The Central Bank of Nigeria (CBN) issued Guidance Notes on Politically Exposed Persons in June 2023 (Guidance), building on its 2022 Regulation on Money Laundering/Terrorist Financing/Proliferation Financing.
Objectives and Applicability
The objective of this Guidance is to assist financial institutions (FIs) in the identification and management of risks associated with politically exposed persons (PEPs) in the course of business relationships.
The goal is to prevent the exploitation of the financial system for money laundering, terrorist financing, and proliferation financing (ML/TF/PF) by PEPs, who may be prone to corruption due to their influential positions.
The Guidance applies to FIs under the regulatory purview of the CBN.
Important to note
The CBN defines PEPs as individuals entrusted with prominent public functions, including Domestic PEPs (in Nigeria), Foreign PEPs (in other jurisdictions), and International Organization PEPs. Family members and close associates of these individuals are also included. Given the country’s corruption risks, domestic PEPs in Nigeria are generally classified as high-risk.
The guidance aligns with global Financial Action Task Force (FATF) standards, emphasizing a risk-based approach for FIs to assess and manage PEP-related risks, particularly through enhanced due diligence (EDD).
Financial institutions must enhance their customer due diligence, risk assessments, and monitoring of PEP customers to comply with these guidelines.
PEPs themselves are subject to increased scrutiny, which includes more detailed disclosures about their sources of wealth and more extensive monitoring of their transactions.
Steps for compliance
Customer identification and verification: Establish whether new or existing customers are PEPs, including their family members or associates.
Risk-based assessments: Assess PEP risk, factoring in country of origin, public function, business interests, and conflict of interest potential.
Enhanced due diligence (EDD): For high-risk and foreign PEPs, obtain senior management approval for any business relationship.
PEP screening and monitoring: Apply appropriate risk management systems during onboarding and periodic reviews.
Maintain a PEP register: Regularly update and review PEP relationships.
Enhanced monitoring: Understand and document the source of wealth and funds for high-risk PEPs.
Internal policies and staff training: Develop policies on handling PEP relationships and train staff to identify and assess PEP risks using real-life examples.
Recordkeeping and reporting: Keep records for at least five years and report suspicious transactions to the Nigerian Financial Intelligence Unit (NFIU).
PEPs themselves must disclose their status and be prepared for increased scrutiny, including providing detailed information about their financial activities.
How Regfyl Can Help
Regfyl’s AML and compliance platform is designed to simplify and enhance your institution's ability to comply with the CBN’s guidelines on managing PEP-related risks. Our solution offers:
Automated PEP identification and verification: We use real-time data to screen and identify PEPs, including their family members and close associates, ensuring that your customer database is always current.
Dynamic risk assessment: Our PEP feature automatically feeds into our risk rating feature that supports your automated risk rating of individuals.
PEP register management: With Regfyl, you can maintain an up-to-date PEP register, track changes in PEP relationships, and automate periodic reviews to ensure compliance.
Enhanced due diligence workflows: Streamline the EDD process by using our customizable workflows to obtain senior management approval, collect necessary documentation, and conduct ongoing monitoring.
Ongoing monitoring and reporting: Regfyl provides continuous monitoring of PEP transactions, helping you stay compliant with CBN and NFIU reporting requirements.
By integrating Regfyl, financial institutions can confidently navigate the complexities of PEP due diligence and ensure adherence to the latest regulatory standards, protecting themselves from financial crime and corruption risks.
Reach out to us to find out how we can support you with your PEP identification needs.
Book a 15 min discovery call today.
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