According to the Anti-Money Laundering Specialist (the 6th edition) resources, PEPs are individuals who are or have been entrusted with prominent public functions, such as heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, or important political party officials1. PEPs pose a higher risk of money laundering and corruption due to their position and influence2. Therefore, financial institutions should apply enhanced due diligence and ongoing monitoring measures when dealing with PEPs as customers3. This includes:
Conducting enhanced ongoing monitoring of the businessrelationship to detect and report any suspicious transactions or activities4. This may involve more frequent reviews, higher-level approvals, or increased documentation of the transactions and the rationale behind them.
Taking adequate measures to establish the source of wealth and source of funds which are involved in the business relationship or occasional transaction. This may involve verifying the origin, legitimacy, and purpose of the funds, as well as the economic activities and assets of the PEP.
The other two options are incorrect because:
Expedite due diligence when a PEP is pre-approved by a member of senior management is not a recommended course of action, as it may compromise the quality and integrity of the due diligence process. Pre-approval by senior management does not exempt the financial institution from conducting thorough and timely due diligence on the PEP and the business relationship.
Obtain appropriate senior management approval for establishing a business relationship with a PEP from a high risk country is a necessary but not sufficient course of action, as it does not address the ongoing monitoring and source of funds aspects of the PEP risk management. Senior management approval is required for establishing or continuing a business relationship with a PEP, regardless of the country of origin or residence of the PEP.
1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 83 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 84 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 85 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88
