Politically Exposed Persons Screening
Politically Exposed Persons Screening (PEPS)
The Risk of PEPs in Cross-Border Grantmaking
Every funder engaged in international philanthropy faces heightened risks when grantee leadership includes Politically Exposed Persons (PEPs). These are senior officials, political leaders, state enterprise executives, and their close associates whose public influence creates opportunities for corruption, diversion of funds, and reputational harm.
For U.S. foundations, this exposure includes the risk of penalties under the Foreign Corrupt Practices Act (FCPA), which can reach up to $2 million per violation, as well as heightened scrutiny under IRS rules requiring private foundations to exercise prudence in cross-border grantmaking. For funders across the global north, similar risks arise under frameworks such as the UK Bribery Act, EU Anti-Money Laundering Directives, Canada’s CRA rules, Switzerland’s financial regulations, and Australia’s ACNC standards. Beyond financial penalties, the reputational damage from even one association with corruption can undermine decades of charitable work, erode donor trust, and halt program delivery. Global authorities such as the Financial Action Task Force (FATF) and OECD highlight the need to identify and monitor PEPs precisely because of their heightened risk of corruption, financial crime, and diversion of funds. Beyond financial penalties, the reputational damage from even one association with corruption can undermine decades of charitable work, erode donor trust, and halt program delivery. Global authorities such as the Financial Action Task Force (FATF) and OECD highlight the need to identify and monitor PEPs precisely because of their heightened risk of corruption, financial crime, and diversion of funds.
These risks underscore the need for a due diligence partner who not only identifies PEPs but also upholds the stewardship responsibilities of philanthropic funders by delivering audit-ready reports for the grant file. Paragon meets this need with a specialized, analyst-led approach.
Why Paragon’s Expert-Driven Process Delivers Superior Results
Unlike automated screening tools that generate overwhelming false positives or general due diligence firms unfamiliar with philanthropic compliance nuances, Paragon provides a PEP screening service designed exclusively for cross-border philanthropy.
Our Unique Advantage:
- Human-verified accuracy: Our analysts not only bring cultural and jurisdictional expertise to every review, they also understand the stewardship expectations of foundations, donor-advised fund sponsors, and international charities.
- Grantee-sensitive approach: Paragon engages directly with grantees through structured, professional communication that clarifies results without damaging relationships. This ensures compliance while preserving the trust that underpins effective philanthropy.
- Audit-ready documentation: Paragon’s reporting is more than just data: it is strategic documentation. Each report is prepared to withstand IRS or CRA audits, meet board-level scrutiny, and satisfy global regulatory expectations. Funders walk away with audit-ready evidence that demonstrates prudence, protects against accusations of negligence, and reinforces their reputation for ethical international giving.
Enhanced Risk Safeguards
Our screening process combines CSI WatchDog Elite and Dow Jones RiskCenter with expert human verification to deliver definitive PEP determinations. In addition to identifying politically exposed individuals, our reviews surface Special Interest (SI) categories such as corruption, financial crime, organized crime, terrorism, and trafficking. These designations may apply to PEPs as well as other individuals connected to a grantee, and they serve as an early warning system for risks that extend beyond political exposure.
Global authorities, including the Financial Action Task Force (FATF) and the OECD, emphasize that corruption and financial crime are among the greatest threats to the integrity of international giving. By flagging SI categories alongside PEP status, Paragon equips funders with critical intelligence to protect charitable assets, preserve reputation, and safeguard donor trust before risks materialize.
Compliance Across Jurisdictions:
- United States: FCPA protection and IRS prudence standards
- European Union & UK: AML directive alignment and Charity Commission requirements
- Canada: CRA international activities compliance
- Australia: ACNC cross-border safeguards
- Switzerland: Financial market regulations
Who Benefits from PEP Screening
Paragon’s PEP Screening service supports a wide range of funders who face unique risks and compliance expectations in cross-border giving:
- Private Foundations: With international portfolios and the highest exposure to FCPA penalties, foundations benefit from audit-ready documentation that demonstrates prudence and protects against accusations of negligence.
- Private Foundations: With international portfolios and the highest exposure to FCPA penalties, foundations benefit from audit-ready documentation that demonstrates prudence and protects against accusations of negligence.
- Donor-Advised Fund Sponsors: Managing multiple grants across diverse regions, sponsors require scalable screening that maintains efficiency without sacrificing accuracy.
- Community Foundations: Foundations expanding donor interest into global causes require PEP screening to preserve local reputation while meeting growing international demand.
- Corporate CSR and ESG Programs: Companies funding global initiatives need to align philanthropic investments with compliance frameworks and brand integrity.
