PEPs are not criminals, but their position gives access to public funds and influence, so they carry higher corruption risk. The FATF standard requires enhanced measures for foreign PEPs in every case, and a risk-based approach for domestic PEPs and people holding senior roles at international organisations. Family members and close associates are covered too.
Example
A bank onboards the brother of a foreign minister: it must identify the source of wealth and source of funds, get senior management approval and monitor the account more closely.
Where it appears in the exams
This topic is relevant for CAMS, CFCS, CGSS.
Read more
Politically exposed persons (PEPs) explained: who counts, what EDD is required and for how long
Related terms
- Enhanced due diligence (EDD): Enhanced due diligence is the additional scrutiny applied to higher-risk customers, relationships or transactions, beyond standard customer due diligence.
- Customer due diligence (CDD): Customer due diligence is the set of checks a firm does on a customer: identify and verify them, identify the beneficial owner, understand the purpose of the relationship, and monitor it over time.
- Beneficial owner: The beneficial owner is the real person who ultimately owns or controls a customer, or on whose behalf a transaction is carried out, even if ownership is held through companies, trusts or nominees.
Source: FATF Recommendation 12. Independent explanation for study purposes, not legal advice.