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EU elections affecting PEPs & how to avoid AML penalties

RegLab Summer Reads

Summary

In this series of summer reads, we cover an update or relevant case related to AML every month in summer. This edition, we focus on the impact of the European Parliament elections on the identification of Politically Exposed Persons (PEPs) and the importance of KYC and preventing fines and reputational damage.

PEP checks are crucial after the EU elections

The European Parliament elections created a lot of new Politically Exposed Persons (PEPs). Therefore, it is now extra important to pay attention to the PEP check in client investigations. If a client is identified as a PEP, an enhanced investigation must be conducted.   

Additionally, continuous monitoring of existing relationships is essential. Use reliable sources to determine the PEP status of your clients and keep in mind that the list of PEPs changes after elections. This approach ensures integrity and compliance with AML regulations.   

Did you already know that the RegLab application also allows you to automatically screen for PEPs? 

 

 

Ignoring AML requirements leads to high costs

After all, this could lead to hefty penalties and reputational damage

 

The importance of KYC 

All businesses, regardless of industry, are at risk of fraud. You may be unknowingly involved in money laundering activities when your services are used to deposit, transfer or withdraw money.   

With this reason, you are not only responsible for understanding the AML/KYC obligations, but also for implementing the right procedures to prevent money laundering. 

 

Not complying with AML is expensive 

KYC is crucial not only to combat money laundering, but also to protect one's own business interests. After all, not complying with AML can lead to hefty penalties and reputational damage. This applies not only to financial institutions, but also to lawyers, notaries, tax advisers and accountants. 

In 2022, institutions worldwide received nearly USD 5 billion in fines for violating sanctions and deficiencies in KYC and AML processes. This trend continued in 2023. 

Unfortunately, it does not stop there. The publication of the penalty could lead to reputational damage, which could be even more damaging than the fines themselves. 

We see that until now many lawyers have only received a warning from the regulator when they are incompletely compliant with AML, but take note. This is about to change. In several countries, such as the Netherlands, Belgium and the UK, penalties are now being increased for law firms that are incompletely AML compliant. 

 

How to avoid AML fines 

Failure to implement AML correctly can result in penalties. This is imposed for every offence. The most common AML deficiencies that result in a penalty are: 

  • Inadequate identification and verification of client identity.  

  • Failure to conduct thorough risk assessment of clients and transactions.  

  • Failure to monitor high-risk clients.  

  • Failure to have an AML policy or to comply with it.  

  • Inadequate training of employees on AML obligations. 

Make AML a dynamic part of your work process, ensuring that your AML records stay up to date. It helps if you use software such as RegLab that performs automatic screenings for sanction lists, watchlists, PEPs and adverse media. It is also important to train your team regularly on AML requirements. 

 

With sunny regards, 

Team RegLab 

 

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