EXPERT FORECAST : BANKING AND FINANCE
THE IMPORTANCE OF POLITICALLY EXPOSED PERSONS SCREENING AMID GLOBAL EVENTS AND REGULATORY SHIFTS
In 2024 , several significant developments in the realm of politically exposed persons ( PEPs ) and money laundering have made headlines . These include a series of high-profile cases and regulatory changes aimed at enhancing transparency and accountability . Greg Pinn , Babel Street ’ s Director of Name Screening , dives into the importance of screening PEPs , and how technology such as AI , holds the key to advancing the process .
About half of the world ’ s population will be going to the polls in elections this year , and a number of these elections will have a considerable impact on global stability . The possible elevation of so many people to positions of power raises the risk of bribery and corruption , dramatically elevating the need for Politically Exposed Persons ( PEP ) screening and mitigation .
PEPs are individuals who are or have been entrusted with prominent public functions . As such , they have a higher likelihood of being involved with bribery , corruption and / or money laundering due to their potential influence on laws , contract awards and political outcomes .
Changes in PEP regulations
PEP regulations around the world are changing , with stricter requirements for due diligence and the costs of noncompliance violations increasing every year . Financial institutions ( FIs ) must conduct PEP screening to assess the level of risk associated with each individual and determine the extent of due diligence required to understand and mitigate risk .
In a risk-based approach to PEP screening , FIs and other regulated entities evaluate various factors to determine the level of risk posed by a particular PEP .
There are four key areas to consider :
1 . Country risk : Whether using a commercial country risk ranking tool or one provided by a non-governmental organisation , understanding comparative risks for countries , including their level of election integrity and freedom of the press , is essential to assessing PEP risk .
Limitations in press freedom can often obscure corruption research , making it nearly impossible to bring such crimes to light . While country risk is an important part of PEP screening , some institutions are too reliant on this single point . No PEP should be dismissed outright solely based on location .
2 . Event timelines : Elections are highly correlated with corruption , both immediately before and after they take place . Buying influence before a candidate www . intelligentfin . tech
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