How to Audit Controls to Manage Financial Crime Compliance (FCC) Risks Associated with Politically Exposed Persons

Author: Alexandra Rosi, CAMS-Audit

While risks associated with politically exposed persons (PEPs) are important to mitigate across all financial institutions, this paper will focus on auditing the financial crime compliance (FCC) risks associated with foreign PEPs in large U.S. financial institutions. Whether your financial institution has already defined a process and implemented controls for PEP customers or your financial institution is one that is looking to strengthen their anti-money laundering (AML) program by establishing processes for identifying and managing the risk of PEPs, it is vital to your AML program to ensure the appropriate controls are in place to deter, detect and report suspicious activity inherently associated with these customers. Internal audit plays an important role as the third line of defense in testing and evaluating the Bank Secrecy Act/anti-money laundering (BSA/AML) controls currently in place as well as identify gaps in controls not in place. This paper aims to provide solutions to internal auditors who audit controls to manage the financial crime and counter terrorism risks associated with PEPs.

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