Risk categorization of individual persons/organizations

Methodology

The risk model created by PEPData was developed to be flexible, maintaining a degree of simplicity that allows it to be easily understood. This is composed of 3 distinct risk categories: low, medium and high. Each individual person or organization falls into the various risk categories taking into account the following criteria:

Individual persons

• Existence of suspicion

  • If you have a suspicion regarding the documentation presented or the individual person himself

• Sanctioned countries

  • If the individual person is of birth, nationality or residence in internationally sanctioned countries

• Tax heavens

  • If the individual is resident in a country considered to have a "privileged taxation regime"

• Classification as an identifiable person

• Classification as a sanctioned person

Organizations

• Existence of suspicion

  • If you have a suspicion regarding the documentation presented or the organization itself

• Sanctioned countries

  • If the country of incorporation, the country of address of the registered office or the country(ies) of business origin is(are) sanctioned

• Tax heavens

  • If the country of incorporation, the country of address of the registered office or the country(ies) of business origin is(are) considered to have a "privileged taxation regime" by the Portuguese law

• Other geographic criteria

  • If it is not headquartered in your organization's country

• Classification of economic activity

  • If any of the legal entity's NACE codes is considered to be a high risk

• Classification as a sanctioned person

• Customer representation

  • If any of the representatives are classified as having a medium or high risk level

• Holders of Administration/Management organs or equivalent

  • If any of the holders are classified as having a medium or high risk level

• Holders of shares/voting rights

  • If any of the holders are classified as having a medium or high risk level

• Beneficial owners

  • If any of the beneficial owners are classified as having a medium or high risk level

Risk factor adjustment based on the percentage of capital or voting rights

The propagation of risk from a related questionnaire is adjusted according to its percentage of capital/voting rights in the organization. For example:

• Organization A

  • Beneficial owner A (20% capital share, 30% voting rights) - Risk 1

  • Beneficial owner B (80% capital share, 70% voting rights) - Risk 3

To determine the percentage to be used for each related questionnaire, the maximum between the capital share percentage and voting rights percentage is calculated. If this percentage exceeds 50%, the questionnaire's risk will be fully counted.

In the example above, the final risk for the section will be 3, meaning the maximum between 0.3 (30% of the risk of Beneficial owner A) and 3 (the full risk of Beneficial owner B).

Cyclical relationships may exist between organizations through holders of capital shares/voting rights.

Participants in cyclical relationships are identified in the questionnaire with the symbol () and their risk value does not influence the risk of the organization under analysis.

Note: our risk calculation algorithm is under constant development. If you have any proposal for improvement or specificity in your professional area, do not hesitate to contact us.