PEP

A politically exposed person, or PEP, is someone entrusted with a prominent public function, such as a senior government official, judge or state-owned company executive. PEP status is a risk category for financial-crime checks, not an allegation of wrongdoing.

In identity verification and anti-money-laundering compliance, screening for politically exposed persons helps organizations identify customers who may present a higher risk of bribery, corruption or misuse of public funds.

A PEP can be domestic, foreign or connected to an international organization. Rules and risk assessments may also cover the person's family members and known close associates.

Why PEP status matters

Financial institutions and other regulated businesses generally apply enhanced due diligence to higher-risk PEP relationships. Enhanced due diligence means taking additional, proportionate steps to understand the customer, the source of their wealth and funds, and the purpose of the relationship.

• PEP status does not mean a person has committed a crime or must be refused service.
• Organizations commonly check whether a customer is a PEP during onboarding and monitor relevant changes over time.
• Risk decisions should consider factors such as the person's role, country, transaction activity and credible adverse information.
• US and EU requirements differ in detail, but both use a risk-based approach rather than treating every PEP relationship identically.

Common examples

Examples can include heads of state or government, senior politicians, high-ranking military officers, senior judges, senior officials at state-owned enterprises, and senior leaders of international organizations. The exact categories and treatment of relatives and associates depend on the applicable law and an organization's risk controls.

Go deeper: PEP Screening: Who Counts, and for How Long and AML Screening: Customers, Payments and Transactions.