Microscope on PEPs in targeted compliance assessment

Microscope on PEPs in targeted compliance assessment

10 MAY 2021

The Department of Internal Affairs (DIA) is moving to more targeted compliance assessments to test reporting entities’ understanding and implementation of various areas of their AML obligations – starting with politically exposed persons (PEPs).

Microscope on PEPs in targeted compliance assessment

It recently used the approach on a sample of law firms and real estate agencies, to evaluate the effectiveness of their PEP screening policies, procedures and controls.

The key issues uncovered included:

  • no policy to conduct PEP screenings on customers and their beneficial owners;
  • no policy to obtain senior management approval before continuing a business relationship with a PEP;
  • no procedure outlining how a PEP screening would be conducted;
  • no policy or procedure to keep records of the PEP screenings conducted;
  • no New Zealand definition for PEP included in AML programmes; and
  • no control to ensure that PEP checks had been completed.

The DIA also found that compliance rates for PEP checks were better where companies used third-party electronic customer due diligence providers.

You can find the DIA’s full article on Targeted Compliance Assessments – Politically Exposed Persons here.