What is a politically exposed person?
A Politically Exposed Person (PEP) is an individual who is or has been entrusted with a prominent public function. PEPs present a higher risk for involvement in bribery, corruption, and money laundering due to their position and influence. The FATF requires regulated businesses to identify PEPs and apply Enhanced Due Diligence.
Categories of PEPs
PEPs fall into a few categories, and each is treated slightly differently.
Foreign PEPs
Individuals entrusted with prominent public functions in a foreign country. These always require EDD under FATF standards.
Domestic PEPs
Individuals holding prominent public functions domestically. The risk-based approach applies - they require EDD only when assessed as higher risk.
International organisation PEPs
Senior officials of international organisations (UN, EU, World Bank, etc.).
Family members and close associates
PEP status extends to family members (spouse, children, parents) and known close associates, who may be used as proxies for the PEP's financial activities.
PEP screening in practice
FirmScreen's screening checks customers against PEP databases alongside sanctions lists, enabling law firms, accountants, and other non-financial businesses to identify PEP exposure as part of their standard CDD workflow.
Related terms
- EDD - the enhanced measures required for PEPs
- CDD - the process in which PEP checks are embedded
- Beneficial Owner - PEPs may be beneficial owners of entities