What is a PEP and why are they considered High Risk?

• PEP stands for Politically Exposed Person (PEP). A PEP is an individual who holds or has held a prominent public position or role, which may make them more vulnerable to corruption or bribery due to their influence and access to resources.

• PEPs are at a higher risk of being involved in money laundering, terrorist financing, or other illicit activities due to their power and access to resources.

• Due to this exposure, we need to ensure we are carrying out the correct due diligence. There are rules in GMS which will trigger alerts if there is a match or a close match to a PEP. We must review the information and see if it is a True Match or a False Positive. 

What are Sanctions?

• Sanctions refer to restrictions or penalties imposed by governments or international bodies (e.g., OFSI (UK), the United Nations, European Union, or the U.S. Treasury's Office of Foreign Assets Control - OFAC) to achieve foreign policy or national security objectives.

• Sanctions can be applied to individuals, entities, sectors and countries.

Types of sanctions:

1. Financial sanctions:

i) Preventing access to funds, property, or economic resources. 

ii) Restrictions on financial services: Prohibiting the provision of loans, investments, or banking services. 

iii) Prohibition of financial transactions: Banning monetary dealings with sanctioned entities or individuals.

2. Trade sanctions: 

i) Export controls: Banning the export of specific goods (e.g., technology, weapons, or dual-use items) to sanctioned countries or entities. 

ii) Import restrictions: Prohibiting the import of goods from certain regions or countries. 

iii) Embargoes: Comprehensive bans on trade with a particular nation.

3. Sectoral Sanctions: 

i) Restrictions on sectors like energy (oil and gas), banking, defense, or technology.

ii) Limiting access to international capital markets or key technologies.

4. Travel and Visa Sanctions:

i) Visa bans: Refusing or revoking travel visas for specific individuals.

ii) Travel restrictions: Prohibiting entry into certain countries or regions.

5. Other sanctions for purposes of UN obligations, such as:

i) Arms Embargoes

ii) Humanitarian Sanctions

How to work PEP/Sanction alerts?

1. Firstly we must see if the data sets we have are a strong match.

i) Full name match (first name, middle name and last name)

ii) Full entity name match as well as location match

iii) Full date of birth match (DOB)

iv) Exact or strong picture match

2. If we have weak data set match then we must have at least 2 data sets matching.

i) First and last name only but our customer has a middle name

ii) Partial date of birth match (month/year match only for example - also more than 2 years difference)

iii) Location match

iv) Occupation match

Examples:

1. Name match (however, the name isn't considered a common name. If considered a common name then another data set such as date of birth, location or occupation should also match). If our customer or the alerted individual has a middle name and we have our customer's passport which does not have a middle name we can discount the hit. 

2. Date of birth data must be used along with the name and not on it's own.

3. Location match, if we are able to see the individual also resides in that location and is close proximity then this can be used alongside the name and not on it's own. When considering the location, we need to review how close it is to the customer's address and not just a country match, however, we can use country to discount the hit.

What if I cannot if I can't mark as False Positive or a True Match?

1. If you are unable to discount the hit because you have limited information, you can request further information (RFI) from the client. This can include information around a different form of ID (for example they provided a driving licence which does not contain their full name), address history (if you have the location of the PEP/Sanctioned individual, you can request address history to see if the customer matches that location around the time of the article/hit), occupation history and any other information you feel may help you discount the alert.

2. If the customer has not replied in 3 days, please send a reminder email to the client.

3. If the customer replied and we have enough information to discount the hit then approve the payment and no further action is needed. If still no reply in 7 days, then go to step 4 

4. Reject the payment, send rejection email and go to step 5.

5. We must carry out a review of the customer's account. Please see Investigations page.

Resources:

1. Sanctions

2. FCA Guidance on PEPS

3. Guavapay's Internal policies can be found here: Z:\Policies & Procedures\1. AML Policies