A Quick Guide to PEP and Sanctions Screening

1. Understand your regulatory obligations

Understanding what regulators expect of your organisation will help shape your internal compliance policies to ensure you remain compliant.

As an AUSTRAC reporting entity and designated service provider, you are required to follow strict AML/CTF Rules. These call for you to identify individuals or beneficial owners who are PEPs or associates of PEPs. You must also conduct ongoing customer due diligence using a risk-based approach.

Australian sanction laws apply to activities in Australia and those made by Australian citizens and Australian-registered bodies corporate overseas. Australia implements the United Nations Security Council (UNSC) sanctions regimes and Australian autonomous sanctions regimes. These impose different sanctions measures that generally prohibit certain activities or services.

2. Understand what PEPs are

According to AUSTRAC, PEPs are individuals who occupy a prominent public position or function in a government body or international organisation. This definition also extends to their immediate family members and close associates ¹. Note that PEPs are categorised as domestic PEPs, foreign PEPs and international organisation PEPs.

3. Manage the PEPs in your portfolio

PEPs and their associates are perceived as higher-risk customers for financial institutions because their position and influence may make them more susceptible to bribery or corruption.

Because of the risks associated with PEPs, the Financial Action Task Force (FATF) Recommendations require the application of additional AML/CFT measures or enhanced due diligence, to business relationships with PEPs. These requirements are preventive (not criminal) in nature. For this reason, they shouldn’t be interpreted as meaning that all PEPs are involved in criminal activity, or that PEPs and their associates cannot be onboarded as your customers.

4. Understand what sanctions are

Sanctions are measures imposed by the Australian Government and the United Nations Security Council (UNSC) in situations of international concern. Different sanctions regimes may restrict activities relating to particular countries, goods and services, persons and entities.

In general, sanctions measures may include prohibitions on:

• making a ‘sanctioned supply’ of ‘export sanctioned goods’;
• making a ‘sanctioned import’ of ‘import sanctioned goods’;
• providing a ‘sanctioned service’;
• engaging in a ‘sanctioned commercial activity’;
• dealing with a ‘designated person or entity’;
• using or dealing with a ‘controlled asset’; or
• the entry into or transit through Australia of a ‘designated person’ or a ‘declared person’.

Source: https://dfat.gov.au/international-relations/security/sanctions/Pages/about-sanctions.aspx#aims

5. Don’t deal with sanctioned entities

Breaching Australian sanctions laws can be a serious criminal offence, resulting in imprisonment up to 10 years and substantial fines. To avoid breaking the law, do not conduct prohibited activities with a sanctioned entity, or cease to do so as soon as possible.

There are exceptions when a sanctions permit has been granted to allow prohibited activities to be carried out by the permit holder, but these are rare and have associated conditions.

6. Conduct ongoing customer due diligence

Once the due diligence processes have been carried out at the point of onboarding, use a continuous risk-based approach to identify any changes in the PEP status of existing customers and beneficial owners. This approach ensures the appropriate monitoring and due diligence processes have been conducted based on the risk that PEPs pose to your organisation.

It’s also crucial to identify when any entities within your portfolio become sanctioned. Once done, you can take preventative measures to avoid severe penalties and a breach of the Australian sanctions law.

To find out how Equifax can help you identify PEPs and Sanctions, email us.

¹http://www.austrac.gov.au/part-b-amlctf-program-customer-due-diligence-procedures#requirements