What is a politically exposed person (PEP)?
A PEP flag is not an allegation. It records that an individual is or has been entrusted with a prominent public function, along with their family members and close associates, and that the relationship calls for enhanced measures rather than a refusal.
The concept comes from FATF Recommendations 12 and 22 and is transposed in the EU through the anti-money-laundering framework. It exists because prominent public functions can be abused for corruption and for laundering the proceeds. The most common misunderstanding, and one FATF states plainly, is that the requirements are preventive rather than criminal: identifying a customer as a PEP means applying additional controls, not refusing or reporting them.
What this workflow covers
SCOPE- Identify the status at onboarding, obtain senior management approval before the relationship opens, and evidence source of wealth and source of funds.
- The class is wider than ministers: heads of state, senior judges, central bank board members, senior military officers, senior executives of state-owned enterprises and members of political party governing bodies.
- Status does not lapse on the last day in office; a risk-based assessment continues, and twelve months of further consideration is a common floor.
- PEP screening here draws on 750,000+ records compiled from 134 public sources and runs in the same check as sanctions and criminal watchlists.
- A PEP flag on its own is not a sanctions hit and not grounds for a suspicious activity report.
Compliance glossary
TERMS- Prominent public function
- A senior role in government, the judiciary, the military, a central bank, a state-owned enterprise or a political party, as defined in the applicable AML rules.
- Source of wealth
- The origin of a customer's total assets, evidenced rather than asserted; a standard enhanced due diligence requirement for PEPs.
- International organisation PEP
- A person entrusted with a prominent function by an international organisation, such as a director or board member.
Authoritative references
SOURCES- 01FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22)
Financial Action Task Force
- 02Directive (EU) 2015/849 on the prevention of the use of the financial system for money laundering or terrorist financing
EUR-Lex, Official Journal of the European Union
- 03The FATF Recommendations
Financial Action Task Force
Frequently asked questions
Q&A- Do we have to refuse a PEP?
- No. FATF says the requirements are preventive and should not be read as meaning all PEPs are criminals. Apply enhanced due diligence and senior approval instead; FATF criticises firms that de-risk whole categories of customer to avoid the work.
- Are the spouse and the children PEPs too?
- Not in their own right, but the same enhanced measures extend to them, because assets are so often held through relatives and associates. Screening data normally records them as RCAs rather than as PEPs.
- How long does someone stay a PEP after leaving office?
- There is no automatic cut-off. FATF and the EU framework apply a risk-based assessment weighing the seniority of the former role, any continuing influence and the corruption risk of the country. Twelve months is a common floor, not a rule you can point at.
- Where is the official PEP list?
- There is not one. No government publishes a definitive global PEP register, so the data is compiled from official gazettes, parliamentary rosters, company registers and other public sources. Treat it as a sourced dataset whose coverage and freshness vary by country, not as a legal register.