Definition
A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public function, such as a head of state, senior politician, senior judge or senior official of a state-owned enterprise, along with their family members and close associates. PEPs face heightened due diligence because their position can create bribery and corruption risk.
How it works
Firms screen customers and beneficial owners against PEP data at onboarding and periodically, identify the PEP's family members and close associates, and assess the actual risk of the relationship. Where enhanced measures apply, they typically include senior management approval, establishing source of wealth and source of funds, and enhanced ongoing monitoring.
Requirements by jurisdiction
US: BSA regulations do not define "PEP." A 2020 joint statement by FinCEN and the federal banking agencies says there is no supervisory expectation for unique, additional due diligence steps for PEPs; diligence should be commensurate with risk, and the agencies do not interpret the term to include US public officials. Enhanced scrutiny does apply to senior foreign political figures in private banking accounts (31 CFR 1010.620).
EU: The AMLR covers both foreign and domestic PEPs, including heads of regional and local authorities serving at least 50,000 inhabitants. Enhanced measures must continue for at least 12 months after a person leaves office (Article 45(2)), and longer if risk persists. These rules apply from 10 July 2027.
UK: The Money Laundering Regulations 2017 require EDD for PEPs, but since 10 January 2024 domestic PEPs and their family and close associates must be treated as lower risk than foreign PEPs in the absence of other risk factors. The FCA's finalised guidance FG25/3 updates its approach following its 2024 review of PEP treatment.
Common challenges
PEP lists differ between data vendors, definitions of "close associate" are subjective, and screening generates many low-risk domestic matches. Regulators have criticized firms for applying definitions broader than the law requires and for declining PEPs as a category rather than assessing risk.
How teams handle it in practice
Teams apply tiered PEP risk ratings based on role, jurisdiction and corruption indicators, document source-of-wealth findings, and set review frequencies by tier. Declassification after leaving office follows a documented risk assessment. Compliance platforms like Corsa can keep PEP status and related-party links current and adjust risk scores automatically.
How Corsa helps:
Dynamic Risk Assessment →
Frequently asked questions
Are domestic officials PEPs?
Under the EU AMLR and UK MLR, yes, though the UK requires domestic PEPs to be treated as lower risk absent other factors. US agencies do not interpret the term to include US public officials.
How long does someone remain a PEP?
In the EU, enhanced measures continue for at least 12 months after leaving office and longer if risk persists. The UK follows a similar risk-based approach.
Is being a PEP grounds for refusing a customer?
Not by itself. Regulators expect firms to assess the actual risk of each relationship rather than decline PEPs as a category.
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