What is a Politically Exposed Person?
A PEP is an individual who holds or has held a prominent public function — typically a senior government, judicial, military, or senior state-owned enterprise role. The concept exists because such individuals may have access to public funds and may face greater risk of bribery and corruption.
AUSTRAC defines PEPs to include:
- Heads of state, government ministers, and senior government officials
- Members of parliament (both major and minor parties)
- Senior judicial officers and magistrates
- Senior military officers
- Senior officials of major political parties
- Senior executives of state-owned enterprises
- Senior officials of international organisations
Importantly, PEP status also extends to their immediate family members and close associates — spouses, children, parents, and business partners.
Why are PEPs higher risk?
PEPs don't represent illegal activity by definition — most PEP clients are entirely legitimate. The elevated risk stems from their access to government resources and the potential for corruption, bribery, or misuse of public funds to flow through professional service providers.
Key point: Being a PEP is not a red flag. It's a risk indicator that requires enhanced due diligence — more scrutiny, not automatic refusal.
How to identify PEPs in your client base
Manual identification of PEPs across a large client base is impractical. The standard approach is to screen clients against commercial PEP databases at onboarding and on an ongoing basis. These databases aggregate publicly available information about prominent public figures globally.
CompliDesk includes automated PEP screening as part of the KYC verification process — every new client is automatically checked, and existing clients are re-screened when databases are updated.
What enhanced due diligence (EDD) means for PEPs
If you identify a PEP client, you must apply enhanced due diligence. This means:
- Obtaining senior management approval before establishing or continuing the business relationship
- Gathering additional information to understand the source of their wealth and funds
- Conducting more frequent ongoing monitoring of transactions
- Applying greater scrutiny to any unusual transactions
Former PEPs
Former PEPs — people who previously held prominent positions but no longer do — remain higher risk for a period after leaving office. AUSTRAC doesn't prescribe a specific time period, so you need to make a risk-based judgment. Most firms apply a 12–24 month post-exit enhanced scrutiny period as a minimum.
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