Top 6 Ways to Screen RCAs in PEP Screening

Who could have thought the Guardian of Public Properties would become the biggest threat to its financial system? 

Reports from the Stolen Assets Recovery reveal that public office holders, by using their influential power and exploiting their position, possess up to 40 billion dollars every year.

How politically exposed persons easily launder their corrupted money isn’t short of the thrillers and the suspense penned by Stephen King in his horror and thriller novels.

The influential power of PEPs is one factor, but the role of RCAs in money laundering keeps them ahead of the monitoring and screening process.

Understanding the web of power spread beyond those in public office is crucial for financial firms.

Financial institutions solely focus on monitoring the people who hold public office, ignoring their relatives and close associates.

In this article, we will explore why the EU considers the siblings of PEPs as high risk and best practices for RCA Monitoring and Screening.

Who are Relatives and Close associates (RCA)?

Individuals or groups of individuals who are not officially entitled to any political or public office but are closely associated with those who do, either through business or family relations, are known as the Relatives and Close Associates of PEPs.

The list isn’t limited to just family members; close friends, legal advisors, and business partners are also considered as the RCAs.

Despite the most advanced policies in place, screening for RCAs and PEPs has become challenging for businesses. The reason is the complex web of RCAs and their involvement in crimes.

Not all PEPs and their close associates are culprits; however, every company doing business with them must screen against the sanctions lists due to their proximity to power and the potential for illicit financial activity that comes with their positions.

However, how can an organization verify and conduct safety screening against RCA?

Did you know? The use of technology to perform adverse media checks is crucial for PEP and RCA monitoring and screening. It keeps the financial institutions up to date on real-time news of PEPs and their close allies, news of arrests, and other potential negative consequences.

Identifying and Authenticating RCAs

We all know that politically exposed persons do not expose themselves when committing financial crimes.  They deceive the AML compliance by hiding their identity behind their family members and close associates. This is why screening PEP clients and their close associates is essential for every organization under the compliance program.

To comply with the AML regulations, businesses must identify their clients’ relatives and close associates.

With a few key steps, you will have the upper hand on RCA’s screening.

1. Commercial Database Integration: Integrating commercial databases in your RCA screening and monitoring process allows you to check from various sources and can be a quick way to identify potential RCAs and risks associated with them.
2. Use Advanced Tools: Utilize advanced tools and software that use human intelligence and machine learning to analyze data and identify connections.
3. Regular Monitoring: Regularly monitor your client’s activities and associations. Relationships and connections can change over time, so ongoing monitoring helps in keeping information current.
4. Adverse Media Screening: Media outlets can reveal connections between people and news that are not the center of attention of regulatory bodies. RCA’s being infamous is more likely to be found among adverse media than any other data repository.

What do EU AML Directives have to say about RCAs?

As per the  AML directive, the EU parliament identified the family members of PEPs as problematic entities. With the fourth AMLD in place, the amendment in the 3(9) articles widened the definition of PEPs and their close allies.

The EU’s latest AML compliance program has enhanced the customer due diligence measures for financial institutions. Even if the RCAs aren’t involved in any criminal activity, they still have to undergo EDD measures similar to those applied to PEPs.

The EU directives intend to detect and curb the money laundering risks associated with family members and close allies of PEPs. Due to their close relationships, there is a higher chance they will get the same benefits and influence as PEPs, which can help them launder their illegal money.

Is it worth it to screen RCAs?

“Once a PEP always a PEP” is a common assumption across the globe. However, this might not be true. Yet, the risk they carry has a high probability of posing risk to the business.

A definite answer to this question can be “Yes.” In the present era, PEP screening ensures the business is secure and free from criminal activities during onboarding and in later stages of the journey as well.

Top 6 Steps for RCA and PEP Monitoring and Screening?

Screening new customers while onboarding is a must part of due diligence, but reviewing it periodically can save the business from emerging threats posed by politically exposed persons.

Financial institutions are in high need to maintain a risk-based approach and perform the screening process based on the risk and threat an individual PEP and his relatives and close associates (RCAs) may pose.

Here are the top 6 ways to improve the screening process in 2024.

1. Gather Personal Information

• Financial institutions must collect the personal information necessary for customer verification.
• Customer Full Name (first name, middle name, and last name)
• Gender
• Authority Level (when he/she joined the public office)
• Date of Birth
• Date PEP left public office (if he is currently not serving any public office)

2. AML Screening

Look into the background of RCA’s and PEP network by using an advanced, reliable, and efficient PEP and RCA database.

As we know, managing the screening of relatives and close associates of PEPs is quite challenging, therefore, businesses must only rely on databases that are officially sought, cleansed and get updated in real-time.

3. Integration of PEP screening Software

Once a full suite PEP screening software is integrated in the workflow, do you know what pros it gives you?

Efficient AML screening solutions allow institutions to set their own custom screening parameters, generating alerts and results matching the given parameters.

4. Checking False Positive

False positives emerge when the screening system incorrectly identifies a person as a PEP or RCA.

Deploying a simplified AML solution, with improved algorithms, custom risk parameters and improved control over data can help avoid inefficient screening results.

5. Enhanced Due Diligence

Enhanced due diligence is applied when the organization sees a major threat that demands increased scrutiny. The process becomes nearly undeniable when the customer is assessed as a high-risk PEP or RCA.

The PEP screening process involves thoroughly investigating the background and network analysis to confirm the presence of risky network connections.

6. Continuous monitoring

Crimes are becoming dynamic in nature, so are the risk levels associated with PEP and RCA’s. A PEP at level 1 may quickly drop down to lowest with others emerging as most risky.

Therefore, ongoing screening is performed to keep businesses informed of the dynamic changes in authority levels.

It’s understandable that complying with AML regulations isn’t as easy as it seems to be, so make the best decision today to prevent your business from having complicated compliance processes.

Want to make compliance easier for your team? Here’s a cheat sheet for top 3 regions with regulatory screening requirements.

How can we help?

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