Politically Exposed Persons (PEP)¶

Definition¶

A PEP (Politically Exposed Person) is an individual who holds or has held a prominent public function, making them a higher risk for potential involvement in bribery, corruption, or money laundering. Financial institutions must apply Enhanced Due Diligence (EDD) when dealing with PEPs.

PEP Categories¶

graph TD
    A[PEP Types] --> B[Foreign PEP<br/>Political figure in another country]
    A --> C[Domestic PEP<br/>Political figure in own country]
    A --> D[International Org PEP<br/>Senior role in intl organization]
    A --> E[Family Member<br/>Close family of any PEP]
    A --> F[Close Associate<br/>Known associate of PEP]

    B --> G[Always EDD]
    C --> H[EDD - risk-based]
    D --> G
    E --> G
    F --> G

    style A fill:#4051B5,color:#fff
    style G fill:#e53935,color:#fff

Who Qualifies as a PEP¶

Category	Examples
Heads of State/Government	Presidents, Prime Ministers, Monarchs
Senior politicians	Cabinet ministers, parliamentarians, senators
Senior judicial	Supreme/High Court judges, constitutional court members
Senior military	Generals, admirals, chiefs of staff
State-owned enterprise leaders	CEOs/directors of major SOEs
Central bank officials	Governors, board members
Ambassadors	Senior diplomatic representatives
Senior party officials	Leaders of major political parties
International organizations	UN Secretary-General, World Bank President, EU Commissioners

Family Members & Close Associates¶

Relationship	Examples
Spouse/partner	Husband, wife, civil partner
Children	Sons, daughters (and their spouses)
Parents	Mother, father
Siblings	Brothers, sisters (in some jurisdictions)
Close associate	Business partners, joint beneficial owners, close personal advisors

PEP Screening in eKYC¶

How It Works¶

graph TD
    A[Customer Name + DOB + Nationality] --> B[Fuzzy Name Matching Engine]
    B --> C[Search PEP Databases]

    C --> D[Dow Jones Risk & Compliance]
    C --> E[Refinitiv World-Check]
    C --> F[ComplyAdvantage]
    C --> G[LexisNexis]

    D & E & F & G --> H{Match Found?}
    H -->|No match| I[Clear - proceed with standard CDD]
    H -->|Potential match| J[Analyst reviews match quality]
    H -->|Confirmed PEP| K[Apply EDD]

    J -->|False positive| I
    J -->|True positive| K

    K --> L[Senior management approval]
    K --> M[Source of wealth investigation]
    K --> N[Enhanced ongoing monitoring]

    style K fill:#e53935,color:#fff
    style I fill:#2E7D32,color:#fff

PEP Screening Challenges¶

Challenge	Details
Name transliteration	Arabic/Chinese/Cyrillic names have multiple English spellings
Common names	"Mohammed Ali" or "John Smith" generates many false positives
Data quality	PEP lists may be outdated or incomplete
Scope of family	How far to extend family/associate screening?
De-PEP timing	When does someone stop being a PEP? (typically 1-2 years after leaving office)
False positive rate	Can be 90%+ — overwhelming review teams

PEP Data Providers¶

Provider	Coverage	Key Feature
Dow Jones Risk & Compliance	2.8M+ profiles	Manually curated by journalists
Refinitiv World-Check	4.8M+ profiles	Broadest coverage
ComplyAdvantage	AI-curated, real-time	Lower false positive rate
LexisNexis	Extensive US/EU coverage	Combined identity + screening

Key Takeaways¶

Summary

PEPs are higher risk due to potential corruption and bribery — EDD is always required
PEP status extends to family members and close associates
Fuzzy name matching is essential — transliteration and common names make exact matching insufficient
False positive rates are very high (90%+) — requiring significant manual review
PEP status doesn't mean the person is criminal — it means higher scrutiny is warranted
De-PEP: Generally considered PEP for 1-2 years after leaving office (varies by jurisdiction)