Why It Matters
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.
Who Qualifies as a PEP?
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.
Enhanced Due Diligence for PEPs
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
How to Screen for PEPs
- 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
Key Regulation
- 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