PEP (Politically Exposed Person)

PEPs are not automatically criminals, but their position gives them power and opportunity for corruption, bribery, and money laundering. History is full of examples: dictators hiding billions in foreign accounts, government officials receiving kickbacks, state enterprise executives embezzling funds. AML regulations worldwide require Enhanced Due Diligence (EDD) for PEPs — failing to identify a PEP is a common reason for enforcement action.

Domestic PEPs

Individuals holding prominent public functions in their home country:

• Heads of state and government
• Senior politicians (ministers, parliamentarians)
• Senior judicial officials (supreme court judges)
• Senior military officers
• Central bank board members
• State-owned enterprise directors and executives
• Senior officials of international organizations

Foreign PEPs

Same positions but in a foreign country — generally considered higher risk than domestic PEPs.

Family Members and Close Associates

PEP status extends to:

• Spouse or partner — equivalent to the PEP's risk level
• Children and their spouses — commonly used as nominees
• Parents — potential recipients of corrupt funds
• Close business associates — individuals with joint beneficial ownership or close business relationships

Former PEPs

A person doesn't stop being a risk when they leave office. Most frameworks require continued monitoring for at least 12–18 months after leaving a prominent function, and risk-based assessment thereafter.

When a PEP is identified, organizations must:

• Senior management approval — opening or continuing the relationship requires sign-off
• Source of wealth — determine how the PEP accumulated their wealth
• Source of funds — identify where specific transaction funds come from
• Enhanced ongoing monitoring — closer scrutiny of transactions and activity
• More frequent reviews — at least annual reassessment of risk
• Documentation — comprehensive records of EDD measures taken

• Commercial PEP databases — Dow Jones, Refinitiv World-Check, LexisNexis
• Government lists — national PEP registers (where available)
• Adverse media screening — news and media searches for corruption, scandals
• Ongoing monitoring — PEP status can change; continuous screening required
• Fuzzy matching — name variations, transliterations, aliases

• FATF Recommendation 12 — PEP requirements
• EU 6AMLD / AMLR — PEP definition and EDD obligations
• US BSA/AML — OFAC and FinCEN PEP guidance
• UK Money Laundering Regulations 2017 — UK PEP framework