Politically Exposed Person (PEP)
A person who holds, or has held, a prominent public position, subjecting their financial accounts to enhanced due diligence given their elevated potential exposure to bribery or corruption risk.
A Politically Exposed Person, or PEP, is an individual who holds, or has previously held, a prominent public position — such as a senior government official, judge, or military official, and often including their close family members and associates — subjecting their financial accounts and transactions to heightened anti-money-laundering scrutiny. This classification reflects the elevated risk that someone in such a position could be involved in bribery, corruption, or using the financial system to move illicitly obtained funds, given their access to public resources and influence.
Crypto exchanges and other regulated financial institutions are generally required to screen customers against PEP status during onboarding and on an ongoing basis, and a customer identified as a PEP typically triggers mandatory enhanced due diligence (see Kaavon's "Enhanced Due Diligence (EDD)" glossary definition) review, including closer source-of-funds verification and more frequent transaction monitoring, even without any specific suspicion of actual wrongdoing by that particular individual.
Examples
- A crypto exchange customer identified as a politically exposed person is typically subjected to enhanced due diligence review automatically, regardless of whether any specific suspicious activity has occurred.
- PEP screening commonly extends beyond the public official themselves to close family members and known associates, given the elevated risk of funds being moved through those relationships.