PEP & Sanctions Screening

Screen customers against 65+ sanctions lists and PEP databases to identify high-risk individuals, comply with international regulations, and prevent financial crime.

Sanctions Screening

What are Sanctions?

Sanctions are restrictive measures imposed by governments and international bodies to:

• Prevent terrorism financing
• Combat money laundering
• Enforce foreign policy
• Punish human rights violations
• Restrict trade with hostile nations

Sanctions Lists Covered (45 Sources)

International:

• UN Security Council Consolidated List - Global terrorism, proliferation
• INTERPOL Wanted Persons - International fugitives
• Egmont Group - Financial intelligence units

United States:

• OFAC SDN (Specially Designated Nationals) - Primary US sanctions list
• OFAC Consolidated - All OFAC programs combined
• FBI Most Wanted - Federal fugitives
• FinCEN 311 - Jurisdictions of primary money laundering concern

European Union:

• EU Consolidated List - All EU sanctions regimes
• CFSP (Common Foreign & Security Policy) - EU restrictive measures
• Country-specific - Individual member state lists (UK, France, Germany, etc.)

United Kingdom:

• UK HM Treasury Sanctions List - Post-Brexit UK sanctions
• UK OFSI (Office of Financial Sanctions Implementation)

Other Countries:

• Canada (OSFI, DFATD)
• Australia (DFAT)
• Japan (MOFA)
• Switzerland (SECO)
• Singapore (MAS)

1 Credit Per sanctions screening

How Sanctions Screening Works

Search Process:

const search = await fetch('/api/v3/aml/search', {
  method: 'POST',
  body: JSON.stringify({
    fullName: 'John Michael Smith',
    dateOfBirth: '1975-03-15',
    country: 'US',
    categories: ['sanctions'],
    matchThreshold: 90
  })
});

Match Result:

{
  "matches": [
    {
      "matchScore": 95,
      "source": "OFAC SDN",
      "name": "John Michael Smith",
      "aliases": ["J.M. Smith", "Johnny Smith"],
      "dateOfBirth": "1975-03-14", // Close match
      "nationality": "US",
      "dateAdded": "2018-06-20",
      "reason": "Drug trafficking",
      "program": "SDNTK (Narcotics)",
      "identifiers": {
        "sdnId": "12345",
        "passport": "US1234567"
      }
    }
  ]
}

Sanctions Hit Actions

If you find a sanctions match:

1. Freeze Assets - Immediately freeze all accounts and transactions
2. Block Transaction - Do not proceed with onboarding or transaction
3. File Report - Submit to regulatory authority (OFAC, OFSI, etc.)
4. Document - Maintain detailed records of screening and decision
5. Escalate - Involve legal/compliance team immediately

False Positive Management

Common Causes:

• Common names (e.g., "John Smith")
• Similar dates of birth
• Shared nationality

Investigation Steps:

1. Compare all available identifiers (passport, national ID, address)
2. Check aliases and spelling variations
3. Review date of birth carefully (day/month/year vs. month/day/year)
4. Examine nationality and city of birth
5. Look for additional context (occupation, associates)

Dismissal Process:

await fetch(`/api/v3/aml/searches/${searchId}/dismiss`, {
  method: 'POST',
  body: JSON.stringify({
    matchId: 'match_abc123',
    reason: 'Different person - DOB mismatch (wrong year), different passport number',
    reviewedBy: 'compliance_officer_id',
    evidence: ['passport_scan.pdf', 'birth_certificate.pdf']
  })
});

Always document why you dismissed a match - regulators will review your decision-making.

PEP Screening

What is a PEP?

Politically Exposed Person (PEP): Individual entrusted with prominent public functions.

Categories:

1. Domestic PEP - Holds prominent position in own country
2. Foreign PEP - Holds prominent position in another country
3. International Organization PEP - Holds position in international body (UN, EU, IMF)

Positions Typically Classified as PEP:

• Heads of state and government
• Senior politicians
• Senior government officials
• Judicial and military officials
• Senior executives of state-owned enterprises
• Important political party officials

Why Screen for PEPs?

