PEP (Politically Exposed Person)
Also known as: Politically exposed person · Senior foreign political figure · SFPF · PEP screening
A person who holds or has held a prominent public function — and, by extension, their family and close associates — whose relationships call for risk-based due diligence; US rules speak of senior foreign political figures.
Legal basis
31 CFR 1010.605 (definitions, incl. senior foreign political figure)
Being a PEP is not a suspicion, it is context. People in prominent office are more exposed to bribery and to laundering its proceeds, so AML programs ask for proportionate attention: identify the status, understand the source of funds and monitor the relationship accordingly.
US regulation does not use the term PEP. It defines a senior foreign political figure: a current or former senior official of a foreign government, political party or government-owned enterprise, plus immediate family and widely known close associates. For private banking accounts held for them, institutions must apply enhanced scrutiny designed to detect proceeds of foreign corruption.
In a 2020 joint statement, FinCEN and the federal banking agencies clarified that they do not read "PEP" to include US public officials and that there is no requirement for unique, additional due diligence steps just because a customer is a PEP — the level of diligence follows the customer's actual risk. What tends to slip through is the indirect tie: the business partner, the relative, the nominee, which only appears when records are cross-referenced.
Frequently asked questions
Who counts as a PEP in the US?
US rules define senior foreign political figures: current or former senior officials of foreign governments, political parties or state-owned enterprises, plus their immediate family and close associates. Regulators have said they do not interpret PEP to include US public officials, though institutions may still assess domestic officials on a risk basis.
Is PEP screening required?
Banks must apply enhanced scrutiny to private banking accounts for senior foreign political figures. Beyond that, the 2020 joint statement says due diligence for PEPs should be risk-based, with no requirement for special steps solely because of PEP status.