Chapter 4: PEP Screening

Screen With Confidence: Spot Every PEP And Associated Risk Level

This raises important concerns of:

How quickly does your Vendor respond to such change?

Does your current PEP screening match your risk appetite and support customized compliance risk management with global data coverage?

Two Main Perspectives to Consider

• • PEP Risk Appetite:The definition of high-risk PEPs according to positions, ranks, and levels may vary across jurisdictions. While obliged entities may need to perform higher due diligence for PEPs, not all the PEPs at different levels may carry the same risk levels. The risk appetite is influenced by factors such as the institution’s regulatory environment, business strategy, and operational capabilities.
• Risk Customization Per Risk Appetite:Risk customization involves tailoring the risk management processes to address the specific risks associated with different types of PEPs per the organization’s risk appetite. Your solution must align with your business’s specific risk appetite requirements to detect each PEP profile and its potential risk level.

How Do Different Definitions of PEPs Alter Screening Results Across Borders?

Inconsistent Definitions Lead To Misassigned Risk Levels
Different countries have varying criteria for what may constitute a high-risk PEP, which complicates the creation of a unified screening process. Such inconsistent definitions may lead to misassigning risk levels, resulting in incorrect risk assessments, compliance gaps, and operational inefficiency, which could lead to potential reputational damage.

An optimum AML solution must flag the risk level of a PEP according to the relevant laws of a jurisdiction, a feature that many contemporary solutions lag.

AML solutions that rely on third parties for data sourcing also fail to assess accurate risk levels associated with PEPs; this is because they don’t have dedicated researchers tracking political events like elections which can even change the risk profiles of many people and hence they may take days in flagging the accurate risk levels.

What Do You Require From Your Vendors For Accurate PEP Screening?

• Global Coverage Inclusive of Every Single Jurisdiction Including Controversial Territories

Financial threats do not respect borders or geographical sizes and can arise from anywhere. While larger jurisdictions often grab the headlines, the smaller, and often overlooked regions may also possess certain PEP risks.

The inclusion of PEPs from controversial or less-recognized regions is also crucial for comprehensive PEP risk management.

For instance, A financial institution conducting business in Eastern Europe uses the advanced PEP screening solution to monitor individuals from conflicted regions like Abkhazia. By including local PEPs from Abkhazia, the institution identifies and mitigates risks associated with individuals involved in local governance, who might otherwise have been overlooked.

Comprehensive PEP screening solution must include efficient tracking of PEPs from every single jurisdiction irrespective of the size and political status, covering each controversial or occupied region, ensuring that risk detection is always aligned with the global political context and compliance with the latest PEP data.

• Accurate Screening Results Across Diverse Language Formats

PEP databases have diverse formats and languages, due to their global nature making it difficult to standardize and interpret data across jurisdictions, increasing the risk of inaccuracies with higher rates of false positives & negatives.

A robust screening solution should not only have global data coverage but also be capable of returning the name screening results with the help of advanced name-matching algorithms.

• Adaptable Solution Adjusts To Changing PEP Statuses And Risk Levels

The status of Politically Exposed Persons (PEPs) frequently changes due to the dynamic nature of political environments and shifts in authority. As individuals move in and out of positions of power, their associated risk levels also change.

To manage the evolving risk profiles of PEPs, your screening solution must integrate with existing compliance systems and update in real time, ensuring that any changes in PEP status and their associated risk level are promptly reflected in the risk assessments.

• Detailed RCA Screening and Its Associated Risks

The solution must detect Relatives and Close Associates (RCAs) of Politically Exposed Persons (PEPs) with accurate risk assessment and potential threats linked with them. The solution must tailor the screening process to the specific regulatory requirements, ensuring that the detection of RCAs aligns with your compliance needs.

What Does AML Watcher Offer?

• Customizable Screening Parameters

AML Watcher allows organizations to tailor their screening parameters to their specific risk profiles and regulatory environments. This includes:

Choosing from multiple definitions: Institutions can select definitions based on international standards (like FATF), regional standards (like EU and UK regulations), or specific national guidelines.
Customizing risk classification: Institutions can assign different risk levels (high, medium, low) to PEPs based on their position, influence, and other risk factors. This flexibility ensures that screening processes align with the institution’s unique needs and reduces false positives.

• Real-Time Update On Changing PEP Risks

At AML Watcher, our solution automatically updates the PEP data and associated risk levels as soon as changes are detected, providing immediate and accurate risk detection of newly elected officials and their associates, and maintaining compliance with global AML regulations.

Our in-house data experts also manually review and adjust risk levels when necessary, adding a layer of accuracy to the automated processes. This ensures that sudden changes in PEP status are accurately reflected, and any complexities that automated systems might miss are considered.

• Beyond Border Detailed PEP Coverage

AML Watcher has a unique feature with its PEP screening is to cover data from less recognized, controversial, occupied regions, or small islands. Our in-house data team also extracts, analyzes, and maintains all PEP information from regions like Kyrgyzstan, Abkhazia, Gibraltar, Taiwan, and many more.

This will ensure that no high-risk individuals from these regions are overlooked, or no profile is wrongly sanctioned thus providing a detailed risk assessment for organizations.

• Accurate Mapping Of RCAs & Associated Risk Levels

AML Watcher offers detailed Relatives and Close Associates (RCAs) screening through advanced data analytics, AI, and integration with global databases. Our solution traces and maps relationships using publicly available information, transactional data, and social media, identifying patterns and connections indicative of RCAs.

Continuous updates and monitoring allow the system to detect new RCAs as they are added to global databases or as new information becomes available. AI and machine learning models identify patterns and connections that indicate familial or close associations with PEPs.

Design Guideline: ADD gif from the RCA section.

• Filter For Relevant Matches

Different persons have the same name with the same spelling and language format, which create hurdles for solutions to target exact matches.

AML Watcher enhances screening efficiency by allowing searches across only relevant hits, significantly reducing false positives. This is achieved through advanced filtering algorithms, customizable screening parameters, distinct information like date of birth, unique identifiers, images, and real-time data integration.

The intelligent matching techniques distinguish between different types of matches, ensuring compliance teams focus on genuine risks. Additionally, in-house team monitoring further refines the process, maintaining accuracy and minimizing unnecessary alerts.

• Screen PEP Level 4 With Local PEP Detection

AML Watcher successfully covers PEP level 4 & associated risks and screens not only national but also local PEPs, including regional officials and local politicians. Detailed screening with granular data captures all relevant political figures, ensuring thorough due diligence.