, whereby the compliance team may be influenced due to political ties and liking for a politically exposed person, the tendency of the business to overlook red flags and risks associated with that person remains higher than ever. 

  • Solution:

Independence in compliance while ensuring a completely transparent and objective approach is necessary to maintain top top-rated onboarding strategy for influential PEPs. 

  1. Influential nature of PEPs 

The time constraints of facilitating onboarding while keeping with accuracy and comprehensive screening against PEP, their close associates, and relatives is strenuous, especially when there exists grave risk associated with whistleblowers. 

  • Solution: 

Screening against power-oriented PEPs, who are involved in cross-border business activities while keeping close relationships with family members, must be done in a balanced way, ensuring complete protection for whistleblowers while keeping screening measures running. 

Summing it up 

Despite, the PEP Screening method being a major component of the risk management program of any business, measures to combat corruption and money laundering through them have always remained inconsistent. Managing environmental, systematic, and cultural barrier guides in PEP list screening come with no information for implementation. This blog has mapped out a contextual diagram explaining how firms should navigate through the intricacies of correctly, timely, and securely onboarding any business. 

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