With the so-called Arab Spring sweeping across parts of the Middle East and North Africa, and gathering momentum on fighting global bribery and corruption, PEPs will continue to be a focus for global regulators.
Where is the specific challenge for banks on PEPs?
The challenge for banks is that, in some cases, PEPs have become sanctioned parties or persona non grata overnight and global authorities have scrutinised past transactions with PEPs with whom they had previously encouraged business.
Banks need to ensure that they can justify their relationships with PEPs, particularly with an eye to future changes in their political standing. They should always be asking where the PEP obtains the funds that they would like to pass to the bank, and be ready to explain the purpose of transactions that they undertake. The involvement of front line staff – who are often best placed to identify higher risk relationships – and senior management – in signing off on these relationships – are both critical.