PEP (Politically Exposed Person)

A Politically Exposed Person is an individual who holds or has held a prominent public function, presenting higher risk for involvement in bribery, corruption, or money laundering due to their position, influence, and access to public funds, requiring enhanced customer due diligence by financial institutions.

PEPs include heads of state or government, senior politicians, senior government or judicial officials, senior executives of state-owned enterprises, important political party officials, and senior military officers. The designation extends to immediate family members (spouses, parents, children, siblings) and known close associates. PEP status typically persists for at least 12 months after leaving office, though risk assessment should consider ongoing influence and connections.

Crypto exchanges and VASPs must screen customers against PEP databases during onboarding and conduct enhanced due diligence including senior management approval for account opening, determination of source of funds and wealth, and ongoing monitoring of transactions for unusual patterns. Enhanced scrutiny applies to politically exposed persons from all jurisdictions, not only those from high-risk countries. PEP relationships create elevated risk because crypto's pseudonymity and cross-border nature can facilitate concealment of corruption proceeds. Blockchain analytics helps identify connections between PEP-controlled wallets and suspicious fund sources, but effective screening requires integration of traditional PEP databases with on-chain transaction monitoring.