According to global anti-money laundering (AML) and counter-terrorist financing (CFT) standards, the identification of a Politically Exposed Person (PEP) represents a significant increase in risk. Standard procedure requires that establishing or continuing a business relationship with a PEP must receive approval from senior management. The KYC analyst's responsibility is to perform the due diligence, identify the risk, and escalate the finding. The management team holds the ultimate authority and accountability for assessing the specific risks and making the final decision to approve the continuation of the relationship (accept the risk) or deny it (exit the relationship).

A. onboarding team for the assessment of risk: The onboarding team is primarily responsible for initial client due diligence, not for high-level risk acceptance decisions discovered during a periodic review of an existing client.

C. head of the KYC team for approval or denial of risk: While the head of the KYC team is part of the escalation chain, the final approval authority for high-risk relationships like PEPs typically rests with senior management, not a department head.

D. privacy officer for the assessment of risk: The privacy officer's function is to oversee data protection and privacy compliance, not to assess or approve money laundering or corruption risks associated with clients.

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1. Financial Action Task Force (FATF). (2012-2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. FATF

Paris

France.

Reference: Recommendation 12

Politically Exposed Persons

page 15.

Quote/Paraphrase: The document states that financial institutions are required to "obtain senior management approval for establishing (or continuing

for existing customers) such business relationships." This directly supports that the decision-making authority for a newly identified PEP rests with senior management.

2. The Wolfsberg Group. (2017). Frequently Asked Questions (FAQs) on Politically Exposed Persons (PEPs).

Reference: FAQ 13

"What is meant by ‘senior management approval’?"

page 10.

Quote/Paraphrase: The guidance clarifies that senior management approval should be sought from a level of authority within the financial institution that can take a holistic view of the relationship. It specifies this is "a level above the usual business relationship approver" and is responsible for accepting the risks associated with the PEP relationship. This confirms the escalation to a "management team" rather than a department head or onboarding team.

3. Basel Committee on Banking Supervision. (2014). Sound management of risks related to money laundering and financing of terrorism.

Reference: Annex 2: Customer due diligence

Paragraph 27

page 23.

Quote/Paraphrase: The document specifies that for PEPs

banks "must obtain approval from senior management to commence or continue a business relationship." This reinforces the principle that ongoing relationships with clients who become PEPs require senior management sign-off.