PEPs Are Using Smaller Banks, Where Their Presence Goes Unnoticed, Say AML Professionals

By Colby Adams and Brian Monroe

Foreign government officials with U.S. accounts are increasingly banking at smaller financial institutions that are vulnerable to financial abuse because of scant compliance resources, say analysts. Spurred by enhanced government scrutiny, screening for politically exposed persons, or PEPs, by larger banks has improved, said a bank examiner based on the East Coast. But community banks with overstretched compliance staff and a skeleton crew of anti-money laundering personnel have become destinations for the proceeds of corruption, said the examiner, who asked not to be named. Smaller institutions often don't recognize that they are banking PEPs, let alone corrupt foreign officials, the...