AML Software, KYC - Know Your Customer, PEP Check

What is a PEP and RCA?

A PEP, also known and a politically exposed person is an individual that holds a public politically influential role in society. As a result of this position, the individual may be more susceptible to bribery, corruption and other money laundering acts.

Types of PEPs:

  1. Domestic PEP: an individual that holds a public politically influential role domestically. This may include an individual who is a member of the government.
  2. Foreign PEP: an individual that holds a public politically influential role in another country. For example a member of government from another country.
  3. International PEP: an individual that holds a public politically influential role in an international organisation.

A good video explanation on ‘Who is a politically exposed person (PEP)’ can be found here.

An RCA, is a relative or close associate of a PEP. This includes individuals such as family members, for example mother, father, brother or sister. RCAs also include those who have close relations with individuals that identify as a PEP, this may be professionally or socially. An example of a close associate is a business partner.

Money Laundering Fines

Australia’s Commonwealth Bank hit with class action suit over money-laundering rule breaches

Who’s next?

SYDNEY, Oct 9 (Reuters) – An Australian lawfirm formally filed a class action suit against Commonwealth Bank of Australia on behalf of shareholders on Monday, accusing it of failing to disclose widespread breaches of anti-money-laundering rules.

The lawsuit by law firm Maurice Blackburn against the nation’s biggest lender follows one by the federal agency AUSTRAC, which has accused it of more than 53,000 breaches of anti-money laundry rules – breaches which have exposed it to billions in dollars of fines.

The suit, which had been previously flagged by Maurice Blackburn and litigation financier IMF Bentham Ltd, said shareholders had suffered a significant share drop in the wake of AUSTRAC’s accusations. The law firm’s statement on Monday did not specify the level of damages sought.

CBA has not disputed that it processed tens of thousands of illicit transfers but argues the breaches were largely caused by a software glitch and contests its level of responsibility. A CBA spokesman had no immediate comment on Monday.

The bank’s stock is down 8.5 percent since AUSTRAC announced its civil lawsuit against CBA in August. CBA shares were up 0.7 percent by mid-morning on Monday, in line with the broader market. (Reporting by Byron Kaye; Editing by Edwina Gibbs)


KYC - Know Your Customer, PEP Check, Uncategorized

PEP Checking for a Successful KYC Strategy

Politically Exposed Person (PEP) – another thing that makes KYC successful apart from the usual details that institutions collect about the customer like location, financial record, etc., is the political exposure of a client. Here a Politically Exposed Person (PEP) means someone who is politically connected. There is no formal definition of Politically Exposed Person, and therefore, different countries have their own method of identifying the PEPs.

Usually, it becomes quite important to investigate and track the transactions of such individuals because of increasing cases of bribery and other illegal transactions in this area. Customers identified as PEP are put through Enhanced Due Diligence (EDD). Institution handling PEP accounts have a separate database of these customers. They also have a defined course of action that is followed when a Politically Exposed Person is involved in money laundering directly or indirectly.

All these checks and screenings are performed regularly to have up-to-date information about the customers. Though the KYC norms have become more technical, yet they are user-friendly. Thus, banks complying with the KYC norms are pretty successful in the keeping a check on the money laundering.

Customer Due Diligence, KYC - Know Your Customer

Customer Due Diligence and KYC

Customer Due Diligence – it is another modern day check that makes KYC a success. Under this, the bank collects the required information on the customers to ensure the client fits their risk profile. Customer Identification program based on the Customer Due Diligence helps in understanding the transaction limits, the record retention, among other things. Customer Due Diligence is not a onetime process; rather the authorities should conduct periodical checks and also record any anomaly seen.

CDD has three levels: Standard Due Diligence, Simplified Due Diligence, Enhanced Customer Due Diligence (PEP Check and Sanction Check)

Standard Due Diligence applies to all clients, unless they fall into ‘simplified’ or ‘enhanced’ due diligence level. Simplified Due Diligence (SDD) is the way to go when a customer is perceived to pose a lower risk of money laundering. On the other hand, if banks or any other institution offering service believes the customer should be subject to greater scrutiny, Enhanced Due Diligence (EDD) approach is taken. EDD is the information collected over and above the SDD process for customers in the ‘high risk’ category.

