What is a Politically Exposed Person?

Protecting the global financial system against money laundering, terrorist financing, and proliferation of weapons of mass destruction

What is a Politically Exposed Person?

A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public function. PEPs are higher-risk customers for financial institutions because they have more opportunities than ordinary citizens to acquire assets through unlawful means like embezzlement and bribe-taking and thus are more likely to launder money. It is important to note that PEP status does not imply guilt or suggest a link to abuse of the financial system.

After determining that a customer is a PEP, financial institutions in most jurisdictions must apply additional AML/CFT measures to the business relationship. They are also responsible for conducting ongoing due diligence specifically tailored to the client’s PEP status. These requirements are preventive in nature and should not be interpreted as meaning that all PEPs are involved in criminal activity.

The term “politically exposed person” emerged in the late 1990s in the wake of the Abacha affair, a money laundering scandal in Nigeria which galvanised global efforts…