Case snapshot: professional or personal?
Max’s screen flickered with a familiar type of alert: a new private banking client had been flagged as a “close associate” of a Politically Exposed Person (PEP).
The client—a corporate lawyer with a clean record—appeared in a database match linking him to a senior government minister. When asked about the connection, the client was quick to clarify:
“Yes, we’ve worked on the same corporate boards. But that’s it. No family ties, no personal dealings. Purely professional.”
On the surface, the profile looked tidy. Stable income, transparent source of wealth, no adverse media. Yet the PEP flag complicated everything.
Max knew that not all PEP links carry equal risk. But regulators expect consistency. He raised the case with Ella and Marcus.
Ella spoke first:
“Professional ties can still imply exposure. The risk isn’t just about corruption—it’s about influence and access. Could this lawyer be a channel for someone else’s funds?”
Marcus added a dose of pragmatism:
“We don’t treat every PEP associate the same. The obligation is to assess the nature of the link and apply enhanced due diligence proportionately. But ignoring the connection isn’t an option.”
Together, they agreed: the client should not be automatically rejected, but additional checks were necessary—enhanced source of funds verification, ongoing monitoring, and periodic reviews beyond the standard cycle.
Regulatory lens:
Under Article 20 and 42 of the AMLR , institutions are required to apply enhanced due diligence (EDD) when dealing with:
- Politically Exposed Persons (domestic, foreign, and international),
- Family members of PEPs, and
- Close associates—a deliberately broad category that captures professional and business ties.
Key obligations include:
- Establishing the source of wealth and source of funds with greater scrutiny.
- Securing senior management approval before establishing or continuing such relationships.
- Applying enhanced ongoing monitoring to detect unusual transactions or patterns.
Final thought: grey zones require bright lines
PEP screening isn’t about blacklisting. A professional tie doesn’t always equal corruption risk, but it is a clear signal for enhanced scrutiny. The goal isn’t to label someone as ‘high risk’ forever. It’s to demonstrate to supervisors that you asked the right questions, applied the right checks, and kept the relationship under the right lens. The only way to navigate a grey zone of risk is by upholding bright lines of due diligence.
As compliance professionals, we must understand our role and responsibilities in the bigger picture.
