With the SRA expecting solicitors and firms to continue to meet the high standards the public expect (which includes upholding the rule of law), it is important to ensure that all staff are aware of their obligations when onboarding clients and, with most staff currently working remotely, now is a good time to remind them.
On a number of occasions, I have seen panic set in as soon as someone sees the words “match” for their client on a PEP screening request. But there’s no need to panic! Just because someone is classified as a PEP does not necessarily mean they are a “baddie”!
So, what is a PEP and why are they considered high risk?
A PEP is a person who is or, within the last year, has been a:
Head of State/Government, Minister, Assistant Minister or MPMember of judiciaryMember of Courts of Auditors, or of Boards of central BanksAmbassador or high-ranking officer in the armed forcesMember of administrative management or supervisory bodies of state-owned enterprisesMember of governing body of a political partyBoard of an international organisation (for e.g. FIFA)
In addition, a person will also be classified as a PEP if they are:
A member of a PEP’s familyA known close associate of a PEP (whom the PEP is in business with)A beneficial owner of the PEP’s property (someone who enjoys the benefits of ownership even though the title of the property is in another person’s name)
PEPs are deemed high risk because they generally present a higher risk for potential involvement in bribery and corruption due to their position and the influence that they may hold. Therefore, the main aim of applying Enhanced Due Diligence (EDD) to work involving PEPs is to mitigate the risk that the proceeds of bribery and corruption may be laundered. PEPs are also easy targets for identity theft due to a great deal of their personal information being publicly available.
The best way to check whether someone is a PEP is through PEP screening solutions online – many firms already have electronic verification which will normally include PEP screening as part of the checks that are carried out. Some online screening solutions will also provide additional information, such as adverse media and any criminal conduct – a good way to check whether your PEP is a “baddie” or not! Don’t forget Google, it is amazing what information you might find from a Google search.
Regulation 33 (1)(d) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) states that EDD is required in situations where the client is a PEP, or a family member or known close associate of a PEP. Therefore, it is important to establish whether or not your client is a PEP at the outset.
In addition, under Regulation 35 of the MLR 2017, if your client is a PEP you must:
get senior management approval for the business relationshiptake adequate measures to establish the source of wealth and source of fundsclosely monitor the business relationship throughout
If you need any assistance when dealing with PEPs please get in touch and we would be happy to help. Drop us an email at firstname.lastname@example.org.