Challenges of identifying and monitoring politically exposed persons (PEPs) in Latin America

Abstract

Purpose

The purpose of this paper is to analyze politically exposed persons (PEPs) according to Financial Action Task Force (FATF) Recommendations and assess the identification process followed by financial institutions to create a harmonized regional model for PEPs identification in Latin America.

Design/methodology/approach

FATF Recommendation No.12 states that financial institutions should identify PEPs. To do so, the latter uses either an internal identification system or an external database. Within this framework, the purpose of the research work is to determine whether the procedure adopted by the regulated entities complies with the requirements of the regulations. Both analytical and interpretative methods have been used for this purpose.

Findings

In accordance with FATF Recommendation No.12, national and foreign PEPs, as well as officials of relevant international organizations, close relatives and closest associates must be identified. This wide range of people forms an hybrid type of PEPs. Because of the lack of a harmonized identification policy, it is likely that some people who meet these conditions may not be spotted.

Originality/value

PEPs control success relies on accurate and prompt identification. Therefore, it is crucial to create an inter-state model of harmonized identification at a regional level in Latin America. It includes not only the participation of the obligated subjects but also the sector entities associated to the concerned economic activity.

Citation

Clavijo Suntura, J.H., Rosero Rosero, P.M. and Aragón Cuamacás, G.E. (2021), "Challenges of identifying and monitoring politically exposed persons (PEPs) in Latin America", Journal of Money Laundering Control, Vol. 24 No. 2, pp. 268-277. https://doi.org/10.1108/JMLC-05-2020-0061