PEP (Politically Exposed Person)

PEP stands for “Politically Exposed Person.” The term refers to individuals who are or have been entrusted with prominent public functions, as well as their family members and close associates. Due to their position and influence, it is recognized that PEPs are at a higher risk of being involved in bribery or corruption, and thus, transactions made by PEPs are subject to a higher degree of scrutiny under Anti-Money Laundering (AML) regulations.

PEPs can include:

• Heads of State or Government
• Senior politicians
• High-ranking government, judicial, or military officials
• Senior executives of state-owned corporations
• Important political party officials
• Family members and close associates of the above

The specific definition of a PEP can vary by country, but the emphasis is always on individuals who, by virtue of their role and influence, could potentially be involved in corrupt acts. Financial institutions are required to establish whether a potential or existing client is a PEP, and if so, they must apply enhanced due diligence measures to monitor and manage the higher risks associated with these clients. This often includes account monitoring, source of funds checks, and seeking approval from senior management to establish or continue such business relationships.