PEPs, sanctions, NCCTs: what do they mean, what should they mean to regulated financial firms?

The latest version of the draft Joint Money Laundering Steering Group (JMLSG) Guidance Notes [1] incorporates for the first time not only money laundering but also terrorist financing in its title.The onus on firms to identify politically exposed persons (PEPs) and sanctioned persons/entities is clearly greater than ever. Backed by the UK Financial Services Authority requirement that authorised persons obtain and heed UK government and Financial Action Task Force (FATF) findings [2], the need to conduct enhanced due diligence (EDD) on PEPs (FATF Recommendation 6), with special attention to PEPs from countries that do not adequately apply the FATF Recommendations, is unavoidable. Monitoring PEPs, sanctions lists and those from the FATF Non Cooperative Countries and Territories (NCCTs) is an onerous and time-consuming task. There is a danger that firms may either be overwhelmed by its magnitude and give up or else regard methodologies put in place some time ago as still sufficient.