A related party is any individual or entity that has a direct or indirect relationship with a customer, company or organization that could influence, or be influenced by, the customer’s decisions or activities.

Related parties can include family members, close associates, shareholders, beneficial owners, subsidiaries, joint venture partners or entities under common ownership or control. These relationships may involve shared financial interests, governance ties or influence over management decisions. In higher-risk scenarios, such as when dealing with politically exposed persons (PEPs) or sanctioned individuals, related parties can also pose indirect exposure to financial crime risk.

Screening and monitoring related parties help financial institutions and regulated entities detect hidden risks, uncover complex ownership structures and comply with regulatory expectations. Failing to identify a high-risk related party can result in regulatory penalties, reputational damage and enforcement actions.

By incorporating related party analysis into Due Diligence (DD), Enhanced Due Diligence (EDD) and Ongoing Due Diligence (ODD) monitoring processes in their Anti-Money Laundering (AML) and Know Your Customer (KYC) programs, organizations can better assess interconnected risks, strengthen compliance controls and make more informed decisions about the business relationships they maintain.