Global Anti-Money Laundering Regulations and the Imperative for Business

Businesses are rushing to comply with one of the more substantial changes to Anti-Money Laundering (AML) regulations in recent history.  Companies must identify and closely monitor Politically Exposed Persons (PEPs) within financial transactions, implement an effective risk review and perform enhanced monitoring of the business relationship. This is not a simple task given the volume of global commerce and the broad definition of a Politically Exposed Person.

With a number of directives continuing to go into effect worldwide, and fines for non-compliance spiking into the millions, the urgency is high to secure a practical and efficient solution to screen for PEPs.

Nearly 50 countries have initiated or are revisiting anti-corruption laws covering bribery, influence of public officials, facilitation payments and more.  Some recent highlights include: 

  • Canada – The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
  • European Union – The Fourth Anti-Money Laundering Directive (EU) 2015/849 (4AMLD)
  • United Kingdom - The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
  • United States (Proposed) – The Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017

A Closer Look at Politically Exposed Persons (PEPs)

There is no single, universally agreed upon definition of a politically exposed person. However, according to the global Financial Action Task Force (FATF), a PEP is opaquely defined as an individual with substantial political influence or who fulfills a prominent public function. Not only are PEPs subject to additional scrutiny, their family members and close associates may also require screening, since those close to PEPs are considered more apt to act on their behalf, or serve as secondary targets for influence. 

In recent years, there has been an increased focus on the financial transactions of high net-worth and highly visible figures.  Due to their status and potential influence, governments have noted that those in the PEP category are statistically more likely to be a target or perpetrator of money laundering, bribery or corruption efforts. To better review the activities of PEPs, FATF recommends that financial institutions adopt a stance of reasonable care in regard to the dealings with a PEP.

The Consequences of a Violation & Processes for Due Diligence

The impact of violating PEP laws can be extensive. For example, offering an internship to family members of a PEP has resulted in a fine with one company subject to a $14.8 million penalty. Clearly, the financial and reputational consequences for non-compliance can be devastating to a business. 

Identifying PEPs can be challenging. Data is available from several publicly available sources spanning government-issued lists, Internet and media sources, and industry groups. However, manually collecting this information and ensuring continued compliance is neither practical nor efficient. The best practice to screen for PEPs is to use an automated solution that flags potential matches to help increase due diligence during a business relationship.

Descartes MK Denied Party Screening™ (Descartes MK DPS™)

The Descartes MK DPS™ solution continuously monitors and updates a comprehensive database of PEPs culled from lists maintained by government and international organizations. Our team of world-class data experts reviews and standardizes the information, and delivers the content in a number of flexible formats. Options range from a web-based research option, to web services including an Application Programing Interface (API), to a review of parties within Enterprise Resource Planning (ERP) systems such as Oracle and SAP, to ecommerce screening and more.

Descartes MK Dynamic Screening™ can also ensure a high level of compliance through proactive screening to scan for new PEP results. The service reviews master data when a new entry is made in a PEP list and a notification report is automatically generated to share the result.

Contact us to learn how Descartes can help you better identify ensure compliance with global PEP requirements. Register for two weeks of complimentary access to our comprehensive, searchable web-based solution, Descartes MK Denial.