WATCH LIST OFAC / PEP
What is a PEP?
A PEP is a politically exposed person. This is either a political official or someone related or with direct ties to a political official. It isn’t illegal for businesses to work with these parties, but there are certain risks involved. OFAC screening software with links to PEP databases help identify these individuals for banks and financial institutions.
What are the Risks? ď‚¨
PEPs are more likely to engage in behavior that could compromise the integrity of a bank or financial institution. This could mean being involved in bribery, fraud, or other forms of illegal activity. It is important to monitor any banking activity for these individuals to remain OFAC compliant.
What Does the OFAC PEP Watch List Monitor?
The system looks at a diverse set of information.
This includes customer information, wire transfers, ACH, letters of credit, and other types transactions.
The system scans the watch lists against transactions and client information to provide a total picture of the risks for any PEP.
How Can a Bank Identify a PEP ď‚¨
The PEP may be updated from various sources that publish lists of PEPs, such as those from FACITVA, WORLDCHECK, or LEXIS/NEXIS.
Which Transactions Should Be Monitored?
If a bank chooses to do business with a PEP, it should monitor activity to prevent liability. This means examining cash and check deposits, wire transfers, and other movements of money. Taking on the risk of a PEP means keeping an eye out for suspicious activity.
What Can Happen if a Bank Fails to Monitor?
Banks are required to practice due diligence. Taking on a PEP without this practice could result in hefty fines leveraged against the bank. Examples of PEPs that successfully skirted the rules with the assistance of banks that did not follow due diligence include Hosni Mubarek and Muammar Gadafi.
What Else Can OFAC Screening Do?
OFAC screening can do more than identify PEPs. It can identify known aliases to ensure that banks are able to make informed decisions about doing business with certain parties. The algorithms are set to prevent false positives.
Just because someone is a PEP does not mean that he or she can’t be a good, honest client. When banks have as much information as possible, they can make more informed decisions. OFAC screening helps take the guesswork out of business dealings and liability.
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Image Attribution ď‚¨
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