PEPhenkilöt

PEP-henkilöt, or Politically Exposed Persons (PEPs), is a term used in anti-money laundering and counter-financing of terrorism (CFT) to designate individuals who hold or have held prominent public functions, as well as their immediate family members and close associates. The designation recognizes an elevated risk of bribery, corruption, and misuse of funds, and therefore warrants enhanced due diligence by financial institutions and other obliged entities.

Categories: PEPs can be domestic (holding a public function in the same country), foreign (in another country), or international organization PEPs. Family members and close associates (FCA) of PEPs are often covered because their connections can be used to access illicit proceeds.

Regulatory framework: The concept is anchored in international standards, notably the FATF recommendations, which require a risk-based approach to identifying PEPs and applying enhanced due diligence (EDD). Many jurisdictions implement PEP provisions through national AML/CFT laws and regulations, including ongoing monitoring and verification of sources of wealth.

Practical implementation: On onboarding, institutions screen customers for PEP status, assess risk, collect additional information on sources of funds, and conduct enhanced ongoing monitoring of transactions involving PEPs or their family and close associates.

Duration and dynamic: PEP status typically applies for the period of holding the office and, in many regimes, for a defined period after leaving office; practices vary by jurisdiction and risk assessment.

Criticism and challenges: PEP rules raise privacy concerns and can lead to misidentification or excessive scrutiny. Effective use relies on accurate data, clear definitions of FCAs, and proportionate monitoring.

See also: Money laundering, AML/CFT, FATF, financial regulation.