Introduction
Under the relevant regulatory compliance laws in Nigeria, there is an obligation for financial institutions and designated non-financial professions and businesses to conduct checks to confirm if a client is a Politically Exposed Persons (PEPs). Nigeria’s regulatory landscape for PEPs is shaped by several laws and guidelines, including (but not limited to):
Money Laundering (Prohibition) Act
Economic and Financial Crimes Commission (EFCC) Act
Central Bank of Nigeria (CBN) and Securities Exchange Commission (SEC) guidelines
Nigeria Financial Intelligence Unit (NFIU) regulations
Under the relevant laws and regulations, a PEP falls under one of the following three categories - foreign PEPs, domestic PEPs, and international organization PEPs.
Foreign PEPs: These are individuals who hold or have held high-ranking positions in foreign countries. They may include heads of state, senior politicians, judicial or military officials, and other significant public figures from outside one's own country.
Domestic PEPs: Contrary to foreign PEPs, domestic PEPs are those who occupy or have occupied prominent public functions within one's own country. This might encompass positions like government ministers, senior judiciary members, or high-ranking officers in armed forces.
International Organisation PEPs: These refer to persons who hold or have held positions of influence within international organizations. Such roles could be at bodies like the United Nations, World Bank, or other major global institutions.
Relatives and Close Associates: While it is not a PEP category on its own, it is important to note that PEP checks also extend to the family members and close associates of politically exposed individuals. Relatives and associates of PEPs may also be subject to enhanced scrutiny due to their proximity to individuals in positions of power.
PEPs are individuals who hold prominent public positions, potentially posing a higher risk for involvement in bribery, corruption, and other illicit activities. In Nigeria, with its dynamic political landscape, the significance of thorough PEP checks cannot be overstated. This article provides a comprehensive guide on how to conduct PEP checks effectively in Nigeria.
Understanding Politically Exposed Persons (PEPs)
A PEP is typically someone who holds a public office or has been entrusted with a prominent public function. This includes, but is not limited to:
Senior government officials
Judicial or military officials
Senior executives of state-owned corporations
Important political party officials
Family members and close associates of the above
Importance of PEP Checks
PEP checks are a legal obligation, as it helps institutions manage risks associated with financial crimes such as money laundering and terrorism financing. The more senior the role a person holds in government, the more exposure that person has to the people and resources that can influence or corrupt the laws that govern financial actions. Those that are politically exposed are more likely to have the opportunity to manipulate and misuse the financial system for illicit gain and personal advantage. They are seen to represent a greater risk of corrupt practices such as bribery and fraud, which are often predicate crimes for money laundering.
By identifying and monitoring PEPs, organizations can implement enhanced due diligence measures, ensuring compliance with national and international regulations.
Steps to Conduct PEP Checks in Nigeria
1. Gather Customer Identity Information
Identify whether a customer or associated person is a PEP. This involves collecting comprehensive information during the onboarding process:
Full name
Date of birth
Nationality
Residential Address
National Identification Number
Biometric Verification Number
Occupation and role
Relationships and affiliations
2. Screening
Use specialized PEP screening databases and software. Regfyl has one of the most comprehensive tools available in Nigeria. It has a unique AI algorithm that powers our self-populating PEP list. The system generates an alert when it discovers a probable hit due to a matching name and other parameters.
3. Verification
Verify the accuracy of the information obtained from the screening exercise. This may involve:
Cross-referencing with government and regulatory bodies
Checking media sources for relevant news articles
Reviewing public records and official documents
4. Enhanced Due Diligence (EDD)
Once an individual has been identified as a PEP, there is an obligation to conduct Enhanced Due Diligence (EDD). These measures include:
Gathering extra verification documents such as financial statements, tax records.
Obtain additional information on the PEP’s source of wealth and funds
Conduct more frequent and thorough transaction monitoring
Require senior management approval for establishing or continuing business relationships
Developing a monitoring plan for ongoing client scrutiny.
5. Documentation
Maintaining comprehensive records of the PEP screening process is essential. This includes documenting the rationale behind decisions and any actions taken to mitigate identified risks.
6. Ongoing Monitoring
Regularly update and review PEP information. PEP status can change, so continuous monitoring is essential. Regfyl has a module that conducts ongoing monitoring on individuals to alert our clients when an individual’s status changes and they have now become a PEP. Please note that in Nigeria, once an individual is a PEP, the individual is always a PEP. There is no time limit on when a PEP stops becoming a PEP. This is because many PEPs retain significant influence even after leaving office.
Best Practices
Utilize advanced software like Regfyl for efficient screening and monitoring.
Regularly train staff on the importance of PEP checks and the latest regulatory requirements.
Conclusion
Conducting PEP checks in Nigeria is a critical component of AML compliance by financial institutions and designated non-financial professions and businesses, helping to mitigate risks associated with corruption and financial crime. By following structured steps and adhering to regulatory guidelines, organizations can effectively identify and manage PEP-related risks, ensuring robust compliance and contributing to the integrity of Nigeria’s financial system.
Want to see how Regfyl can actively enhance your organization's PEP identification process? Click here to schedule a demo and consult with our experts.
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