While conducting a review of a medium-risk customer, an analyst noted that a newly added authorized signatory is a foreign politically exposed person (PEP). Which is the appropriate next step for the analyst to take?
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A. B. C. D.D
When a medium-risk customer adds a foreign politically exposed person (PEP) as an authorized signatory, the appropriate next step for the analyst to take would be to categorize the authorized PEP signatory as high-risk (Option D).
A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function. PEPs are generally considered higher risk because they have greater potential to abuse their positions for personal gain, which could lead to money laundering or terrorist financing. Therefore, when a PEP is added as an authorized signatory, the risk profile of the customer changes, and the customer should be re-assessed as high-risk.
Option A, which suggests reviewing beneficial ownership to finalize the risk category of the customer, may be appropriate in some cases, but it does not specifically address the issue of the newly added authorized PEP signatory.
Option B, which suggests removing the PEP as the authorized signatory, may be an option, but it may not always be feasible or necessary. If the PEP is authorized to conduct legitimate business on behalf of the customer, removing them could disrupt the customer's operations and potentially result in reputational damage.
Option C, which suggests re-categorizing the customer as high-risk, is not specific enough. It is important to identify the source of the increased risk and take appropriate actions, such as categorizing the authorized PEP signatory as high-risk, as suggested in Option D.
In summary, when a medium-risk customer adds a foreign PEP as an authorized signatory, the appropriate next step for the analyst would be to categorize the authorized PEP signatory as high-risk (Option D) and take other appropriate risk mitigation measures, such as enhanced due diligence.