Politically exposed person
PEPAlso called senior foreign political figure
A politically exposed person is someone entrusted with a prominent public function, such as a head of state, minister, senior judge, central bank board member or senior military officer. Their family members and known close associates are treated in a similar way. Because of the bribery and corruption risk, firms apply enhanced due diligence to them.
How it works
Firms screen customers and beneficial owners against PEP databases at onboarding and on an ongoing basis. When a match is confirmed, the firm assesses the risk, obtains senior management approval for the relationship, establishes the source of wealth and source of funds and monitors the account more closely. Being a PEP does not mean a person is suspected of wrongdoing.
UK rules now treat domestic PEPs as lower risk by default unless other risk factors exist. FCA guidance warns firms against refusing PEPs and their families accounts as a matter of course. In the US, regulators have said there is no separate PEP requirement in the CDD rule, though private banking accounts for senior foreign political figures need enhanced scrutiny.
The rules
Recommendation 12 requires risk management systems for PEPs, senior management approval, source of wealth and funds checks and enhanced ongoing monitoring.
Countries, which apply them to regulated firms through national lawRegulation 35 requires enhanced due diligence for PEPs, family and close associates, with domestic PEPs starting at lower risk since 10 January 2024.
Banks, insurers, payment firms, cryptoasset firms and other relevant personsSets FCA expectations for proportionate PEP treatment, including lower-risk domestic PEPs and flexibility over which senior manager approves relationships.
FCA-supervised firmsStates the CDD rule creates no separate PEP requirement and banks should apply risk-based due diligence to such customers.
Banks supervised by the Federal Reserve, FDIC, NCUA and OCCCommon questions
How long does someone stay a PEP?
Under UK rules, enhanced measures continue for at least 12 months after a person leaves office, or longer if the firm judges the risk requires it. FATF standards take a risk-based approach without a fixed end date.
Are family members of PEPs covered?
Yes. Family members include spouses or civil partners, children and their spouses or partners, and parents. Known close associates, such as business partners or joint owners of companies, are also covered. Under UK rules, their PEP-related measures stop when the PEP leaves office.
Is a domestic PEP treated differently?
In the UK, yes. Since 10 January 2024 the Money Laundering Regulations treat domestic PEPs and their families as lower risk than foreign PEPs unless other risk factors are present, so less enhanced due diligence applies.
Does being a PEP mean someone is high risk?
Not automatically. PEP status triggers enhanced due diligence because of the potential for corruption, but firms assess each relationship individually. FCA guidance says firms should not decline PEPs simply because of their status.
