Politically exposed person (PEP)
Checked against the official texts on .
A politically exposed person (PEP) is a natural person who is or has been entrusted with a prominent public function — for example a head of state, minister, member of parliament, supreme-court judge, ambassador, or member of the board of a central bank or a state-owned enterprise. Middle-ranking and junior officials are not PEPs.
Also called: PEP. Their family members and close associates are often abbreviated RCA.
Why it matters for PSPs and EMIs
A PEP can be the customer or a beneficial owner of a business customer (a PEP who is only a director is not covered by the PEP measures as such, but is a risk factor to consider: EBA/GL/2021/02, Guideline 2). Holding a public function is not wrongdoing, but it brings a higher risk of corruption-related money laundering, so EU law requires specific additional measures when the customer or a beneficial owner is a PEP — and senior management must approve the relationship.
What the law says
Definition. AMLR Art. 2(1)(34): natural persons entrusted with prominent public functions in a Member State (including heads of state and government, ministers and deputy or assistant ministers; members of parliament; members of governing bodies of political parties with seats in national bodies or in regional or local bodies representing at least 50 000 inhabitants; members of supreme and constitutional courts; members of courts of auditors and central bank boards; ambassadors and high-ranking officers in the armed forces; board members of certain state- or regionally-controlled enterprises; heads of regional and local authorities with at least 50 000 inhabitants — Member States may set lower thresholds, Art. 2(3)), in international organisations, at Union level, and equivalent functions in third countries.
Not junior officials. AMLR Art. 2(2).
Duty to determine. AMLR Art. 20(1)(g): determine whether the customer, its beneficial owner and, where relevant, the person on whose behalf a transaction is carried out is a PEP, a family member or a person known to be a close associate.
Measures. AMLR Art. 42(1): senior management approval to establish or continue the relationship; adequate measures to establish the source of wealth and source of funds; enhanced ongoing monitoring.
Official lists. AMLR Art. 43: each Member State keeps a list of the exact functions that qualify; the Commission assembles a single list.
Former PEPs. AMLR Art. 45: continue to take the continuing risk into account and apply measures for at least 12 months after the function ends, and longer while the risk remains.
Family and close associates. AMLR Art. 46.
Until 10 July 2027. Directive (EU) 2015/849, Art. 3(9) and Arts. 20 to 23, as transposed nationally. EU law applies these measures to domestic and foreign PEPs alike.
International standard. FATF Recommendation 12 and the FATF Guidance on Politically Exposed Persons (Recommendations 12 and 22).
How ProofVolt handles it
ProofVolt screens natural-person customers, and the directors and beneficial owners of business customers, for politically-exposed-person status. A match on a name alone stays a candidate until an agreeing date of birth or an officer's review confirms it. A confirmed PEP moves the case to enhanced due diligence: a source-of-wealth declaration is added to the documents the customer is asked for, and approval needs a second approver.
Related
Sources
Informational only, not legal advice.