Politically Exposed Person (PEP) Examples: Who Qualifies and Why

A Politically Exposed Person — PEP — is an individual who holds or has held a prominent public position that may make them more susceptible to bribery, corruption, or money laundering. PEPs are a defined higher-risk customer category under AML regulations, and fintechs are required to apply enhanced due diligence to customers who are PEPs or who have close associations with PEPs.

Understanding who qualifies as a PEP — and being able to recognize PEP status in your customer base — is an important part of a compliant customer due diligence program. This article covers concrete examples of PEP categories to help fintechs apply the concept correctly.

Why PEP Status Creates Elevated Risk

PEPs present elevated money laundering risk not because they are presumed to be corrupt, but because their public positions provide potential opportunities for corruption and bribery. Funds associated with foreign corruption are a significant source of illicit financial flows globally. AML frameworks require heightened scrutiny of PEPs to detect and deter the use of financial systems to conceal and move proceeds of corruption.

Categories of PEPs

Senior Government Officials

Heads of state and government — presidents, prime ministers, chancellors, and their equivalents. Senior ministers and cabinet members. Senior legislators — senators, members of parliament, and their equivalents. Senior judicial officials — supreme court justices, constitutional court members, and equivalent senior jurists. Senior military officials — generals, admirals, and equivalent flag officers. Senior officials of central banks and major regulatory bodies.

Senior Political Party Officials

Leaders and senior officials of major political parties — party chairpersons, secretaries-general, and other leadership positions with significant influence over political decisions.

Senior Executives of International Organizations

Heads and senior directors of international organizations such as the United Nations, International Monetary Fund, World Bank, and regional equivalents.

State-Owned Enterprise Executives

Senior executives — chairpersons, presidents, CEOs, CFOs — of state-owned or state-controlled enterprises. This category is particularly relevant for countries with large state sectors, where senior enterprise executives may have significant access to government funds.

Family Members and Close Associates

PEP status also extends to certain family members and close associates of PEPs. Family members typically include spouses and domestic partners, children and their spouses or domestic partners, and parents. Close associates typically include individuals known to be business partners or close personal associates of the PEP.

The rationale for extending PEP designation to family and associates is that illicit funds are frequently moved through the accounts of trusted individuals close to the primary official rather than through accounts held directly by the official themselves.

Domestic PEPs vs. Foreign PEPs

US AML regulations — particularly for banks — have historically distinguished between domestic PEPs (US persons holding US public positions) and foreign PEPs (persons holding public positions in other countries). Foreign PEPs have typically been subject to automatic enhanced scrutiny; domestic PEPs to risk-based enhanced scrutiny that may vary by position and risk factors.

For fintechs operating internationally or serving customers in multiple countries, both foreign and domestic PEPs are relevant categories requiring heightened review.

Former PEPs

PEP status does not automatically end when an individual leaves a public position. Most AML frameworks require continued elevated scrutiny for a period after leaving office — typically 12 to 24 months or longer, depending on the jurisdiction and the nature of the position — until the risk associated with the former role is judged to have diminished sufficiently.

Frequently Asked Questions

Are lower-level government employees considered PEPs?

Generally, no. PEP designation is intended to apply to senior, high-influence positions — not to all government employees. A mid-level civil servant processing routine government business is typically not a PEP. The threshold is seniority and the degree of influence over government decisions and resources.

What enhanced due diligence is required for PEPs?

Enhanced Due Diligence for PEPs typically involves additional identity verification, collection of source of wealth and source of funds information, senior management approval for the customer relationship, and more frequent ongoing monitoring than applies to standard-risk customers. See our dedicated EDD articles for full details on what EDD requires.

How ComplyOne Helps

ComplyOne helps fintechs design PEP screening and EDD programs that meet regulatory requirements — from PEP identification through enhanced due diligence procedures and ongoing monitoring — through advisory services, compliance technology, or both.

Talk to the ComplyOne team to get started.

The information in this article is for general educational purposes and does not constitute legal or regulatory advice. Consult a qualified compliance professional for guidance specific to your situation.