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About Dealers in Precious, Metals and Stones

About Dealers in Precious, Metals and Stones

Initiate PEP Risk Assessment With AML-TRACE

Money laundering is on a constant rise because of different factors. Controlling it with effective steps is one of the most important steps any financial institution has to go through. Ask a few institutions or dealers in precious metals and stones, and evading the effects of money laundering would be counted as one of the most hyped concerns. People are getting attracted to easy money and therefore committing heinous crimes of laundering money. With financial breaches on the rise, the solutions are evolving as well. To eradicate money laundering cases, technology has designed the best anti-money laundering software that safeguards the funds. 

Are precious metals and stones dealers at risk?

Even when we hear about dealers in precious metals and stones, we know their financial standing is huge. The precious metals and stones business is known to be one of the most returning businesses. Since there are constant huge dealings, the inflow and outflow of financial transactions are also high. Money launderers find it to be an easy target. So, yes, precious metals and stones dealers are at high risk of getting involved in money laundering cases.  

Now, let's understand what PEP is. The term means Politically Exposed Persons. For anti-money laundering software to work as expected, it is important to prune out the most doubtful people. Ignoring money laundering cases not only affects you financially but also impacts your online reputation. Since money laundering cases can also be linked with terrorism and huge-level financial breach, it gets tough to avoid societal stains and standing. 

PEP- Politically Exposed Persons

Since money laundering is growing in almost every sector, it is important that we prune out the riskiest entries and keep them from getting in. Software like AML TRACE does a proper KYC that helps the authorities examine which customer holds a criminal background. The regulations on anti-corruption and anti-money laundering cases are based on the risk factor level. The risk-based approach has proven to be one of the best and most effective in avoiding any major transaction fraud. PEP is basically considered to be the list of people who have an advantage in political power and the back of influential people.  

What is PEP Risk Assessment?

Political Exposed Persons are basically high-risk customers with extraordinary opportunities to access assets through illegal means like money laundering or taking bribes. PEPs must be recognized and listed in the list of risky transactions in order to avoid any financial breach. Identifying and screening the defaulters or PEPs is termed PEP list screening. It is an important screening to stay compliant with the AML compliance programs. Since AML compliance aims to reduce money laundering cases, it is helpful if the PEP risk assessment is performed in the best possible way. This is relatable in most countries. The ones with power are more likely to get involved in such cases with the belief and confidence of getting out of the issue. On the other hand, financial institutions feel responsible for such activities, and to avoid it, they indulge in risk management and assessment. 

The need for PEP determination

People today are hidden behind financial frauds like bribery and corruption. They find it easy and beneficial just to snatch the money that other firms and institutions earn instead of earning their own. Of course, it is wrong, but what supersedes it is the fact that we don’t take the necessary steps to overcome the issue. Hospitals, financial institutions, precious metals, stone dealers, and even real estate businesses are trapped by such money breaches. PEP determination can be counted as one of the most important steps to avoiding money laundering cases. Listing out the most dangerous transactions can help control fraud in the future. As per recent reports, $1 trillion is processed in bribes every year and 2.6 trillion for corruption. Currently, these might look like mere digits, but these have some serious implications for financial institutions. PEP screening is the best way to evade financial fraud. 

The sanction screening process is performed by understanding the potential risks associated with the transactions. PEP screening is and should be done during the initial engagement of the customers. Since financial institutions need to work on a risk-based approach, managing PEP and their close associates is important. Due to country-specific legislation, there is no particular definition of PEP. Considering the fact that power doesn’t bring loyalty, every politically exposed person who is financially strong and has a higher position can be held accountable for any proven financial fraud. The PEP and close associates are involved in the detailed screening and reporting. 

Financial institutions, businesses, and enterprises find it important to steer clear of any probable risks. The PEPs evidently have more chances to acquire secured assets and money illegally. Over the period, they have been most accused of being involved in crimes like bribery, kickbacks, and other financial frauds. With the change in bribery and corruption legislation trends around the world, PEP risk assessment gets all the more important. 

PEP risk management framework

A variety of controls exist to manage PEP relationships. Some of the controls are:

  • New Customer Identification: Financial institutions or enterprises should be considered when clients come in for financial dealings. Once the customer is recognized as PEP, the institution needs to immediately take appropriate enhanced due diligence actions with the client. 
  • Existing Customer Identification: If an existing customer becomes a PEP, the institution should implement the risk-based approach and controls. Studying the existing customer base and recognizing the PEP list helps avoid any in-house financial breach. 
  • Customer Risk Assessment: Once the new or current customer is identified as a PEP, the institutions perform a risk assessment to determine the financial risk posed by the customer. According to the level of risk, appropriate monitoring and due diligence measures are taken. Some factors like business type, product, and geography should be considered to assess the risk. 
  • Approval: The financial institutions should seek approval from the senior management. They might have PEP relationships and financial crime risk within the AML control environment of the entity. AML software like AML-TRACE is subject to enhanced monitoring that instantly detects any unusual suspicious activity. 
  • Training: AML training is becoming imperative with the increasing number of money laundering cases. There should be a proper AML training program for the employees to prune out suspicious entries at the initial stage. 

AML TRACE is attracting all the attention with its tremendous advantages. Despite making all efforts to avoid suspicious transactions, using the software can make the process convenient for everyone. Whether you are dealers in precious metals and stones or own a real estate business, AML TRACE is equally helpful for everyone.