A PEP is a politically exposed person: someone who holds or held a prominent public function, such as a head of state, minister, member of parliament or ambassador. Family members and close associates of such a person also count. A PEP is not a suspect. The Wwft does, however, require you to carry out enhanced customer due diligence on a PEP.
PEP screening is therefore a standard part of every KYC investigation.
Who is a PEP?
The Wwft and its implementing rules list the functions that make someone a PEP. Among others:
- heads of state, heads of government, ministers and state secretaries
- members of parliament and of similar legislative bodies
- members of the governing bodies of political parties
- members of the highest courts, such as a supreme court or constitutional court
- members of courts of audit and of the boards of central banks
- ambassadors and high-ranking officers in the armed forces
- members of the management and supervisory bodies of state-owned enterprises
- directors of international organisations
Middle-ranking and junior officials are generally not included. It is about the top.
The Wwft makes no distinction between domestic and foreign PEPs. A Dutch minister is therefore just as much a PEP as a foreign one.
Family members and close associates
The risk does not lie only with the PEP. Money can also flow through people close to them. That is why the enhanced measures also apply to:
- family members: among others the spouse or partner, the children and their partners, and the parents
- close associates: for example persons who, together with a PEP, are ultimate beneficial owners of a legal entity, or who have close business relations with a PEP
For a corporate customer, also look at the UBOs and representatives. If one of them is a PEP, the enhanced regime applies to the relationship. Read more about UBOs in What is a UBO?
Why a PEP presents a higher risk
Someone with a prominent public function has influence. That influence can be misused for corruption or bribery. The proceeds have to go somewhere. The financial system is then an obvious route.
This does not mean that a PEP is doing anything wrong. It means that the risk is higher than average. That is why the law expects you to look more closely.
What enhanced due diligence do you carry out?
For a PEP you carry out enhanced customer due diligence. The core:
- Senior management approval. A manager with sufficient authority approves entering into or continuing the relationship.
- Source of wealth and source of funds. You investigate where the customer's wealth comes from (source of wealth) and where the money in the relationship or transaction comes from (source of funds).
- More intensive monitoring. You follow the relationship and the transactions more closely and review the file more often.
Record what you have done and why. If you have doubts about transactions, report them as unusual to FIU-Nederland.
How does PEP screening work?
You check whether the customer, the UBOs and the representatives are PEPs. You do this when entering into the relationship and on an ongoing basis afterwards. After all, someone may take up a prominent function during the relationship.
In practice you use:
- a declaration from the customer
- screening against PEP databases
- public sources, such as news and official publications
A hit is not yet a conclusion. You assess whether it really concerns the same person. If so, you apply the enhanced regime. If it is someone with the same name, you record why you discount the hit.
How long does someone remain a PEP?
When someone leaves office, the risk does not disappear straight away. You continue to take the risk the person presents into account for at least 12 months. After that, you keep taking risk-based measures for as long as you consider that a higher risk remains. Think of the influence the person still has or the nature of the former function.
From 10 July 2027 the European AMLR applies. It sets out the PEP rules in a single regulation for the whole EU. The core remains the same: identify, carry out enhanced due diligence and keep monitoring.
Doing PEP screening yourself or outsourcing it
Good PEP screening requires reliable sources, experience in assessing hits and time to research the source of wealth. Many organisations do this themselves. Others outsource the execution, for example during peaks or a remediation project. You then remain responsible for the policy and the decisions, but the research is carried out by specialists. Read more about the analyst's role in What does a CDD analyst do?