Who are considered politically exposed persons (PEPs)?

Politically exposed persons (PEPs) are defined as individuals who hold prominent public positions or roles in government or international organizations. This designation typically includes heads of state, ministers, members of parliament, judges, and other high-ranking officials. The reason such individuals are classified as PEPs is due to the potential risk of involvement in bribery or corruption given their influence and access to public resources.

Being a PEP entails a higher level of scrutiny in the context of anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. Financial institutions are generally required to conduct enhanced due diligence on these individuals because they may be at a greater risk of engaging in illicit financial activities, owing to their powerful status and the opportunities for exploitation that accompany it.

In contrast, individuals with private sector jobs, those with minor political roles, and those with no political connections do not fall under the PEP classification. They do not typically have the same level of influence or access to public funds that could pose a higher risk for financial crime, hence they do not require the same level of scrutiny as PEPs.