Identifying and Managing Risks Associated with Politically Exposed Persons (PEPs)

Under the Wet ter voorkoming van witwassen en financieren van terrorisme (Wwft), financial institutions are required to implement risk-based procedures to identify and manage the risks associated with Politically Exposed Persons (PEPs). These individuals are considered at a higher risk for corruption due to their political roles and influence.

Who Qualifies as a PEP?

A PEP is typically someone who holds a prominent public position or has been entrusted with a public function. This includes individuals such as:

• Heads of state, government officials, ministers, and deputy ministers.
• Members of parliament or legislative bodies.
• Senior figures in the judiciary and military.
• High-ranking officials in international organizations.

Family members and close associates of PEPs are also subject to scrutiny, given their potential proximity to power and influence.

Enhanced Due Diligence for PEPs

When a client is identified as a PEP, enhanced customer due diligence is necessary. This process involves:

• Getting approval from senior management to establish or continue a business relationship.
• Taking adequate measures to understand the source of the PEP’s wealth and funds.
• Conducting ongoing monitoring of the business relationship.
  
  

PEP Screening and Investigation

Identifying PEPs can be challenging. Financial institutions commonly use commercial services that provide PEP lists for screening, as well as direct inquiries with the client. Additionally, conducting online checks, such as a Google search with the person's name and relevant terms, can be part of the investigation process.

Tailoring Procedures Based on the Number of PEP Clients

The extent and depth of procedures and measures depend on the number of PEPs in a financial institution's client base. A risk-based approach is essential for effective management.