Know your customer: gathering information at onboarding, as well as on an ongoing basis is key to ensuring mitigation of risks around PEPs. As for any new customers, the opening of a new account should trigger risk-based checks that would identify a PEP and associated risk. However, a person may not be a PEP when they initially open their account, and become an elected official later. Thus ongoing screening is crucial.
Use a risk-based approach: If a client is a PEP, are they an international PEP, foreign, domestic? What risk do they present to your institution? Are they a retired senator with income from book deals, or a governor with ambitions of becoming prime minister? These are very different risk profiles with significantly different risk mitigation needs. Using a tested risk scoring system will help determine the appropriate level of controls.
Ongoing enhanced due diligence: Senior management should review high risk PEP accounts on a regular basis, the source of funds should be well established, and reviews should take place at a more frequent timing than for lower risk customers.
Remember that generally, PEPs are innocent until proven guilty: Although some PEPs have been convicted of crimes, most have not and will not be, because they are not engaged in criminal activity. Treating a high risk customer like a criminal will lead to a poor relationship for all parties involved, and likely an account closure, either by the bank or the customer. Explaining to the PEP why certain measures are being taken and why additional reviews and documentation are required will make them more amenable to these requests during the banking relationship. In some cultures, such requests are also considered rude, but explaining that these are international standards backed by domestic laws will help the individual feel less singled out and generally help them move forward with the banking relationship.