JFSC 2024 POLITICALLY EXPOSED PERSON [PEP] – 5 EXAMINATION ISSUES and GOOD PRACTICE

The JFSC 2024 POLITICALLY EXPOSED PERSON [PEP] examination feedback Issued on 28 March 2025 highlighted problems and good practices in the following areas:-

1. Corporate governance
2. Systems and controls (including policies and procedures)
3. Identification measures
4. Ongoing monitoring
5. Staff training

READ THE HIGHLIGHTED ISSUES AND GOOD PRACTICE:-

1. CORPORATE GOVERNANCE - SUMMARY OF ISSUES IDENTIFIED   

• Inadequate consideration and assessment of PEP risk in the business risk assessment
• Inadequate oversight of the effectiveness of systems and controls because the compliance monitoring programme was outsourced and not adequately mapped to Jersey’s legal and regulatory requirements

GOOD PRACTICE

• The exposure to PEPs in a supervised person’s customer base is regularly monitored to ensure it remains aligned with risk appetite
• The business risk assessment clearly articulates a supervised person’s understanding of the risks associated with its PEP customers, along with commensurate mitigating measures
• Material issues relating to compliance monitoring (such as changes to content, testing frequency, results analysis and remediation matters) are adequately recorded in the board minutes with an appropriate level of documented discussion and challenge (if any), along with clearly articulated rationale for the decisions made

2. SYSTEMS AND CONTROLS (INCLUDING POLICIES AND PROCEDURES) - SUMMARY OF ISSUES IDENTIFIED     

• Policies and procedures relevant to PEPs contained inaccuracies and inconsistencies
• A failure to maintain the PEP register in line with requirements set out in policies and procedures

GOOD PRACTICE

• When changes are made to legal or regulatory requirements, a thorough review of all relevant policies, procedures and guidance is undertaken to ensure the changes are reflected promptly
• A PEP register recording the category of PEP and the associated risk classification (e.g. standard or high-risk domestic, high-risk foreign or high-risk prominent person) is maintained and periodically reviewed, with a record made of any declassification
• Relating to PEPs set out the specific steps to be undertaken and the matters to be considered and satisfied in order to declassify each category of PEP

3. IDENTIFICATION MEASURES - SUMMARY OF ISSUES IDENTIFIED 

• Failure to obtain/retain documentation establishing the rationale as to why a customer is entitled to benefit from a CDD exemption
• Failure to identify PEPs or PEP connections at onboarding
• Declassifying a PEP too early, contrary to the provisions of the Money Laundering Order

GOOD PRACTICE

• Taking steps to independently verify the date on which an individual ceased to perform a prominent public function

4. ONGOING MONITORING- SUMMARY OF ISSUES IDENTIFIED           

• Failure to periodically assess the effectiveness of screening arrangements used to identify PEPs and PEP connections
• Failure to undertake periodic reviews on PEP customers at the frequency specified in policies and procedures

GOOD PRACTICE

• Policies and procedures for ongoing monitoring clearly explain how to conduct effective open media searches (e.g. specifying key search terms for bribery and/or corruption) and determine what documentation needs to be retained
• Periodically assessing the appropriateness of the list of PEPs against which PEP screening is performed
• Evaluation of screening processes, including a review of:
• The appropriateness of the timing and frequency of screening
• The effectiveness of screening (the ability to create a match against the name of a PEP)
• The efficiency (the number of alerts per name screened and whether the level of false positives generated is manageable)
• The configuration of automated screening tool(s) used (e.g. fuzzy logic)
• The actual usage by staff (e.g. is it in line with procedures)
• The completeness of screening (e.g. whether the entire customer base is screened)

5. STAFF TRAINING - SUMMARY OF ISSUES IDENTIFIED           

• Training delivered to staff had not been updated, contained errors and included references to superseded legislation

GOOD PRACTICE

• Training includes a comprehensive overview of the risks associated with PEPs (e.g. bribery and corruption) and provides case studies relevant to the business to give context and support understanding
• Training is tailored to the employee’s role (e.g. those responsible for conducting periodic reviews are trained to identify factors which may indicate a customer has acquired PEP status)
• Training materials are reviewed regularly to ensure they contain up-to-date and accurate references to internal policies and procedures and legal and regulatory requirements

Read the full examination feedback.

https://www.jerseyfsc.org/media/8171/2024-politically-exposed-persons-examination-feedback.pdf