FATF's politically exposed person measures address risk in foreign, domestic and international-organisation PEPs. Identification, senior approval where required, source-of-wealth or funds checks and enhanced monitoring inform implementation without equating PEP status with wrongdoing.
TL;DR:
- Foreign PEPs require approval, wealth-and-funds checks and enhanced monitoring.
- Higher-risk domestic or international-organisation PEPs need comparable measures.
- Family and associates matter; PEP status is distinct from sanctions and evidence of criminal conduct.
Summary
A preventive response to prominent public functions
FATF Recommendations 12 and 22 address politically exposed persons and the risk that public positions can be abused for corruption or other illicit activity. The requirements are preventive: being a PEP does not establish wrongdoing. The framework distinguishes foreign, domestic and international-organisation PEPs and extends relevant measures to family members and close associates. A sanctions designation is a different legal conclusion, even when screening systems examine some of the same identity information.
Approval and understanding the origin of value
For foreign PEPs, the standard calls for systems to identify PEP status, senior-management approval for establishing or continuing the relationship, reasonable measures to establish source of wealth and source of funds, and enhanced ongoing monitoring. Wealth concerns the wider origin of assets, while funds concern the particular value involved in the relationship or transaction. Knowing only the sending bank is not necessarily an explanation of the economic origin of the money.
Risk treatment and ongoing review
For domestic and international-organisation PEPs, the standard calls for reasonable identification measures and enhanced treatment where the relationship is higher risk. The assessment therefore considers the function, relationship and circumstances rather than applying an unsupported assumption to every public employee. Customer due diligence provides the foundation, and later changes can affect the risk picture. Monitoring should relate actual activity to the institution's understanding of the customer and the origin of the value involved.
Information tools do not replace the decision
FATF explains that commercial PEP databases can assist but are neither required by the standard nor sufficient on their own. Institutions need enough information to identify relevant customers and beneficial owners and apply the measures required by national law. A possible database match needs resolution, and a confirmed PEP relationship needs a documented risk response rather than an automatic allegation of criminality. Binding detail and supervisory expectations come from the applicable jurisdiction's implementation.
Keywords
- FATF PEPs
- public functions
- foreign officials
- domestic risk
- senior approval
- wealth sources
- funds origins
- enhanced monitoring
- family members
- close associates