PEPs and high-risk customers

In short

A politically exposed person (PEP) is someone who holds, or recently held, a prominent public role: a minister, a member of parliament, a senior judge, a senior military officer, a head of a state-owned enterprise, and similar. Their relatives and close associates (RCAs) are treated with similar care.

Being a PEP is not an accusation. It means the person’s position could expose them to bribery or corruption, so AML rules expect institutions to apply enhanced due diligence (EDD): know more, check more, and have senior management sign off.

The same thinking applies to other high-risk customers: those your institution has rated high risk because of their business, geography, adverse media or behaviour.

How SpeculaPro represents them

What	Where
PEP status (domestic, foreign, international organisation)	A pep risk designation
Relatives and close associates	A pep_rca designation
High-risk customers	A high_risk designation and/or a high customer risk rating
Adverse media	An adverse_media designation

Designations are set by hand, by someone with designations.manage (by default Senior analyst and MLRO), with Flag on the customer’s page (see Flagging a customer), or through the Designations API. Screening sets them too, when a reviewer confirms a potential match as a true match: see Reviewing a sanctions match. Designations are never deleted, only revoked, so you can always see what was in force when a transaction happened.

Which rules surface activity

Rule	What it does
F2 PEP transaction above threshold	Flags PEP transactions above a set amount, optionally including RCAs
F3 Lower thresholds for high-risk customers	Makes every other rule more sensitive for high-risk customers
F5 Inconsistent with declared profile	Activity well beyond what the customer said to expect
F1 Sanctioned entity	Any activity at all by a sanctioned party

Your administrator can set up an escalation policy for cases about a PEP, or a PEP’s relative or associate: such a case then opens straight at level 2 or with the MLRO, in a named team’s queue, with its own deadline, and can require a second person to close whatever its priority. See Escalation policies. The policy is chosen when the case is opened, from the subject’s designations at that moment. If your workspace has no such policy, or the customer was designated after the case was opened, escalate the case by hand as your policy requires (on the case, select Escalate; see Escalating a case); each escalation raises the case’s priority one step, and once a case is high or critical, closing it needs a second person’s approval. See Escalation and SLAs.

What to look for

The central question for a PEP is: is the money consistent with the person’s known, legitimate sources of income and wealth?

Red flag	Possible innocent explanation	How to tell them apart
Large inflows well above a public salary	Declared business interests, family wealth, sale of property	Is the source documented in the customer’s EDD file? Is it plausible and verifiable?
Payments from government contractors or state bodies	Legitimate allowances or reimbursements	Is the payer, amount and purpose consistent with the role?
Funds routed through relatives’ or associates’ accounts	Ordinary family support	Large or regular sums through RCAs, especially just after contract awards, need scrutiny
Cash-heavy activity	Constituency or community giving	Large cash use by a PEP is a recognised risk; ask for the source
Transfers abroad to unexplained beneficiaries	School fees, medical bills, property	Supporting documents usually exist for legitimate purposes

How to investigate

1. Read the EDD file. What is the PEP’s role? What sources of wealth and of funds were declared and evidenced at onboarding? When was the file last reviewed?
2. Compare the activity with the declared sources. Does the money fit? Note specific amounts and dates.
3. Look at counterparties. Pay attention to state bodies, contractors, companies the PEP may control, and RCAs.
4. Check public information. News reports, public procurement awards, court records. Record what you searched and found.
5. Consider the timing. Inflows around elections, contract awards or the end of a term in office deserve attention.
6. Escalate per policy. PEP cases normally need a senior decision. A PEP shows a pep badge on the subject card of the alert and case; a relative or close associate shows PEP associate. Don’t close a PEP case at level 1 unless your policy explicitly allows it.
7. Document thoroughly. PEP cases are among the most likely to be reviewed by regulators.

Don’t let seniority or relationships influence the review

PEPs are often valued, well-connected customers, and staff may feel pressure to clear their alerts quickly. Apply the same method as for anyone else, and record your reasoning. The 4-eyes rules exist precisely so no single person decides a sensitive case alone.

When does PEP status end?

Requirements on how long someone remains a PEP after leaving office differ between regimes. Follow your institution’s policy and current Ghanaian guidance. When status ends, revoke the designation with a reason rather than deleting anything, with Remove on the customer’s page (see Flagging a customer). To end it automatically at a known date, pick the date under Ends (optional) when you add the flag (see How to flag a customer), or set valid_to through the Designations API.

What to record

• The PEP’s role and the declared sources of wealth and funds.
• How the activity compares with those sources.
• Counterparties of interest.
• Public information found, with sources.
• The senior decision and who made it.

When to escalate or report

• Always follow your policy’s escalation for PEP alerts, typically to level 2 or the MLRO.
• Report when funds can’t be reconciled with known legitimate sources and you have reasonable grounds to suspect, for example proceeds of corruption.
• Sanctions matches go straight to the MLRO, whatever else the case involves.

Related

• Risk designations
• F. Customer risk and designation rules
• Escalation and SLAs
• Writing an STR