There are a lot of different risks that can ultimately impact your BSA Program. The FFIEC’s BSA/AML Examination Manual outlines many such risks, one of those being politically exposed persons (PEPs). It states, while Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations do not define the term Politically Exposed Person (PEP)…the term PEP is commonly used in the financial industry to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as to their immediate family members and close associates.
PEPs are generally considered to have an overall higher risk of money laundering and terrorist financing, and you should have policies and procedures in place to mitigate those risks. While our BSA/AML regulation and guidance speak only to foreign PEPs,there are such things as domestic PEPs. We have seen some auditors and examiners expanding their scope to include domestic PEPs and criticizing financial institutions that don’t.
Kevin explains more in the video.