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Applying Compliance in PEPs Negotiations

19 AUG 2019

19 AUG. 2019 / por Diego Silveira

Negotiations with PEPs (Politically Exposed Person) demands security and trust in an unprecedented level. 


Do you know what is a PEP? According to a resolution from the Brazilian Financial Activities Control Council, also known as COAF, those are people (generally public agents) that had worked or are still working in public position in either Brazil or foreign countries. Those who are “gifted” with the PEP abbreviation,Person Politically Exposed, are any individual family-related or representative who in the preceding five years (or currently) has had any job or relevant public functions.  


The FATF declared that in Canada PEPs are people who hold or have held important public functions in the country like heads of state, judicial officials, senior politicians and governments, senior military leaders and senior executives of state-owned corporations. 


In Brazil this is definitely a good title to have, given that we are known as a problematic country in the matter of corruption and politics. However, with some mechanisms, it is possible to control and understand deeper the business of the PEPs, especially if we apply the process to Know Your Client (KYC)  and the compliance correctly. 


Who is the PEP and are the risks of not identifying it


Before anything, it is necessary to recognize the politically exposed person from your organization, especially if it is private. By doing so, several rules should be observed because as we said above, the time-lapse of “observation” of a person of this type is five years, and it’s not just the individual itself, all people related should be in your radar.


Punishment is not a pleasant thing, so the best way is to prevent situations involving corruption, money laundering, and fraud and it’s really important that the companies seek to protect themselves, especially with the aid of compliance


After finding the PEP, an analysis needs to be done thoroughly, in order to make sure that this person is suitable and has a clean record. This analysis is independent of the company size, after all, crimes are crimes and the loss could be huge. 


With good practices of compliance it´s possible to check and monitor any involvement in fraud and corruption, participation in slave labor, fiscal and financial history, partnerships, financing of terrorist acts and, of course, the professional history. A good compliance team can check for international PEP standards and can easily identify any foreign who has this profile, also if the company or compliance team judges that it’s necessary more study about this person they should be allowed to search without interference.


The research is generally performed using software with high precision and a lot of times makes use of the Big Data and Artificial Intelligence platforms. If the PEP are in compliance with the standards of your company they should be allowed to negotiate or work in a position there, whatever that it, and should not bring preoccupations to the company, establishing a relationship of trust that will help not only to protect the finances and from possible punishments from the government but also the image of the company, which after all it´s one of the most important things, since it guarantees good functioning of the business.