As part of customer due diligence, financial institutions not only work to verify the identities of their customers but examine contextual information in order to establish whether those customers present a higher money laundering risk. That information might include the customer’s political status, references to them in negative news media, their personal or professional connections or their involvement in criminal activity. In certain circumstances, those high-risk customers are known as special interest persons (SIPs) or special interest entities (SIEs).
Special Interest Persons
After verifying the identities of their customers during customer due diligence, firms must perform certain important AML processes, including screening to see if the customer appears on official sanctions lists or if they are a politically exposed person (PEP) and vulnerable to money laundering as a result of their political status.
Special interest persons are similar to PEPs and sanctioned individuals because they present an elevated risk of money laundering — in their case, however, this risk is a result of their involvement, or suspected involvement, in crime. More specifically, SIPs are likely to be high-profile people who have been convicted of serious financial or organized crimes or are (or have been) the subject of an investigation into those types of crimes.
While they do not necessarily match the risk profile of PEPs or warrant inclusion on an official sanctions list compiled by governmental authorities, SIPs may be identified using intelligence gathered during those types of screening processes. Indeed, SIPs may be included on unofficial industry watchlists and should be considered high risk by the firms that do business with them. The types of activity which might warrant SIP status include:
- Financial crimes, such as money laundering, fraud, tax evasion or theft
- Terrorism or the financing of terrorism
- Trafficking in banned goods and services, such as narcotics or weapons, or human trafficking
- Corruption, bribery or extortion
- Organized crime
- War crimes
Like PEPs, firms doing business with SIPs should consider the issue of relatives and close associates (RCAs) when determining the level of risk they present. Although it is not illegal to do business with SIPs, firms that operate with a high level of internal AML control, or that are concerned about reputational risk, may need to know about this status when entering into a new customer relationship.
Special Interest Entities
Special interest entities pose the same AML challenge as SIPs. Firms should consider SIEs at higher risk of money laundering as a result of their involvement or suspected involvement in serious financial or organized crimes. Like SIPs, SIEs may be identified through adverse media checks or sanctions screening, or they may feature on certain industry watchlists.
How ComplyAdvantage Can Help
Identifying SIPs and SIEs requires the analysis of large amounts of data, including adverse media reports and sanctions lists. Completing that process manually involves significant administrative effort and includes the risk of human error.
ComplyAdvantage helps firms avoid these problems by implementing a smart AML solution, tailored to their unique risk environment. Our solution provides ongoing, automated screening and monitoring capabilities. We continually monitor sanctions lists and produce adverse media and PEP status reports as well. These tools help you identify SIPs and SIEs quickly and efficiently and, therefore, significantly enhance your compliance performance.