Simplified or the Enhanced Due Diligence, helps in making KYC of a customer foolproof.  Tracking the transactions and identifying anything that is unusual is generally the first trigger that should alert the authorities for conducting the Enhanced Due Diligence (EDD) on the customer. For instance, if a business selling a definite nature of product or service suddenly breaks into any new stream of business, it should be the trigger for the authorities to look into such developments and transaction. There are various other factors that determine whether the customer should be put in the SDD or EDD level. Some of these factors are:

  • Nature of the Business
  • Purpose which the customer states while opening the account or availing the service
  • Nature of transaction, volume and also frequency at which the transactions are made
  • Source as well as the destination accounts where the funds transfer are being made and frequency of these transactions
  • Documentation of the business
  • Type of customers that the business, who is availing the service has
  • Beneficiary or the beneficial owner of the account
  • Reputation of the business and list of clients
  • Location of the business
KYC - Know Your Customer, Sanctions

Sanction Checking and KYC

What is Sanction Checking?

Sanction Check – is an important part of KYC process, and helps in limiting money laundering at the initial stage. For those not aware of what sanction check means, it is a check of the customer’s name against the government-sanctioned list of entities prohibited from particular activities. Banks and other financial institutions should carry sanction checks to make sure that none of their customers have their name on the list. This is one of the best ways to weed out money launderers, drug traffickers, PEP (Politically Exposed Person), terrorists and any other individuals, whose name appear on that particular list.

To ensure the sanction check is carried accurately, banks seek help from various third parties. Since every country has their own way of publishing the list (and decoding it is not easy), thus it becomes even more important to hire a specialized firm for sanction check. After the checks have been performed, the next step that helps banks with their AML checks is Customer Due Diligence (CDD).

These checks include the following lists:


ExxonMobil’s $2 Million Fine for Violating OFAC – Ukraine/Russia Sanctions

OFAC Fines ExxonMobil for Violating Ukraine/Russia Sanctions


 the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $2 million civil monetary penalty against Exxon Mobil Corp., including its U.S. subsidiaries ExxonMobil Development Company (EMDC) and ExxonMobil Oil Corporation (EMOC) (collectively, ExxonMobil), for violations of §589.201 of the Ukraine-Related Sanctions Regulations, 31 C.F.R. part 589. In May 2014, presidents of ExxonMobil’s U.S. subsidiaries signed eight legal documents related to oil and gas projects in Russia with Rosneft OAO (Rosneft) countersigned by Igor Sechin, the president of Rosneft. ExxonMobil has challenged OFAC’s finding of violation and penalty assessment as unlawful under the Administrative Procedure Act (APA) and a violation of its Fifth Amendment rights to due process. The lawsuit is currently pending in the U.S. District Court for the Northern District of Texas.

Reference: Lexology

Companies should perform sanction checks before dealing with any organisations to mitigate the risk of being involved in money laundering and financing terrorism.


Free OFAC Sanction Check Tool

Office of Foreign Assets Control – Sanctions Programs and Information


KYC - Know Your Customer

KYC – why is it needed?

Usually, the central banks all over the world set guidelines that the banks have to follow to prevent money laundering and weed out any suspicious accounts. AML checks have changed the way banks and financial institutions used to screen the customers and their accounts.

Over the years, money laundering has become more sophisticated and technologically advanced. Therefore, regulators are putting more pressure on the banks to include stringent norms in their KYC program. Financial Institutions deploy KYC for all the customers to set an identification of the customer. The process helps banks understand the activity of the customer, identify the legitimacy of the transactions, assess and eliminate the risk of money laundering or the possibility, if any.

By now, it has been an established fact that money launderers are adopting new ways for money laundering. To keep up with them, financial institutions too are devising new ways to improve AML (anti-money laundering) checks, and one important tool at their disposal is Know Your Customer (KYC).

Fourth Anti-Money-Laundering Directive

Revision of the Fourth Anti-Money-Laundering Directive

Written by Angelos Delivorias (1st edition), Directive (EU) 2015/849, which forms part of the EU regulatory framework to combat financial crime, has shown gaps in the light of recent terrorist attacks and the ‘Panama papers’ revelations. In this context, the European Commission proposed to amend the directive, along with Directive 2009/101/EC, to broaden their scope, […]

via Revision of the Fourth Anti-Money-Laundering Directive [EU Legislation in Progress] — European Parliamentary Research Service Blog