Growing regulatory pressure on financial institutions and the aftermath of political instability in certain regions have raised the profile of political risk for banks. Financial institutions are more focused than ever on the need to exercise more scrutiny overPolitically Exposed Persons (PEP) transactions.
Eighty percent of respondents stated that PEP customers are required to provide documents to evidence their source of wealth and / or income. Seventy-seven percent stated that this is required for all high risk clients. As stated in the 2011 survey report, senior management should be more actively involved in the decision-making processes with respect to the highest risk relationships. It is encouraging to see that senior management is engaging with compliance in these areas and not solely in relation to PEPs.
Eighty-four percent of respondents stated that high risk relationships are signed off by senior management. Regulators have issued a number of fines against organizations that have failed to undertake effective enhanced due diligence on relationships with PEPs. A particular area of concern has been the failure to evidence the PEP’s source of wealth / income.