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Politically Exposed People

Politically Exposed People: How Overlooking Certain Profiles Can Be Catastrophic For Your Business



Ever heard of the term dominos effect? One small thing manages to fall and it creates a chain reaction across, taking everything else down with it – one after the other – all within a few seconds.


Onboarding a potentially politically exposed profile could have a similar effect on your business if you choose to ignore the red flags and do not play out your due diligence cards correctly.


The following will discuss in detail who a politically exposed person is, what kind of risks they bring to an organization, how to verify their background and assess risk, and more.


So, let’s get started.

Who Is A Politically Exposed Person

A politically exposed person can be anyone who is in a position of power with some influence on the general public. Think of a governor or a mayor or even a chief officer of a financial institution.


All these profiles are required to deal with high-value transactions regularly, putting them in a position of power. They hold a prominent public position or function and have some influence on their internal teams and people.


When a person in such a prominent position of function takes advantage of their influence and engages in money laundering, embezzlement, illegitimate fund transfers, manipulation of records, or similar activities, the person is termed a “politically exposed” profile.


A person caught engaging in such activities is instantly scrutinized by the media and public, giving them a bad reputation for being fraudulent.


What follows this most-dreaded event is the intense adverse media coverage, criminal investigations, verification of security breaches, and more.

Risks Of Onboarding a Politically Exposed Person

An organization that plans to associate with a politically exposed person must put in all efforts to identify, validate, and verify the politically exposed person’s background.


Regardless of the severity of crimes a politically exposed person has engaged with, the organization must brace itself for a long period of inevitable bad press and investor concerns.


Companies that were previously associated with politically exposed people have not been able to withstand the reputational losses, investor pull-out, mass boycotts, and other revolting measures.


No matter the intention, associating with a potentially exposed person – a money launderer at that is usually seen as an organized financial fraud or organized crime.


A general mass opinion is that a good company does not go out looking for money launderers to invest in their company because they are aware of the risks associated with such connections.


So, a company that does manage to onboard and associate itself with a money launderer is a sure-hit sign that the company has gone rogue or has been planning to do so for a long time.


What Would Happen To Your Organization If You Were To Onboard PEP?

  • Your company might experience the following if you were to associate or onboard a politically exposed profile.
  • Your company’s share value might tank
  • Expect relentless adverse media coverage
  • Investor concerns and eventual withdrawal of investment funds
  • Employee boycotts and organized unions to defy the PEP alliance
  • Irreparable reputational losses
  • Loss of goodwill
  • Financial institutions may freeze your assets/bank accounts for active engagement with high-risk profiles
  • Innumerable allegations followed by investigations from federal agencies
  • IRS audits
  • Penalties for potential violations
  • Legal and civil liabilities
  • Possible imprisonment (if proven guilty for certain crimes)


As you can see, many small things fall apart rapidly at once, making PEP associations extremely risky and dreaded.

What Is PEP Screening?

In order to help businesses protect themselves from associating with potential PEP profiles, the federal authorities and financial custodians of the country advise businesses to follow certain AML (Anti-Money laundering) and ATF (Anti-Terrorism Financing) verification procedures.


These procedures help businesses check the background of every individual they associate with, helping them identify if they’re in proximity with a politically exposed person.


Identity checks, such as PEP watch list, OFAC sanctions watch list, Death Master File, Specially Designated Nationals, Blocked Persons List, and other security checks help businesses identify high-risk profiles and deny them access to their business ecosystem.

How Does PEP Screening Help Your Business Prevent Risk

The fundamental role of PEP screening is to identify if a seemingly harmless profile is a politically exposed person by conducting rigorous due diligence checks.


PEP screening helps:


  • Identify the profile’s history with noncompliant engagements per the federal records
  • Obtain evidence to back up the PEP allegations
  • Assess the risk quotient of a profile
  • Conduct due diligence to validate false negatives and false positives
  • Prevent onboarding a high-risk profile
  • Prevent reputational, financial, and legal liabilities
  • Protect businesses from associating with money launderers and terrorism financiers
  • Prevent onboarding of individuals sanctioned by the OFAC and federal agencies

How To Get A Reliable PEP Screening Tool Kit For Your Business?

Compliancely – a real-time identity verification infrastructure enables you to identify, validate, and verify the real identities of a profile (person or entity) per the original source records in real-time.


This means all your customer identification procedures, due diligence ops, and KYC processes are met with accurate identity verification results.


When accuracy meets speed, your compliance efforts are powered.


Our real-time identity verification infrastructure enables you to verify as many as a million profiles within minutes, helping you verify profiles and approve customers in bulk at a faster rate.


You can leverage our API solutions to further simplify your account opening processes.


What’s more? Compliancely automatically re-screens the data to ensure that your identity inquiries are met with the most recent, latest, and accurate results at all times – keeping your identity records relevant and ready.


Our solutions are designed to help you decide and help prevent onboarding PEP profiles, protecting your business from risk consistently.