PEPs and sanctions refer to the screening processes used to identify Politically Exposed Persons (PEPs) and other individuals and entities that are subject to government sanctions. PEPs are individuals who hold or have held prominent positions (for example, senior government officials, executives of state-owned enterprises, and high-ranking military officials) as well as their family and close associates; they may present elevated money laundering risks.
Sanctions lists include individuals, companies, and countries that are subject to asset freezes or other restrictions due to their believed involvement in activities like terrorism or human rights violations. Financial institutions are required to screen customers against PEP databases and sanctions lists in order to be compliant with anti-money laundering (AML) and Know Your Customer (KYC) regulations.
Use case/ examples for PEPs and sanctions
Customer screening: Screening all new and existing customers against PEP databases and government sanctions lists during onboarding, and on an ongoing basis, to identify high-risk individuals requiring enhanced due diligence.
Enhanced due diligence: Applying additional scrutiny to customers identified as PEPs or sanctions matches, including verification of these customers’ source of funds, transaction monitoring, and senior management approval processes for banking relationships for those identified.
Regulatory compliance: Meeting AML and KYC regulatory requirements by maintaining current screening against updated PEP and sanctions lists, logging all screening results, and escalating matches for appropriate review and action.