Politically Exposed Person (PEP) and PEP Screening under UAE AML Regulations

Introduction

This tutorial provides an overview of Politically Exposed Persons (PEPs) and the necessary screening processes under UAE Anti-Money Laundering (AML) regulations. Understanding PEPs is crucial for financial institutions and businesses to mitigate the risks associated with these individuals. This guide will walk you through the classification of PEPs, the associated risks, and the steps for conducting due diligence effectively.

Step 1: Understand Who is a PEP

• A PEP is an individual entrusted with a prominent public function who has the power to influence government spending and policy.
• Common positions that qualify as PEPs include:
  • Head of Government
  • Senior Politician
  • Senior Government Official
  • Senior Official of a Political Party
  • Judicial and Military Officials (serving or retired)
  • Senior Executives of Government Corporations

Step 2: Recognize Associated PEPs

• Associated PEPs include:
  • Immediate family members (spouse, children)
  • Close business associates
• It is essential to treat these individuals with the same scrutiny as direct PEPs.

Step 3: Identify the Categories of PEPs

• PEPs are classified into three categories:
  • Domestic PEP: Individuals holding prominent public functions within the country.
  • Foreign PEP: Individuals in prominent positions in foreign governments.
  • Head of International Organizations: Leaders of international bodies, such as the United Nations.

Step 4: Assess Risk Levels

• Not all PEPs are automatically considered high-risk. Factors to assess include:
  • The individual must be a natural person, not an organization.
  • The individual must hold a prominent public function that enables influence over public funds and policymaking.
  • The status of a former PEP depends on their ongoing influence after leaving public office.

Step 5: Conduct Enhanced Due Diligence (EDD)

• Given the potential risks, consider all PEPs and Associated PEPs as high-risk. EDD should include:
  1. Verification of the PEP's identity and legitimacy of identity documents.
  2. Investigation into the source of funds and wealth for legitimacy.
  3. Clarification of the purpose of the business relationship.
  4. Verification of the PEP's professional or financial background.
  5. Monitoring for adverse media reports through reliable sources.
  6. Ensuring the first transaction payment is made from the PEP's own bank account.
  7. Securing approval from senior management for establishing the relationship.

Step 6: Implement Ongoing Monitoring

• Once a business relationship is established with a PEP, enhance the frequency of ongoing monitoring of transactions and relationships to detect any unusual activities.

Conclusion

Understanding and managing the risks associated with PEPs is essential for compliance with UAE AML regulations. By following these steps—identifying PEPs, conducting thorough due diligence, and implementing ongoing monitoring—you can significantly mitigate risks related to financial crime. For further insights on the AML/CFT framework, consider exploring more resources and training materials.