Sanction, PEP, SIP and RCA Checks
What we do
Sanction, PEP, SIP and RCA Checks.
What are Sanctions and PEPs?
Sanctions are used by governments across the world to restrict - or prohibit entirely - trade with people or organizations involved in criminal activities. OFAC is the Office of Foreign Assets Control, the US department that enforces economic and trade sanctions on countries, regimes and individuals engaged in activities that threaten US national security. OFAC publishes lists of individuals and companies owned or controlled by or acting for or on behalf of sanctioned countries and lists known individuals, groups, and entities involved in terrorism and trafficking.
A PEP - Politically Exposed Person - is someone whose prominent position in public life makes them more vulnerable to bribery and corruption, so it is important to assess the potential money laundering risks of entering into a customer relationship with them.
We answer your questions about Sanction, PEP, SIP and RCA Checks
Special Interest Persons (SIPs) are like PEPs but rather than having an increased risk of money laundering due to their public position, their risk is due to previous involvement, or suspected involvement, in crime. SIPs are people who have been convicted, arrested, or are undergoing investigation for serious financial or organized crime. Relatives and Close Associates (RCAs), sometimes referred to as ‘PEPs by association,’ are related to or have a close connection to a PEP. RCAs will include spouses, partners, family members including in-laws, as well as close friends, legal advisors, and business associates.
What is Sanction and PEP Screening? Lists of individuals, companies and other entities known to be or suspected of being engaged in anything illegal are issued by governments and financial authorities. Smartsearch’s OFAC Screening includes the SDN (Specially Designated Nationals List), Consolidated Sanctions List, the SSI (Sectoral Sanctions Identifications) List and the FSE (Foreign Sanctions Evaders) List. Sanction and PEP Screening is when businesses use these lists to screen individuals and businesses as part of their customer due diligence, compliance, and AML processes.
It is not illegal to do business with PEPs, SIPs or RCAs but knowing if an individual customer or stakeholder of a corporate client is a PEP will help you evaluate the risk of entering into a customer relationship with that individual or business, or halt proceedings altogether if a Sanction is found. It is important to screen for RCAs due to their relationship with someone in a position of authority and influence and their increased proximity to bribery, blackmail, and corruption.
Sanction lists are issued by different governments across the world, and while organizations like OFAC offer access to multiple sanctions lists, there is no one central list with all known Sanctions, PEPs, SIPs and RCAs, so keeping records up to date manually virtually impossible. The most reliable way to monitor Sanction lists is via electronic daily monitoring which can accesses multiple lists automatically. SmartSearch uses the Dow Jones Watchlist, which compiles data from more than 1,100 global PEP and Sanction lists and is updated daily.
How we help you
SmartSearch automatically performs Sanction, PEP, SIP and RCA Screening on every AML check you run and will automatically trigger Enhanced Due Diligence on any matches. Our innovative identity verification software filters out any false positives ensuring that you are notified if a true match is confirmed. SmartSearch’s ongoing monitoring service screens all checks against updated Sanction lists every night and alerts you to any changes.See it in action
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Frequently Asked Questions
For companies to maintain an effective risk assessment process, they must keep up-to-date with the constantly changing sanctions lists from organisations such as the UN and EU, including any new entries or expungement.
Financial sanctions are legal restrictions, put in place by the government to limit or prevent entirely the trading of individuals, companies or whole countries. They are usually levied against people or corporations who have committed financial crimes and fall into one of three categories: the freezing of assets, specific restrictions on financial markets and orders to cease all trading.
Used by financial authorities and governments all over the world, sanctions lists are databases which detail all the financial sanctions that are currently active in a specific state, country or continent. Some of the most well-known examples in the industry are the United Nations list, the UK Consolidated list and the EU Consolidated list.
The UK Consolidated List, which is the most widely used official list of financial sanctions in the UK, details three types of sanctions. These are the following: targeted asset freezes, financial restrictions and directions to cease all business. Every country is legally obliged to adhere to any financial sanctions levied against it if it’s enforced by the relevant authorities (for example, the Office of Financial Sanctions Implementation in the UK).
Every country is legally obliged to adhere to any financial sanctions levied against it if it’s enforced by the relevant authorities (for example, the Office of Financial Sanctions Implementation in the UK).
If you fail to include a Sanctions search when carrying out your AML checks, you could end up unwittingly entering into business with a client or customer who is currently sanctioned. In the UK, having dealings with any sanctioned business or individual is illegal if those dealings break the terms of the arrangement, except in very specific circumstances when a licence is required. If you’re found out, the consequences can include substantial fines or even a prison sentence, as it’s considered an AML compliance failure.
Regardless of the circumstances, when collaborating with others, you must not partner with anyone who is sanctioned by the government. This includes their close family members and associates.
A PEP (Politically Exposed Person) check should be carried out when onboarding new customers to ensure that they are not linked to any form of financial crime. For example, if a customer is a government official or a family member of a government official, it is important to conduct a PEP check as such individuals may be involved in bribery or corruption. Additionally, a PEP check should be performed whenever changes are made that could trigger the need for additional verification. This could include changes in address, profession, or banking details which may indicate potential money laundering activity.
Organisations can legally provide services/products or choose to work with PEPs; it is their responsibility, however, to manage the risk associated with doing so. Regulated industries, especially those in the finance sector, are required to conduct PEP checks and sanctions screening as part of their Customer Due Diligence (CDD) during onboarding. After conducting their checks, they may require further verification before making a decision on whether or not to accept the customer. CDD steps are just a part of the Know Your Customer process. Failing to abide by the nation's AML protocols can result in financial penalties and even jail time.
The time frame a person is deemed to be a PEP may vary depending on their particular function, with designation potentially lasting up to a year after their official departure. To guarantee adherence and surveillance, a thorough assessment must be conducted into the individual and their prior connections before PEP status is cleared from them.
When onboarding a Politically Exposed Person according to Regulation 35 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), you must: Secure approval from upper management for the business association. Ensure the origin of assets and funding is adequately investigated. Keep a close eye on the business relationship over time. Regulated businesses must ensure they meet KYC and AML regulations by performing PEPs and sanctions checks as part of their due diligence process.
RCA stands for Relatives and Close Associates, defined as any individuals or businesses that are either related to or closely associated with a PEP. It’s important to identify RCAs as they may be vulnerable to bribery, blackmail and corruption due to their relationship with someone in a position of authority and influence.