Politically Exposed Persons (PEPs): Who They Are and Why They Matter

A politically exposed person (PEP) is a person who is or has been entrusted with an important public function. PEPs are higher risk customers for financial institutions and designated non-financial businesses and professions (DNFBPs) because they have more opportunities than ordinary citizens to acquire assets through illegal means such as embezzlement and corruption and are therefore more likely to launder money. That said, being a PEP does not in itself equate to being a criminal or suggest a connection to abuse of the financial system.

After determining that a customer is a PEP, financial institutions and DNFBPs in most jurisdictions must apply additional AML/CFT measures to the business relationship. They are also responsible for performing ongoing due diligence tailored specifically to the client’s PEP status. These requirements are preventative in nature and should not be interpreted to mean that all PEPs are involved in criminal activity.

The term « politically exposed person » emerged in the late 1990s following the Abacha affair, a money laundering scandal in Nigeria that galvanized global efforts to prevent abuse of the financial system by public figures. policies. A similar term, often used interchangeably with PEP, is « Senior Foreign Political Figure ». Although there is no universal definition of the PEP category, most countries base their definition on the guidelines developed by the Financial Action Task Force (FATF). The FATF defines a PEP as follows:

• a senior official, current or former, of the executive, legislative, administrative, military or judicial branches of a government (elected or not)
• a senior official of a major political party
• a senior official of a government-owned commercial enterprise, either a company, firm or other entity formed by or for such person
• a member of the immediate family of such a person, ie spouse, parents, siblings, children, parents or siblings of the spouse.
• any person publicly known (or actually known by the relevant financial institution) to be a close personal or business associate.

Different types of PPE are generally considered to have different levels of risk. The categorizations below are not meant to be absolute, but can be helpful in thinking about which PEPs require the most thorough due diligence.

Through our monitoring platform, filter individuals based on our extensive global list of PEPs, sanctions and negative news.