- International NGOs and Religious Organizations: Operating in high-risk environments, these organizations use PEP screening to protect against corruption networks and ensure donor trust.
- Family Offices: Family offices with bespoke grant programs across multiple countries need defensible due diligence to demonstrate stewardship to high-net-worth principals.
When to Use PEP Screening
PEP Screening provides practical value across diverse grantmaking contexts:
Lower-Risk Jurisdictions: Even in countries with strong governance frameworks, funders use PEP screening to meet regulatory expectations and demonstrate prudent stewardship to donors.
Higher-Risk Regions: In environments where corruption and political influence are prevalent, screening serves as an essential safeguard against political corruption networks and regulatory violations.
Cyclical Grantmaking: For funders that disburse grants annually or biannually, PEP screening ensures continued compliance as political landscapes and leadership positions shift over time.
Long-Standing Relationships: Verify ongoing compliance even as grantee leadership or political circumstances change.
Structured Process, Reliable Results
Phase 1: Secure Information Collection (Days 1-2): We initiate culturally sensitive outreach to grantees using structured questionnaires and professional communication. This ensures that names of board members, key staff, and other relevant individuals are collected directly from the source.
Phase 2: Database Screening & Analysis (Days 3-7): All names are screened against CSI WatchDog Elite and Dow Jones RiskCenter, supported by multi-language searches and transliteration checks. Our analysts review each potential match for accuracy, significance, and jurisdictional context.
Phase 3: Verification & Clarification (Days 5-10): When ambiguity remains, our team engages directly with grantees through structured questionnaires and culturally sensitive communication, with translation support for non-English communications. This step resolves false positives and provides clear confirmation of true matches.
Phase 4: Report Generation (Days 8-12): Analysts compile a comprehensive, audit-ready report that includes an executive summary, confirmed PEP or non-PEP determinations, Special Interest category alerts, and supporting evidence.
Deliverables Designed for Compliance Success
Each engagement concludes with a comprehensive, audit-ready report for the grant file, designed to withstand board, donor, and regulatory scrutiny. Every report follows procedures benchmarked against international standards, including FATF recommendations and recognized due diligence frameworks.
Reports include:
- Executive Summary: Clear PEP/non-PEP determinations for every individual screened.
- Evidence Documentation: Match details, source verification, and analyst assessments.
- Special Interest Alerts: Identification of corruption, financial crime, or other integrity risks for any positive PEP matches or Relatives and Close Associates (RCAs).
- Supporting Materials: Registry extracts, grantee correspondence, and verification documents.
All deliverables undergo quality control before release to ensure accuracy, objectivity, and audit-readiness. While Paragon does not provide legal, tax, or financial advice and does not certify compliance under specific statutes, our reports equip funders and their counsel with the intelligence needed to make informed, defensible decisions in cross-border philanthropy.
Complementary Due Diligence Services
PEP Screening provides critical protection on its own and also anchors a broader risk management strategy when combined with complementary services. Each of Paragon’s due diligence services generates an audit-ready report designed to integrate directly into a client’s compliance file, ensuring consistent documentation for board review, donor stewardship, and regulatory inquiries. Together, these modular tools work seamlessly to safeguard cross-border philanthropy:
- Sanctions and Watchlist Checks: Flag individuals and entities subject to OFAC and international sanctions, complementing PEP findings with legal prohibitions.
- Adverse Media Reviews: Surface reputational risks and allegations of misconduct not captured in sanctions or PEP databases.
- Financial Health and Controls Screen: Structured, document-based review that highlights observable financial and operational risks in grantees.
- Rapid Validation and Screening: Fast, document-based check (without grantee contact) that verifies legitimacy, screens leadership for sanctions, PEP exposure, and adverse media, and delivers a concise risk rating in 3–5 business days.
- Expenditure Responsibility (ER) and Equivalency Determination (ED): For U.S. donors, PEP Screening strengthens both processes by documenting leadership integrity, demonstrating prudence, and reducing the risk of accusations of negligence. Paragon facilitates ER directly and supports ED in partnership with specialized providers, ensuring both processes are thorough, efficient, and well-documented.
Proven Track Record
Paragon is trusted by leading U.S. foundations, donor-advised fund sponsors, and international NGOs. We have vetted thousands of grantees across more than 50 countries, including high-risk regions where our specialized expertise delivers the greatest value.
Selected Clients
Greater Houston Community Foundation
The Rockefeller Foundation
Chicago Community Trust
Zoetis Foundation
Greater Kansas City Community Foundation
Marin Community Foundation
Douglas B. Marshall, Jr. Family Foundation
Rodan + Fields Prescription for Change Foundation
Whittier Trust
Communities Foundation of Texas