Politically Exposed Person (PEP)

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Also known as: PEP

A politically exposed person (PEP) is someone who holds, or has recently held, a prominent public position, such as a senior politician, judge, senior military officer or head of a state-owned company, together with their close family members and associates.

Because of their positions, PEPs may be more exposed to bribery and corruption, and their status could be used to launder money. Anti-money laundering rules therefore require banks and other regulated businesses to apply enhanced due diligence to PEPs.

Enhanced checks typically include obtaining senior management approval to accept the customer, establishing the source of their wealth and funds, and monitoring the relationship more closely.

For example, when a government minister opens a bank account, the bank must identify them as a PEP, ask about the source of their wealth and keep the account under closer review.

Being a PEP does not mean someone is suspected of wrongdoing; it means the risk needs to be managed. Rules differ on how long a person remains a PEP after leaving office and whether domestic and foreign PEPs are treated differently. Standards are based on Financial Action Task Force recommendations.

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