As I was writing my previous blog post, a little thought tweaked at the corner of my mind. It’s not terribly well-formed (either the thought, or indeed the mind), but here goes. I was thinking about PEPs and monitoring, and of course one of the elements that you check when monitoring a relationship is the current standing of the jurisdictions concerned. So a client from Syria, let’s say, might have been perfectly ordinary a decade ago but requires much closer scrutiny today, whereas one from Bulgaria, for instance, would have been a much more risky proposition before his country joined the EU in 2007. (Simplistic examples, to be sure, but you get the point.)
But what if you are a regulated firm actually in a high risk jurisdiction? Do you recognise your own high risk status and allow accordingly? If you are shading your domestic PEPs, as we were discussing earlier in the week, does the high risk nature of your whole jurisdiction (as seen by the rest of the world) influence you into labelling them all high risk? Do MLROs in high risk jurisdictions start all their risk assessments from a higher point? Or is there a (perhaps natural) tendency to think that others are exaggerating your high risk status, or that your own understanding of how things work in your own country reduces the risk for you?
I did note that the new Isle of Man legislation (which is how we got onto this domestic PEP jag in the first place) talks not of “high risk” domestic PEPs, but of “higher risk” ones, which allows for a ranking rather than a strict delineation. (You can say that all of your domestic PEPs are high risk, but it would be illogical to say that they are all higher risk – for some to be higher, others must be lower. I bet you’re glad you started reading this. Never mind: it’s nearly elevenses and you can have a reviving Jaffa Cake.)