PEP
Politically Exposed Person
A PEP (politically exposed person) is someone who holds or has held a prominent public position, along with their relatives and close associates. These clients require enhanced due diligence.
What is PEP (Politically Exposed Person)?
A PEP is an individual entrusted with prominent public functions: heads of state and government, ministers, members of parliament, judges of supreme courts, senior military officers, and executives of state-owned companies and central banks. The concept is defined in FATF Recommendation 12 and carried into national AML/CFT legislation, so the exact list may differ between jurisdictions.
## How screening works
At onboarding, the payment company or operator screens the client against PEP lists, which are usually compiled from open sources and commercial databases. PEP status also extends to family members and close associates. Enhanced due diligence (EDD) applies to these clients: the source of funds and source of wealth are requested, and the decision to establish or continue the relationship is agreed with the compliance department.
## Where it comes up in high-risk verticals
In fintech and payments, PEP checks are part of KYC and transaction monitoring, especially for large transfers and cross-border operations. In crypto, PEP status matters for VASPs and exchanges, where funds can move quickly through multiple wallets. In online casinos, screening is triggered by high stakes and large deposits, and without it the operator risks claims related to money laundering.
## Common mistakes
Typical failures include screening only at registration without re-screening, ignoring relatives and beneficial owners, and making a formal source-of-funds request without supporting documents. Another mistake is assuming a PEP is automatically rejected: PEP status raises verification requirements but does not prohibit working with the client.
FAQ
Is it prohibited to work with a PEP?
No. PEP status does not prohibit a business relationship, but it requires enhanced due diligence and ongoing monitoring. The decision to proceed is based on a risk assessment and legal requirements.
Who is considered a PEP's family member?
Usually this includes a spouse, children, parents, and close business partners. The exact scope is defined by national law and the company's internal policies.
How long does a person remain a PEP after leaving office?
The duration depends on the jurisdiction and internal rules, and the status often lasts for some time after resignation. Check the requirements of the specific regulator.