Like all regulations, the laws governing onboarding new customers is packed full of acronyms, and terms which mean little outside of the context of anti-money laundering (AML) legislation.
John Dobson is chief executive of SmartSearch
Like all regulations, the laws governing onboarding new customers is packed full of acronyms, and terms which mean little outside of the context of anti-money laundering (AML) legislation.
Sanctions, PEPs and RCAs fall into this bracket, but it’s vital to understand their meaning to ensure compliance with the latest AML guidance.
Financial sanctions were created to prevent financial crime internationally. All over the world, governments restrict and prohibit conducting business with anyone on a sanctions list. So, having a full understanding of who is on these sanction lists ensures brokers are able to screen out potential fraud.
Sanctions checks are specialised searches that include a number of government sanction databases that identify individuals who are prohibited from certain activities or industries.
Essentially these checks are to ensure that the person purchasing the property is not on a list which should prevent them from this type of transaction.
What it means for brokers
Working with someone on a sanctions list is not just morally questionable, it is also illegal. To be put on a sanction list, someone has to have either committed a very serious crime, or be connected to someone who has.
This means if brokers are not conducting the proper checks and end up working with a client on a sanction list, they will be failing in their due diligence process.
What is a PEP?
Another common acronym in the anti-money laundering process is Politically Exposed Persons, or PEP. It essentially means someone who holds a prominent position in public life – for example a senior member of government, the judiciary or police. This, in theory, could make them more vulnerable to bribery and corruption as they hold a position of influence.
Lists of PEPs are publicly available, but there is no central source, so keeping records up to date manually is almost impossible. The best way to monitor PEPs is via an electronic anti-money laundering platform with daily monitoring. SmartSearch uses the Dow Jones WatchList which has access to more than 1,100 PEPs and sanctions lists and is updated daily.
Working with PEPs
Although it is not illegal to work with those who are on PEP lists, it does increase the threat of money laundering or fraud. In this situation, brokers should take extra precautions in and conduct more due diligence, to make sure they are protecting themselves.
Not only do brokers need to be aware of PEPs, they also need to be aware of those close to them. These are known as Relatives and Close Associates (RCAs).
RCAs are defined as any individual or business that is either related to, or closely associated with a PEP. It’s important to identify RCAs as they may be vulnerable to bribery, blackmail and corruption due to their relationship with the person in a position of authority and influence.
To protect themselves, brokers should make sure sanctions searches and PEP screenings form a central component of their AML checks. By using a digital platform, such as SmartSearch, brokers can confirm their client doesn’t present a money laundering risk and avoid any potential fines or damage to the broker’s reputation.