PEPs have higher money laundering risk because:

• Access to public funds
• Influence over government contracts
• Potential for bribery and corruption
• Risk of asset misappropriation
• Close associates may exploit their position

PEP Databases (20 Sources)

Global PEP Databases:

• World-Check (Refinitiv)
• Dow Jones Risk & Compliance
• LexisNexis Bridger Insight
• ComplyAdvantage
• Acuris
• Sayari

Coverage:

• Current and former PEPs
• Relatives and Close Associates (RCAs)
• State-owned enterprise leadership
• International organisation officials

2 Credits Per PEP screening

PEP Risk Levels

Enhanced Due Diligence for PEPs

When you identify a PEP:

1. Source of Wealth - Document how they accumulated assets
2. Source of Funds - Verify origin of money in transaction
3. Purpose of Relationship - Why are they using your service?
4. Ongoing Monitoring - Continuous transaction monitoring required
5. Senior Management Approval - Require executive sign-off
6. Regular Reviews - Re-assess risk quarterly or annually

PEP DD Documentation:

{
  "pepInfo": {
    "position": "Minister of Finance",
    "country": "Example Country",
    "fromDate": "2018-01-01",
    "toDate": "present",
    "pepType": "foreign"
  },
  "enhancedDD": {
    "sourceOfWealth": "Inherited family business, government salary",
    "sourceOfFunds": "Salary from current position",
    "purposeOfRelationship": "Personal investment account",
    "approvedBy": "CEO",
    "riskAssessment": "medium",
    "monitoringFrequency": "quarterly"
  }
}

Relatives and Close Associates (RCA)

Family Members:

• Spouse or partner
• Children and their spouses
• Parents

Close Associates:

• Business partners
• Joint beneficial owners
• Close personal friends known to have joint beneficial ownership

RCA Screening:

await fetch('/api/v3/aml/search', {
  method: 'POST',
  body: JSON.stringify({
    fullName: 'Jane Smith',
    categories: ['pep'],
    includeRCA: true // Include relatives and close associates
  })
});

Former PEPs

De-PEP Period: Individual considered PEP for period after leaving office.

Guidelines:

• FATF: No specific timeframe, risk-based
• EU 4AMLD: At least 12 months
• Industry Practice: 3-5 years common
• High Risk: May never de-PEP (e.g., former head of state)

Risk-Based Approach:

• Low-risk former PEP: Junior official, left office 5+ years ago
• High-risk former PEP: Senior official, high-corruption country, recent departure

Combined PEP & Sanctions Screening

Perform both checks simultaneously:

const search = await fetch('/api/v3/aml/search', {
  method: 'POST',
  body: JSON.stringify({
    fullName: 'John Michael Smith',
    dateOfBirth: '1975-03-15',
    country: 'US',
    categories: ['sanctions', 'pep'], // Both categories
    matchThreshold: 85
  })
});

Results:

{
  "sanctionsHits": 0,
  "pepHits": 1,
  "matches": [
    {
      "category": "pep",
      "matchScore": 92,
      "name": "John M. Smith",
      "position": "Senator",
      "country": "US",
      "pepType": "domestic",
      "riskLevel": "medium"
    }
  ],
  "recommendation": "enhanced_due_diligence"
}

3 Credits Per combined PEP + sanctions screening

Matching Algorithms

Fuzzy Matching

Handle name variations and misspellings:

• Exact Match: "John Smith" = "John Smith"
• Phonetic Match: "Jon Smith" = "John Smith"
• Levenshtein Distance: "Jonh Smith" (typo) = "John Smith"
• Name Order: "Smith, John" = "John Smith"
• Initials: "J. Smith" = "John Smith"

Match Scores

Recommended Thresholds:

• Sanctions: 85% (err on side of caution)
• PEP: 70% (cast wider net, investigate matches)

Date of Birth Matching

Common Issues:

• Format differences (DD/MM/YYYY vs. MM/DD/YYYY)
• Off-by-one errors (birth at midnight)
• Incomplete data (only year available)

Matching Strategy:

• Exact: All components match
• Partial: Year matches, month/day close or missing
• Fuzzy: Within 1-2 days (typo tolerance)

Best Practices

1. Screen at onboarding - Before establishing business relationship
2. Screen on-going customers - When customer profile changes
3. Set appropriate thresholds - 85%+ for sanctions, 70%+ for PEP
4. Investigate all matches - Don't auto-dismiss high scores
5. Document decisions - Detailed notes on why you dismissed or confirmed
6. Train staff - Compliance team must understand sanctions/PEP risks
7. Update lists regularly - Sanctions lists change daily
8. Escalate to legal - When in doubt about sanctions match

Regulatory Penalties

Recent Fines for Sanctions Violations:

• HSBC: $1.9 billion (2012) - AML failures
• Standard Chartered: $1.1 billion (2019) - Sanctions violations
• Deutsche Bank: $630 million (2021) - AML deficiencies
• Danske Bank: €2 billion investigation (ongoing)

PEP Failures:

• Westpac: $1.3 billion (2020) - Failed to monitor PEP transactions
• CommBank: $700 million (2018) - PEP due diligence failures

Next Steps