5 tips on how to choose the best AML PEP screening software

While regulated financial institutions are all required to have some form of politically exposed person (PEP) screening software, finding a solution that aligns with a business’ specific needs, risk profile, and diverse customer base can be daunting. Senior decision-makers must ensure their chosen software meets current demands and can scale with the organization. Despite each business’ unique challenges, the core attributes of effective PEP screening software remain consistent, with accurate and comprehensive data at the forefront. 

This article presents five key tips for firms when selecting the best AML PEP screening software for their business.

How to choose the best AML PEP screening software 

1. Ensure the PEP database is effectively maintained and updated 

Maintaining the accuracy and reliability of PEP screening processes hinges on the regular maintenance and updating of the database. This process not only involves the addition of new PEPs but also the timely removal of individuals who are deceased or no longer hold positions of public trust.

The best vendors can be differentiated from standard PEP screening solutions in this way, as they will keep track of national-level political events such as elections, cabinet appointments, reshuffles, and other significant changes. Once new PEPs are identified, their database should be updated promptly, ideally within 24 hours, to ensure the screening solution reflects the most current information. 

Without up-to-date data, firms can face several significant PEP challenges and risks:

• Increased false positives: Outdated information can cause a spike in false positives, where individuals no longer considered PEPs are incorrectly flagged, adding unnecessary workload for compliance teams.
• Compliance failures: Missed PEPs due to outdated data can result in non-compliance with regulatory standards, exposing the organization to potential legal penalties and reputational damage.
• Derisking: Incorrect or outdated PEP data can lead to financial institutions (FIs) terminating or restricting customer relationships based on incorrect information, harming customer relations and market opportunities.
• Operational inefficiencies: Manually verifying or correcting outdated information can cause significant delays and inefficiencies in compliance processes.
• Regulatory scrutiny: Up-to-date and accurate data is crucial for passing audits and regulatory inspections. Failing to maintain current data can attract increased scrutiny from regulators. To ensure regulatory compliance, firms should prioritize partnering with vendors that update their data promptly – e.g. Less than 12 hours after the UK general election on July 4, 2024, ComplyAdvantage had already updated its PEP data to reflect the results from 644 declared constituencies, including both re-elected and newly elected MPs. 

2. Assess the vendor’s data coverage

When choosing PEP screening software, assessing the vendor’s data coverage and quality is crucial to ensure comprehensive and thorough screening. The software should provide access to a wide-ranging dataset that includes PEP information from all the countries relevant to the organization’s operations. This extensive coverage is essential for identifying PEPs across various jurisdictions, which helps mitigate risks associated with financial crimes.

For example, poor data coverage might mean the software only includes PEP information from a limited number of countries, missing crucial jurisdictions where the organization operates. This can lead to significant compliance gaps and an increased risk of undetected financial crimes. On the other hand, good PEP data coverage looks like: 

• Detailed and up-to-date information: Providing analysts with current and accurate data from a comprehensive list of countries to ensure that all relevant PEPs are identified.
• Adverse media hits: Monitoring local, regional, and international news outlets in multiple languages to identify any adverse media hits related to PEP entities, contributing to a more effective risk assessment.
• Relatives and close associates (RCAs): Highlighting the entity’s RCAs to uncover any potential additional risks.
• Comprehensive historical data: Including data on former PEPs and maintaining records of their previous positions to help create a more thorough risk assessment.
• Accurate hierarchical information: Clear delineation of the level of authority and seniority held by a PEP to help analysts understand the potential influence and risk associated with the individual.
• High name-matching rates: Ensuring the software can accurately match names against PEP lists, accounting for variations in spelling and transliteration to reduce false positives and negatives.

In fact, RegTech Solutions (formerly SQA Consulting) has rated ComplyAdvantage’s PEP data coverage as ‘Excellent.’

“Our benchmarking shows ComplyAdvantage’s name-matching efficiency and effectiveness are market-leading, with name-matching rates of close to 100%. This is very good, almost exceptionally good, a little higher than we often see for exact name tests.”

