Why Your Company Needs PEP and Sanctions Screening



2 Solutions to Avoid Difficult Compliance InvestigationsAs a business owner, you probably know that compliance is essential to keeping your business running. This means safely storing financial records to protect client privacy, maintaining firewalls around all your data, and screening clients both during and after the onboarding process. Unfortunately, this third step often goes ignored – so much so that institutions around the world paid nearly $27 billion in non-compliance fines from 2008 to 2018!

All financial institutions (and all other businesses, for that matter) should conduct PEP screening and sanctions screening on every customer who wants to work with them. Not only is this necessary to avoid penalties and fees, but it’s also an important step to prevent illegal activities within your organization.

But what do these screenings look for – and why does it matter to your business? Here’s what you need to know about PEP and sanctions screening.

Who is Considered a PEP (Politically Exposed Person)?

The term “PEP” (politically exposed person) refers to any individual who is or has been entrusted with prominent public functions in the political realm – both domestic and foreign. This can include:

  • Heads of state
  • Senior officials in the government, judiciary, and military
  • Executives in state-owned corporations
  • Key political party officials 

PEPs can also include the relatives and close associates (known formally as RCAs) of any of these politically exposed individuals.

Because of their positions of power, PEPs are considered “high-risk” customers, as they have a greater opportunity to acquire money or assets through illegal activities. As a business, your job is to conduct due diligence and ensure that you properly identify and assess the risks of any PEPs doing business with your organization.

What is a Sanction Screening?

While PEP screening helps businesses identify clients who MIGHT engage in illegal practices, sanctions screening identifies those who already have. The sanctions screening process looks for individuals who appear on the global law enforcement and sanctions lists; an individual on this list is not legally permitted to make financial transactions.

Why Screening PEPs and Sanctions Lists Are Important

There are two main reasons why PEP and sanction screenings are important.

Firstly, conducting checks on sanction lists helps your business identify potential high-risk clients. Once that happens you can take adequate measures to ensure that the business relationship is legal and appropriate, and you can take steps to closely monitor the relationship throughout your time working with the client.

Secondly, PEP and sanction screenings are considered part of your “customer due diligence” – which also means they are part of your company compliance. Failing to screen customers can lead to tremendous fines; for example, international banking group BNP Paribas paid nearly $9 billion in 2014 for illegally processing transactions after failing to comply with sanctions.

Benefits of Automated Sanctions and PEP Screening

Sanctions and PEP screening is obviously a critical part of any business compliance protocol. However, this doesn’t change the fact that conducting these screenings can be time consuming. The global lists are incredibly long and updated constantly, and common names and aliases can make false positives a real problem.

Luckily, today’s businesses can use an automated screening system to do the hard work for them. These automatic screenings are affordable and fast, which means you can screen clients in real-time and always have the most up-to-date information. Additionally, these screening systems help you easily comply with international sanctions, which protects your company and improves your reputation among regulatory bodies.

Screen Current Customers Regularly

Most organizations know that PEP and sanctions screening is critical when you begin working with a new customer. However, compliance shouldn’t stop with that first screening! The screenings lists are constantly being updated, so it is important to continue screening your current customers on a regular basis.

Once again, this is an excellent opportunity to use an automated screening system. A software can take on the busy work of regular screenings, so you and your employees can continue working on building your customer relationships. By delegating this process to an automated system, you can keep up compliance and customer service without overwhelming yourself or your workers.

Ease the Burden with Compliance Solutions

Business compliance is critical to keep yourself and your company out of trouble – and nowhere is it more important than with PEP and sanctions screenings. However, keeping in compliance shouldn’t be a burden on your business. That’s why we suggest using compliance solutions that take the load off you and your employees.

What kind of compliance software is right for your business? Visit ComplianceLine today to see how our systems can help you make compliance easier than ever.