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PEP & Sanctions Screening Training
Training on identifying Politically Exposed Persons (PEPs) and screening against global sanctions lists. Essential for AML compliance under FICA.
In This Training
1What are Politically Exposed Persons (PEPs)?
A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public position. PEPs are considered higher risk for potential involvement in money laundering or corruption due to their position and influence.
Categories of PEPs
Foreign PEPs
Individuals who hold prominent positions in foreign countries:
- • Heads of state or government
- • Senior politicians and government officials
- • Senior judicial officials
- • Senior military officials
- • Senior executives of state-owned enterprises
Domestic PEPs
Individuals holding prominent positions within South Africa:
- • President and Deputy President
- • Cabinet Ministers and Deputy Ministers
- • Members of Parliament
- • Provincial Premiers and MECs
- • Judges and senior prosecutors
International Organization PEPs
Senior officials of international organizations:
- • Directors and deputy directors
- • Board members
- • Senior management
Family Members and Close Associates
Individuals closely related to or associated with PEPs, including spouses, children, parents, siblings, and known close business associates, are also considered higher risk and should be subject to enhanced scrutiny.
PEP Status Duration
Under international standards, a person remains a PEP for a period after leaving office (typically 12-18 months). South African guidance suggests ongoing risk assessment even after a person ceases to hold a prominent position.
2What is Sanctions Screening?
Sanctions screening is the process of checking clients against various sanctions lists to ensure they are not individuals, entities, or from countries subject to financial restrictions. It is a legal requirement and critical for preventing terrorist financing and other illicit activities.
Individuals
Specific persons designated on sanctions lists
Entities
Companies, organizations, and groups
Countries
Geographic regions subject to comprehensive sanctions
Legal Consequences
Conducting business with sanctioned individuals or entities is illegal and can result in severe penalties, including criminal prosecution, substantial fines, and reputational damage. Under South African law, violating sanctions can result in imprisonment.
3Key Sanctions Lists
Effective sanctions screening requires checking against multiple lists from various jurisdictions. Here are the key lists that South African businesses should screen against:
UN Security Council Consolidated List
MandatoryThe primary international list maintained by the UN. All member states, including South Africa, are legally obligated to implement these sanctions.
OFAC SDN List (US Treasury)
Highly RecommendedThe Specially Designated Nationals list maintained by the US. Important for any business with US nexus or dealing in USD.
EU Consolidated List
RecommendedEuropean Union sanctions list. Important for businesses dealing with EU entities or transacting in EUR.
UK Sanctions List
RecommendedPost-Brexit UK sanctions list. Important for businesses with UK connections.
South African Domestic Lists
MandatoryTargeted Financial Sanctions lists published by the FIC implementing UN sanctions and domestic designations.
4Screening Procedures
Effective PEP and sanctions screening requires systematic procedures at multiple stages:
Onboarding Screening
Screen all new clients against PEP databases and sanctions lists before establishing a business relationship.
Transaction Screening
Screen counterparties and beneficiaries for higher-risk or cross-border transactions.
Ongoing Batch Screening
Regularly (ideally daily) screen your entire client base against updated lists.
Real-Time Alerts
Implement systems to receive alerts when sanctions lists are updated and re-screen affected records.
Name Matching
Use fuzzy matching algorithms to catch variations in spelling, transliteration, and aliases.
Documentation
Document all screening activities, matches investigated, and decisions made.
5Managing False Positives
False positives are matches that appear to be hits but, upon investigation, are not actual matches. Managing false positives efficiently is crucial for operational effectiveness.
Best Practices for False Positive Management
- • Secondary identifiers: Use date of birth, nationality, and other data points to confirm or eliminate matches
- • Clear escalation: Define who investigates matches and who makes final decisions
- • Whitelist management: Maintain a list of investigated and cleared false positives to reduce repeated alerts
- • Documentation: Document the rationale for clearing each match
- • Regular review: Periodically review cleared matches against updated information
Frequently Asked Questions
What is a Politically Exposed Person (PEP)?
A PEP is an individual who holds or has held a prominent public position, such as heads of state, senior politicians, senior government officials, judicial or military officials, and their family members and close associates.
What sanctions lists must be screened under FICA?
You should screen against UN Security Council sanctions lists, OFAC (US Treasury) lists, EU sanctions lists, UK sanctions lists, and South African domestic targeted financial sanctions lists.
How often should PEP and sanctions screening be conducted?
Screening should be conducted at onboarding and on an ongoing basis. Best practice is daily batch screening of your entire client base with real-time screening for new clients.
Related Resources
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