Politically Exposed Persons: Preventive Measures for the Banking Sector
FIU Guidance to Reporting Institutions To enable the FIU to collect accurate statistics on PEP STRs, guidance should be in place on how banks are to report PEP STRs, as well as the definition of PEPs; why the definition is important; and so forth. During the field visits, there were two main methods for including this information in the STR: using “key words” in the narrative and checking a “PEP box.” Both approaches were used in all styles of STRs, whether the FIU required banks to complete a form or provide a narrative on the activity.66 In the key-words approach, the FIU asks the banks to include certain terms in the narrative portions of STRs if the transaction is related to a PEP (“foreign corruption” is used by one FIU). With the PEP-box approach, the bank is required to check a box when the transaction is related to a PEP. Based on discussions with banks and FIUs, the key-words approach is the most useful overall. The PEP-box approach can be too restrictive because less narrative information is provided—information that can provide important background for analysis of the STR. In all PEP STRs, even those with a PEP-box, FIUs should focus on helping banks to improve the narrative, including using certain key-words to identify PEP activity. FIUs can use a number of additional mechanisms to provide guidance: formal guidance papers and circulars, including a thematic circular on PEPs; typologies on corruption and AML schemes that involve the suspicious activities of a PEP; feedback on STRs; and a direct line that reporting institutions can use to consult with FIU personnel and obtain guidance on specific cases.
Recommendation: FIUs should provide guidance to banks on completing PEP STRs along with a glossary of key-words to be used in STR narratives.
Gathering Information Accurate statistics are essential for understanding the scope of PEP risks and the effectiveness and efficiency of the system for detecting them.67 In addition to collecting the number of PEP STRs, there could also be a breakdown on whether the PEP was a 66. Some FIUs have developed an STR form that includes specific fields to be completed, such as the name of the beneficial owner, products being used, date and location of activity, reason for suspicion, and so forth. Other FIUs rely on the financial institution to provide a detailed narrative description of the suspicious activity and any other information they deem relevant. 67. FATF 40+9 Recommendations, Recommendation 32 requires countries to maintain statistics on among other things, STRs, investigations, prosecutions, and convictions as a means of measuring effectiveness.
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