RegTech Solutions

3. Evaluate the accuracy of the PEP screening process 

When assessing the accuracy of a PEP screening solution, businesses should consider the importance of robust data quality checks and the integration of both automated systems and human expertise. Leading AML vendors will implement a series of built-in quality checks to ensure the data is comprehensive and reliable and provides the best risk insights. This involves verifying data from multiple reputable sources and conducting thorough cross-references to identify and correct discrepancies. 

In addition to automated data collection and updates, human oversight is crucial. While automated systems can efficiently handle routine tasks such as data scraping and initial screenings, human experts are necessary for complex cases where automated tools might fall short. 

For instance, data strategists and researchers should intervene when the structure of a website changes or when PEPs can no longer be found on a page. A multi-eye review process, where multiple experts review each new data source, significantly reduces the risk of human error and ensures data integrity.

The Challenge of PEPs

A comprehensive and practical look at the PEP landscape and how firms should navigate it.

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4. Consider if domestic requirements are taken into account 

The effectiveness of PEP screening software depends on its alignment with the regulations and definitions of PEPs in each country in which a firm operates. These definitions vary significantly and impact how FIs conduct their screening processes.

For instance, the United Kingdom mandates that individuals should be flagged as PEPs for at least 12 months after they cease to hold a prominent public function. Furthermore, following the Financial Conduct Authority’s (FCA) updated guidance, UK firms must treat domestic PEPs as lower risk as a legal starting point. Meanwhile, Canada imposes a longer monitoring period of five years for its domestic PEPs, reflecting a more stringent approach to risk management. 

The diversity in PEP definitions extends beyond the duration of monitoring to include the scope of who qualifies as a PEP. While most countries encompass high-ranking government officials, their family members, and close associates, specific details can vary widely. Some jurisdictions, like the United States, only use the term “PEP” to refer to foreign individuals who are or have been entrusted with a prominent public function. 

This variance underscores the critical importance of PEP screening software that can flexibly adapt to different regulatory frameworks. Ideally, the software should automatically update and reclassify individuals as “former PEPs” once the required monitoring period ends, ensuring compliance with local laws and facilitating accurate risk assessments.

5. Check how the PEP screening software integrates with existing systems and other processes

For senior compliance decision-makers, ensuring new PEP screening software integrates smoothly with current data feeds, case management systems, and CRM platforms via robust API capabilities is essential. Efficient integration enhances team productivity, reduces the risk of errors, and supports faster decision-making processes. This empowers organizations to uphold regulatory standards effectively while safeguarding against operational fatigue, ultimately saving time by eliminating the need for multiple tools or databases.

However, a comprehensive solution should also provide the ability to screen for other critical factors, such as sanctions hits and adverse media, all within the same platform. By consolidating PEP screening, sanctions screening, and adverse media checks into a single platform alongside existing integration capabilities, the best software solutions enable firms to foster a cohesive information environment. This unified approach eliminates silos and allows compliance teams to access comprehensive insights promptly. 

Digital bank Holvi experienced these benefits firsthand when it partnered with ComplyAdvantage for PEPs, sanctions, and adverse media screening. Holvi’s Head of AML & AFC Operations, Valentina Butera was particularly impressed with the integration that led to a speedy set-up: 

“It was the smoothest implementation of tech that we have ever experienced. We did not experience any downtime or any interruption of business operations – not even for a second.”

Valentina Butera, Head of AML & AFC Operations at Holvi

Advanced PEP screening solutions

As transactions become more intricate and regulatory requirements continue to evolve, traditional PEP screening methods that rely heavily on manual processes will be unable to keep up. Luckily, advanced solutions on the market can use the latest technology to improve the PEP screening process.

With PEP Screening by ComplyAdvantage, firms can benefit from:

• Up-to-the-minute AI-assisted PEP data collection curated by experts.
• Tailored global PEP coverage to meet specific jurisdictional requirements.
• Continuous accuracy with frequent data refreshes.
• High precision in identifying PEPs through linguistic identity matching.
• Geographically tailored solutions with a highly configurable platform.
• Impeccable assurance through a 12-eye review process and an expert team’s thorough research.