Politically exposed person (PEP)
A politically exposed person (PEP) is someone who holds, or has held, a prominent public function, such as a head of state, minister, member of parliament, senior judge or board member of a state-owned enterprise. EU anti-money laundering rules require banks, EMIs and other obliged entities to identify PEPs, their family members and close associates, and to apply enhanced due diligence to them. PEP status marks higher risk, not wrongdoing.
Who counts as a PEP
The EU Anti-Money Laundering Directive (AMLD) lists the functions that make someone a PEP:- heads of state, heads of government, ministers and deputy or assistant ministers
- members of parliament or similar legislative bodies
- members of the governing bodies of political parties
- members of supreme courts, constitutional courts and other high-level courts whose decisions can't usually be appealed
- members of courts of auditors and of the boards of central banks
- ambassadors, chargés d'affaires and high-ranking officers in the armed forces
- members of the management or supervisory bodies of state-owned enterprises
- directors, deputy directors and board members of international organisations
Family members and close associates
The rules also cover people around the PEP, because they can be used to hold or move money on the PEP's behalf.| Group | Who it includes |
|---|---|
| Family members | Spouse or equivalent partner, children and their spouses or partners, parents |
| Close associates | Anyone who jointly owns a company or legal arrangement with a PEP, or has another close business relationship with one; anyone who is the sole owner of an entity set up for a PEP's benefit |
Domestic, foreign and international organisation PEPs
The Financial Action Task Force (FATF) splits PEPs into three groups in its Recommendation 12:- Foreign PEPs: people with a prominent public function in another country.
- Domestic PEPs: people with a prominent public function in the provider's own country.
- International organisation PEPs: senior management of an international body, such as directors, deputy directors and board members of the UN, the IMF or the World Bank.
What happens when a client is a PEP
The provider must apply enhanced due diligence on top of standard customer due diligence:- Senior management must approve opening or continuing the relationship.
- The provider must establish the source of wealth and source of funds involved.
- The relationship gets enhanced ongoing monitoring.
How PEP screening works
Providers check the names of clients, directors and beneficial owners against PEP databases at onboarding, then rescreen regularly, because people take up and leave office. Common names produce false positives, so an analyst confirms a match with date of birth, nationality and role before anything changes.PEP screening usually runs alongside sanctions screening and adverse media screening.Automated vs manual PEP screening
Most providers use automated screening against commercial PEP databases, which track government officials, senior politicians, judicial or military officials and their family members across many countries. Manual screening, searching public sources by hand, only works for a small number of clients and is hard to keep up to date.Effective PEP screening depends on good data and on reducing false positives:- Secondary identifiers: checking date of birth, nationality, country of residence and role, not just the name.
- Tuned matching: fuzzy matching that catches transliterations and spelling variants without flagging every similar name.
- Ongoing screening: rescreening the client base when databases are updated, so a client who takes up a prominent public position is picked up.
- Clear escalation: a documented process for analysts to confirm or dismiss a match, with the reasons recorded.
When PEP status ends
After someone leaves a prominent public function, providers must keep treating them as a PEP for at least 12 months, and longer for as long as they still present a higher risk.What changes under the AMLR
From 10 July 2027, the EU Anti-Money Laundering Regulation (AMLR) replaces national rules with one regulation that applies directly in every member state. Its PEP rules sit in Articles 42 to 46, and the new EU anti-money laundering authority (AMLA) must publish guidelines by 10 July 2027 on identifying close associates and on the risk levels of different PEP categories.How to prepare if your business involves a PEP
If a director, shareholder or beneficial owner is a PEP, a family member or a close associate, say so at the start of onboarding. Providers find out through screening anyway, and an undeclared match slows everything down.Prepare evidence of source of wealth, such as employment history, sale agreements, inheritance documents or tax returns, and explain the company's activity and expected payments. With a complete file, a PEP connection usually means a longer review, not a refusal.FAQ
No. PEP status is a preventive risk marker. It means the provider looks more closely at the source of wealth and the account's activity.
Yes, if the provider can manage the risk. Expect senior management approval, source of wealth evidence and a longer review.
Under EU rules the spouse is a family member of a PEP, which brings the same enhanced checks.
At least 12 months, and longer while the risk remains.
No. A prominent public function is what makes someone a PEP. Board members of state-owned enterprises are the exception.
No. Since the fourth Anti-Money Laundering Directive, domestic and foreign PEPs get the same enhanced due diligence.
Last reviewed October 30, 2026Disclaimer
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
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