What is a Politically Exposed Person (PEP)?

The term “PEP” (or Politically Exposed Person) was coined in the 1990s, and essentially refers to anyone in a prominent position in public life, whether that be in the government, in law enforcement or in publicly-owned corporations.

It’s crucial to identify and pay special attention to PEPs during your AML checks, as they’re generally considered to be more susceptible to bribery and other financial crimes due to their high-profile roles, wealth and influence. This means they present a greater money laundering risk to your firm; if you do decide to go into business with a PEP, you’ll need to carry out Enhanced Due Diligence, and they’ll require more ongoing monitoring than other potential clients or customers.

Examples of a Politically Exposed Person (PEP)

There’s no universally observed definition for PEPs, but most organisations use guidance set out by the Financial Action Task Force. The FATF defines PEPs as ‘individuals who are or have been entrusted domestically with prominent public functions.’ 

Some examples of positions which qualify as PEPs are as follows:

• Senior executives in government-owned businesses, like the BBC.
• Government officials.
• Leaders of political parties.
• Senior members of religious groups.
• High-ranking military officials.
• Consuls and ambassadors.
• Members of the House of Lords.
• Members of parliament.
• Close friends, immediate family members or non-familial associates of the above.

PEPs can be found across a wide range of roles and organisations, both current and former. For instance, those serving in legislative bodies, such as Members of Parliament or the House of Lords, are considered PEPs due to their legislative influence. Senior figures in executive bodies—from heads of state right down to assistant ministers—also fall under this category. Diplomatic roles, including ambassadors and chargés d’affaires, are always flagged as PEPs given their international reach and authority.

Within the judiciary, individuals working at the highest levels, such as supreme or constitutional court judges, are included due to the sensitive nature of their positions. Additionally, PEP status isn’t limited to those currently holding office; former senior executives or board members of state-owned enterprises may still be considered PEPs if they retain influence over public matters.

It’s also important to remember that the net extends beyond the individual themselves: immediate family members, close friends, and even associates who wield influence on behalf of a PEP can be classified as such. This broad scope ensures that potential risks tied to positions of power and influence are thoroughly addressed during your AML checks.

While some organisations might filter these roles into different categories to determine the level of risk, SmartSearch treats every match with equal importance. Our cutting-edge automated PEP screening software can even identify Politically Exposed Persons who are logged under nicknames, aliases and abbreviations, so a thorough search is guaranteed.

Challenges in Identifying PEPs

Pinning down exactly who qualifies as a PEP isn’t a one-and-done task—it’s a moving target. The list of individuals considered PEPs can shift rapidly as people step into new positions of influence, retire, or change jurisdictions. Even the guidelines, such as those issued by the FATF, are periodically updated and interpreted differently across countries.

Adding to the complexity, family structures and close associations can change just as quickly—imagine a new marriage, business partnership, or even a falling-out. Suddenly, the range of people who need to be screened expands or contracts. Organizations must stay vigilant, continually refreshing their data and procedures to ensure that no new risks slip under the radar.

Staying ahead requires both diligent monitoring and up-to-date technology. Outdated records or infrequent checks mean you could easily miss new PEPs, especially with the pace of political and regulatory change on the international stage.

Why the List of Potential PEPs is Always Evolving

The landscape of Politically Exposed Persons is never static. Individuals are frequently promoted, retire, or transfer to fresh positions—meaning new names are added while others drop off. Family ties and close associates can shift, too, as personal relationships change over time.

On top of this, the Financial Action Task Force (FATF) routinely updates its guidance, and different countries may tweak their own regulations accordingly. As governments evolve, organisations restructure, and global events unfold, who qualifies as a PEP can expand or contract. This constant evolution makes it essential to use robust, up-to-date screening tools to ensure every relevant risk factor is detected during your AML process.

How do deal with PEPs

Identifying PEPs amongst your potential clients and customers is half the battle – it’s crucial that you’re able to spot PEPs when carrying out your AML checks, as they drastically increase the money laundering risk to your business.

Once you’ve identified a PEP you’ll need to investigate further, building a solid profile around their public role, and establishing how they might make your company more vulnerable. These details will allow you to make an informed decision about whether or not to have dealings with them.

Financial Conduct Authority's (FCA) guidance on the dealing of Politically Exposed Persons is highlighted in FG 17/6. These guidelines provide definitions of such individuals while also advising regulations on their treatment, including recommendations on how to avoid unnecessary due diligence monitoring. 

If you do decide to work with a PEP, they will require more intensive ongoing monitoring than a normal client or customer. As well as Enhanced Due Diligence, your ongoing monitoring process should involve measures like keeping a close eye on all future transactions, frequently reviewing their PEP status, and setting clear business boundaries.

How long is a PEP considered a PEP?

‘Recommendation 12’ of FATF guidance states that ‘the handling of a client who is no longer entrusted with a prominent public function should be based on an assessment of risk and not on prescribed time limits.’

In other words, this is usually subject to interpretation. Anyone who has been a PEP in the past might still qualify as a PEP years after they leave the high-profile position they occupied if they’re still relatively well-known within their field. Once a past or present PEP has been identified, deciding how to proceed is at your discretion, but vigilant ongoing monitoring will enable you to manage the risks involved.

What is a PEFP?

The FATF guidance makes the specific distinction between PEPs in the UK and PEPs overseas, who must also be considered during your AML checks. A PEFP, or Politically Exposed Foreign Person, is defined by the FATF as any ‘individuals who are or have been entrusted with prominent public functions by a foreign country.’

SmartSearch operates on a global scale, and our sophisticated screening software enables us to identify PEFPs just as easily as PEPs, so you can be sure we’ll never miss a beat.

How can SmartSearch help?

Our complete AML solution is a comprehensive platform that can easily identify PEPs and PEFPs, using unparalleled resources like the Dow Jones WatchList, which is updated daily.

Carry out all your AML checks in one place, from initial checks to sanctions screening and ongoing monitoring – AML compliance has never been easier. Our automated system allows you to ensure that no stone goes unturned, so you’ll always get all the information available about your potential client or customer.

Contact us now to speak to an AML and compliance expert to discover more.

FAQs

What is a PEP?

According to the Financial Action Taskforce, a PEP is an individual who is (or has been) ‘entrusted domestically with prominent public functions.’ Simply put, anyone in a high-profile position within the public sector can qualify as a PEP. Some politically exposed person examples include members of parliament, high-ranking military officials, and senior executives in government-owned organisations, like the BBC or NHS.

What does politically exposed mean?

In the context of AML, to be politically exposed is to be in a prominent public position, generally resulting in significant wealth or influence. When a person is politically exposed, they present a greater risk of involvement with bribery, corruption and other forms of financial crime, so they require monitoring more closely. This is what PEP screenings are for.

Why are PEPs high risk?

Anyone who qualifies as a PEP is automatically a high-risk customer. This is because PEPs – by the very nature of their positions – are exposed to more opportunities to be involved in different forms of corruption, like accepting bribes, tax evasion, fraud or money laundering. This is why PEP lists are so important, as they enable you to identify and monitor politically exposed persons, before going into business with them.