PEP (politically exposed person)
Also called politically exposed person, senior foreign political figure.
Someone who holds or held a prominent public role, or a family member or close associate of one, treated as higher risk for corruption.
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What it is.
Senior officials have more chances to misuse public money or take bribes, so AML rules ask financial firms to identify PEPs and apply extra checks, such as confirming the source of funds and getting senior approval. Being a PEP is not wrongdoing. It is a risk flag.
US rules use the term senior foreign political figure, defined in 31 CFR 1010.605 to include current or former senior officials of a foreign government, senior officials of major foreign political parties and executives of foreign government-owned companies, plus their immediate family and close associates. Other countries have their own definitions.
Why it matters
PEP checks are part of onboarding and ongoing monitoring in any regulated money product. They usually rely on a screening vendor's data, and a match does not mean the customer is refused, so the product needs a review path rather than an automatic block.
In a product build
PEP screening is a vendor call at sign-up and on a schedule, plus a case view where compliance can review matches and record decisions.
Common mistakes.
- 01
Blocking every PEP automatically, which turns away legitimate customers.
- 02
Screening only at sign-up and missing people who become PEPs later.
- 03
Ignoring family members and close associates.
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Related terms.
- Sanctions screeningChecking customers, counterparties and payments against government sanctions lists before letting money move.
- KYC (know your customer)The checks a regulated business runs to confirm a customer is who they say they are and to judge the risk they pose.
- AML (anti-money laundering)The laws, checks and controls that stop criminals from moving or hiding illegal money through financial services.
- KYB (know your business)Checking a business customer: that it legally exists, who owns and controls it, and how risky it is.
