AML and counter-terrorist financing—politically exposed persons—PEPs
AML and counter-terrorist financing—politically exposed persons—PEPs

The following Practice Compliance practice note provides comprehensive and up to date legal information covering:

  • AML and counter-terrorist financing—politically exposed persons—PEPs
  • Purpose of PEP provisions
  • What is a PEP?
  • Prominent public function
  • Family members and known close associates
  • Former PEPs
  • Identifying PEPs
  • Risk-assessing PEPs
  • Procedures for managing the risk associated with PEPs
  • PEPs as beneficial owners of legal entities

Individuals who have, or have had, a high political profile, or hold, or have held, public office, can pose a higher money laundering risk to firms as their position may make them vulnerable to corruption. This risk also extends to members of their immediate families and to known close associates. Politically exposed person (PEP) status itself does not, of course, incriminate individuals or entities, but it does put the client or the beneficial owner into a higher risk category.

You must apply enhanced due diligence (EDD) measures and enhanced ongoing monitoring where you have determined that the client/potential client is a PEP, or a family member or known close associate of a PEP.

When this requirement is triggered, the requirement to conduct EDD is mandatory but you can take a risk-based approach when determining the nature and extent of the EDD measures to apply.

This Practice Note explains provisions relating to PEPs, including their purpose, what is a PEP, requirements in relation to identifying and risk assessing PEPs. It also contains guidance on procedures for managing the risks associated with a PEP relationship and discusses the issue of PEPs as beneficial owners. It takes into account guidance issued by financial and legal regulators. While some of this guidance may be sector specific, it represents good practice and sensible risk management more generally.

Purpose of PEP provisions

The Fourth Money

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