Melissa UK Team | 2023, United Kingdom

Sanctions have been front of mind for organisations in 2023, due to the conflict in Ukraine resulting in a plethora of sanctions enacted largely against entities, politicians and businesspeople in Russia and Belarus.

While it’s common knowledge there is a legal requirement to screen against sanctions lists, what about screening for politically exposed persons (PEPs) and relatives and close associates (RCAs) of PEPs, prior to working with a new customer or client?

These are people who could use their position and contacts, respectively, for illegal activity, and possibly defraud or damage the reputation of your brand.

While it’s not a legal requirement to obtain PEP and RCA data from around the world, unless you are in financial services, it is for a wider best practice approach to sanctions checks. It’s a key way to protect your brand against potential fraud and avoid having a customer who can harm your reputation.

Politically exposed persons (PEPs)

A PEP is defined as “an individual who is or has been entrusted with a prominent public function”. They consist of senior politicians, judiciary and military officials, for example. It is ideal to screen for them in the early stages of any onboarding activity, and then on an ongoing basis across your customer base.

If you have a PEP as a client you should look at categorising them as higher or lower risk, as this will make sure that your enhanced due diligence is proportionate and effective. Also, notifying those responsible for monitoring risk assessments in your organisation that a business relationship with a PEP has started is a vital step.

It’s important to recognise that higher-risk PEPs – often those who are at a senior level – may still pose some risk after they leave office because of their activity and relationships built up during their time in the role. Because of this, it’s advisable to undertake enhanced due diligence of these individuals over a longer period.

Relatives & Close Associates (RCAs)

As part of the PEP screening process, it’s vital to flag relatives and close associates (RCAs) of PEPs. RCAs can be partners, spouses, parents, children, uncles, aunts, cousins and close friends of the PEP. The reason why screening this audience is important is that they may be vulnerable to bribery, blackmail and corruption due to their relationship with someone in a position of authority and influence. With the risk posed by RCAs, screening should take place at the start of the business relationship, and then on an ongoing basis.

Adverse media screening

It’s essential to use technology that enables adverse media checks to take place as part of the PEP and RCA monitoring activity. This technology flags if an individual has any negative news associated with them. It will keep you up to date, in real-time, of news on any arrests or court cases, for example, against your clients who may be PEPs and RCAs; along with other customers who could have potential negative regulatory, financial, or reputational consequences to your organisation.

Also, for adverse media screening to take place effectively, it’s essential that the tool used scans the credible global news media.

If there is negative news against an existing client they should be ranked as high risk, with further due diligence required, which may result in terminating the business relationship. Also, this screening shouldn’t only be used to monitor existing clients, but at the customer onboarding stage, as part of their customer due diligence.

Integrated sanctions technology

The best way to source information on PEPs and RCAs is to have access to technology that can provide an up-to-date sanctions list, also called a watchlist, which as part of the service can deliver data on PEPs and RCAs, along with adverse media screening. The technology behind the watchlist should automatically collect and synthesise sanctions data in real-time from a wide range of trusted sources worldwide, such as governments, regulators, and credit agencies for maximum reach and accuracy.

Electronic identity verification (eIDV)

Such a service works well as part of a wider, more comprehensive approach to automated know-your-customer (KYC) and anti-money laundering (AML) operations. It’s why there’s growing interested in using electronic identity verification (eIDV) technology, which as well as having access to comprehensive sanctions data, including those on PEPs and RCAs, is able to cross-check user-provided details against reputable data streams to ensure individuals are who they say they are in real-time.

All organisations should be accessing the appropriate technology that delivers PEPs, RCA data and adverse media screening for sanctions best practice – not just those in financial services that are legally required to do so. By taking this approach businesses will protect their bottom line and their reputation, something that’s particularly important in these more challenging economic times.