The client's spouse being elected as a member of government makes the spouse a Politically Exposed Person (PEP). According to global anti-money laundering standards, immediate family members of PEPs are also considered PEPs due to their relationship and potential influence. The fundamental and required first action for the compliance member is to update the client's profile to reflect this new risk status. This re-classification is crucial as it triggers the mandatory application of Enhanced Due Diligence (EDD), senior management approval for the relationship, and ongoing monitoring appropriate for a PEP relationship.

A. Informing the relationship manager is a necessary internal communication step, but it is secondary to the primary compliance action of officially updating the client's risk profile in the system.

B. Simply making a note and continuing as usual is non-compliant. The identification of a PEP relationship mandates a shift from standard Customer Due Diligence (CDD) to Enhanced Due Diligence (EDD).

C. The client's new PEP status is a change in their risk profile, not an inherently suspicious transaction or activity. Filing a suspicious transaction report (STR) is inappropriate for this situation.

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.

Recommendation 12 (Politically Exposed Persons): "Financial institutions should be required to take reasonable measures to determine whether a customer or a beneficial owner is a domestic PEP or a person who is or has been entrusted with a prominent function by an international organisation. In cases of a higher-risk business relationship with such persons

financial institutions should be required to apply the measures referred to in paragraphs (a)

(b) and (c)."

Interpretive Note to Recommendation 12: Defines "family members" to include spouses. This establishes that the client must be treated as a PEP

necessitating a change in their status and due diligence level. The first step is to record this status.

2. ACAMS. (2023). Certified Know Your Customer Associate (CKYCA) Study Guide. ACAMS.

Chapter 3: Elements of a KYC Program: This chapter details the requirement for ongoing monitoring and updating customer information. It specifies that when a customer's risk profile changes

such as becoming a PEP or related to one

the institution must update the customer's file and apply the appropriate level of due diligence (in this case

EDD). This directly supports updating the client's information as the primary action.