Buckley Sandler Webcast: Dealing with PEPs - AML and Corruption Risk
Buckley Sandler hosted a webcast, Dealing with PEPs: AML & Corruption Risks, on December 18, 2014 as part of its ongoing FinCrimes Webcast Series. Panelists included Mary Butler, Deputy Chief, International Unit, at the Asset Forfeiture & Money Laundering Section, Criminal Division at the U.S. Department of Justice; Paul Dougherty, Managing Director of the anti-money laundering program for the United States and Canada at Bank of America; and Noreen Fierro, Vice President and Chief Compliance Officer of the Group Insurance Division of Prudential Financial. The following is a summary of the guided conversation moderated by Jamie Parkinson, partner at Buckley Sandler, and key take-aways you can implement in your company.
Key Tips and Take-Aways:
- Make sure that the organization has appropriate procedures in place to identify Politically Exposed Persons (PEPs) and that those procedures appropriately explain how a PEP is defined by the institution.
- Understand the different global standards for PEP compliance and, where appropriate, have country-specific policies and procedures to manage onboarding and monitoring.
- Encourage cooperation among the different financial crime compliance disciplines within your institution to assist in identifying and monitoring PEPs.
Onboarding and Monitoring PEP Accounts
The session began with a discussion of the basic regulatory requirements associated with the onboarding of PEP accounts. The panel addressed the significance of having specific policies and established procedures to identify PEPs on the front end. Specifically, the panelists noted the importance of having procedures that discuss the borrower approval process, the steps taken to onboard the customer and how those steps differ from normal customer onboarding steps, and who is involved in the process. The panelists further noted that regulators pay significant attention to how transactions are monitored for PEPs in comparison to normal customers and what the organization does when an account is flagged. With regard to the actual onboarding procedures, the panelists noted that the primary concern is associated with identifying risks associated with the PEP and investigating the source of the PEPs funds.
Global Approaches to PEP Programs
The panelists then discussed the complications that arise when dealing with the global application of PEP requirements. Specifically, the panelists noted the significant differences from country to country regarding who qualifies as a PEP and whether or not an individual’s status as a PEP continues after the individual leaves his position. Significantly, one of the panelists noted that their company took a country by country approach with regard to PEP onboarding and monitoring in order to address the differences. Panelists further noted a concern regarding the duplication of names between OFAC screening lists and local country lists. Panelists also noted that because of the global nature of PEP regulations, they tend to refer to Senior Foreign Political Figures as Senior Political Figures, even though official guidance uses the foreign distinction.
Intersection of PEPs, Money Laundering and Corruption
Panelists next discussed how the DOJ views the intersection of programs dealing with money laundering and corruption. The panel noted the significant cooperation that exists between individuals working in different areas associated with AML and bribery. The panel highlighted the importance of Suspicious Activity Reports and their use in investigating alleged illegal conduct. The panel also noted that with the increase in disclosure requirements, it is becoming easier to find evidence of money laundering and to eventually recover those illegal proceeds.
Dealing with Local Political Officials
In response to questions from attendees, the panelists then shifted to discussing the domestic application of PEP policies and procedures. The key points discussed were associated with how local political officials are categorized when dealing with PEPs. Specifically, the panelists noted the difficulties associated with deciding how broadly to extend the definition of a PEP with regard to local political officials. The panel suggested that the primary concern when defining local PEPs was to make sure that an organization’s policies and procedures are clearly defined and at least reasonably defensible. Panelists observed that the key regulatory concern is not that the definitions should be identical, but that entities have reasonable definitions that are enforced uniformly.
Monitoring Techniques and Metrics
The panel also discussed the specific complications associated with dealing with the monitoring of PEP accounts. The panelists noted that one of the key aspects of account monitoring is to leverage any AML programs currently in place and allowing that process to help identify any particularly suspicious practices. Furthermore, the panelists pointed out that a key aspect of dealing with suspicious PEP activity is the filing of SARs. One panelist also noted that, while not required statutorily, cooperation with local law enforcement can greatly assist the DOJ with recovering any illegal proceeds.