Mark, who works for ACE Investment Advisers Ltd, has met with a potential new investment customer, Paul, who is a Politically Exposed Person (PEP). Before starting a business relationship with Paul, Mark must:

• A. Run a police check on Paul.
• B. Obtain written permission from the Department of Justice.
• C. Ask Paul to confirm in writing whether he is a PEP.
• D. Obtain ACE senior management approval to take Paul on as a client.

Answer: (D)

When a client is a Politically Exposed Person, the risk level is higher and firms apply a heightened due diligence and governance process. Before starting a business relationship, senior management must review and approve taking on a PEP to ensure appropriate controls, due diligence, and ongoing monitoring are in place. This step helps the firm assess and mitigate the elevated risk of bribery or corruption associated with PEPs.

Police checks are not the standard tool for this situation, as they don’t address the specific political exposure risk. Written permission from the Department of Justice isn’t a typical requirement for onboarding a client. Asking the individual to confirm in writing whether they are a PEP isn’t necessary when the firm uses reliable sources to identify PEP status and applies enhanced due diligence. The key safeguard is the senior management approval to onboard a PEP client.