What Is a PEP (Politically Exposed Person) and What Due Diligence It Requires

Who counts as a PEP, why family members and close associates count too, and what the FATF standard asks you to do.

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A politically exposed person (PEP) is someone who is or has been entrusted with a prominent public function, such as a head of state, a senior politician, a senior judicial or military official or a senior executive of a state-owned company. Because of that position, the FATF asks for additional due diligence on PEPs, their family members and their close associates.

The Three Kinds of PEP

The FATF distinguishes them by who entrusted the function, not by the person's nationality or where they live.

Foreign PEP

A person who is or has been entrusted with a prominent public function by a foreign country: heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations and important political party officials.

Domestic PEP

A person who is or has been entrusted with the same kind of prominent public function by their own country. The functions are the same; what changes is the country that entrusted them.

International organisation PEP

A member of the senior management of an international organisation, or a person with an equivalent function: directors, deputy directors and members of the board.

Middle ranking and more junior officials are explicitly excluded from the definition.

Family Members and Close Associates

The PEP requirements also apply to the people around the PEP, because the relationship can be used to move or hide the proceeds of crime.

Family members: people related to the PEP by blood, by marriage or by a similar civil partnership.
Close associates: people closely connected to the PEP, socially or professionally.
They are treated like the PEP they are linked to, for as long as that person remains a PEP, even when they hold no public function themselves.

The FATF does not fix how far the family or the circle of associates goes: it depends on the social and cultural context of each country, so check the working definition of your local rules.

What Due Diligence a PEP Requires

FATF Recommendation 12 sets the measures for financial institutions, and Recommendation 22 extends them to designated non-financial businesses and professions, such as real estate agents, lawyers, notaries, accountants and dealers in precious metals and stones.

Measure	Foreign PEP	Domestic or international organisation PEP
Determine whether the customer or the beneficial owner is a PEP	Always	Always
Senior management approval to start or continue the relationship	Always	When the relationship is higher risk
Reasonable measures to establish the source of wealth and the source of funds	Always	When the relationship is higher risk
Enhanced ongoing monitoring of the relationship	Always	When the relationship is higher risk

Source of wealth

The origin of the PEP's entire body of wealth, that is, their total assets: how much they would be expected to have and how they acquired it.

Source of funds

The origin of the specific funds or assets involved in the relationship with you, such as the amounts invested, deposited or transferred.

For life insurance, the insurer must also determine whether the beneficiaries of a policy are PEPs, at the latest when it prepares the payout.

How Long Is Someone a PEP?

The FATF standard covers people who are or have been entrusted with a prominent function, so it allows an open-ended approach. Its guidance says that a former PEP should be handled on an assessment of risk, not on a fixed period, and suggests these factors:

The informal influence the person can still exercise
The seniority of the position they held
Whether their previous and current functions are linked

Some countries do set a period in their law. Panama is one of them, as the next section explains.

What Local Rules Add: Panama and Mexico

Each country turns the FATF standard into its own rules. Two examples, taken from the official texts.

Panama: Law 23 of 2015

Article 34 requires enhanced due diligence for foreign and national PEPs, whether they are the client or the beneficial owner, because it considers them high risk.
For international organisation PEPs, family members and close associates, the enhanced measures apply when a risk analysis finds the relationship is higher risk.
A person is a PEP from their appointment until they leave office, and for up to two years after they stop performing the function.
Middle and junior positions are not PEPs, and a PEP who meets the enhanced due diligence may not be treated in a discriminatory way.

Mexico: the 2026 reform of the LFPIORPI Regulations

The reform published in the Official Gazette on 27 March 2026 added Chapter Six Bis, on the List of Politically Exposed Persons kept by the Financial Intelligence Unit (UIF).
Financial entities and those who carry out vulnerable activities may consult the UIF when, after identifying their client, they cannot determine whether the client is a PEP.
The authorities that feed the list must report any change within five business days.

In the other countries where COX operates, check the definition and the period in your local rules or with your adviser.

PEP Checks, in COX

Each file records the client's PEP status and the linked persons with their own PEP status, position and institution. COX screens them against PEP registers and restrictive lists, the risk matrix scores the PEP exposure and flags when enhanced due diligence is required, and every decision stays in the file's trail. The decision to accept the client stays with your compliance officer.

PEP screening with COX

Frequently Asked Questions

No. The PEP requirements are preventive, not criminal. The FATF states that refusing a business relationship only because the client is a PEP is contrary to the letter and spirit of Recommendation 12. What changes is the depth of the due diligence, not the right to be a client.

The country that entrusted the public function. A foreign PEP always requires enhanced due diligence under the FATF standard; a domestic PEP requires it when the relationship is assessed as higher risk. Local rules can be stricter: Panama applies enhanced due diligence to both.

They are treated as one. The FATF standard applies the PEP requirements to family members and close associates, for as long as the person they are linked to remains a PEP. How far the family goes is set by each country's rules.

Yes, when they are obligated under their country's anti-money laundering rules. FATF Recommendation 22 extends the PEP requirements to designated non-financial businesses and professions, and Panama's Law 23 of 2015 applies them to non-financial obligated parties too.

The FATF does not set a period: it asks for an assessment of the risk that remains after the person leaves office. Some countries set one; in Panama, a person remains a PEP for up to two years after they stop performing the function.

This guide is for informational purposes only and does not constitute legal advice. It summarises the FATF guidance on Recommendations 12 and 22 and two local texts without replacing them: confirm definitions, periods and requirements in the rules that apply to your company or with a local adviser.

Know Who Is a PEP Before You Accept the Client

Screen the client, the beneficial owners and the linked persons, and keep the evidence in the file.

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