Guide to PEP screening for politically exposed persons

Onboarding the spouse of a sitting government minister isn’t illegal. However, failing to notice that you did, and having no record of why you were comfortable with it, is what draws regulatory scrutiny.

That tension sits at the center of PEP screening. Politically exposed persons hold roles with influence over public money, contracts, and licensing, which makes them a higher-risk category for bribery and money laundering. But they’re also still customers, so distinguishing genuine risk from a PEP match is essential. 

Key takeaways:

• A politically exposed person (PEP) is anyone who holds or has held a prominent public role, such as a head of state, senior politician, or senior judicial or military official.

• PEP screening checks customers against PEP databases and watchlists at onboarding and continuously afterward, then risk-rates any confirmed matches.

• PEP status isn’t an accusation or automatic rejection, but a signal of elevated bribery and corruption risk that requires further investigation.

• Plaid Monitor screens against Office of Foreign Assets Control (OFAC) lists, global sanctions lists, and PEP lists, with daily rescans that scale to 100M+ users. Enterprise customers report 77% less time reviewing alerts.

What is a politically exposed person (PEP)?

A politically exposed person (PEP) is an individual who holds or has held an important public position, such as a senior politician or military leader. Because of their position or influence, PEPs may pose a heightened risk of bribery, corruption, or money laundering. PEP rules apply to officials in any country and don’t expire at the end of a term. It excludes middle-ranking and junior staff: the standard targets seniority, not government employment.

PEP requirements come from Financial Action Task Force (FATF) Recommendation 12, a key global Anti-Money Laundering (AML) standard.

What are the different types of PEPs?

• Foreign PEPs: Individuals entrusted with prominent public functions in another country.

• Domestic PEPs: Individuals entrusted domestically with prominent public functions.

• International organization PEPs: People entrusted with a prominent function by an international organization, such as directors, deputy directors, and board members. 

• Relative and close associates (RCAs): Individuals related to a PEP by blood, marriage, or civil partnership, or closely connected socially or professionally. For example, a business partner who co-owns a company with a sitting cabinet minister.

What is PEP screening?

PEP screening is the practice of checking an individual against PEP databases and watchlists to determine whether they, or someone close to them, holds a prominent public function. It runs at onboarding as part of Know Your Customer (KYC) checks, then continues for the life of the relationship through ongoing rescreening.

A PEP screen is a matching process, not a decision. It compares the identity data you hold against structured records of political exposure and returns potential matches for review. What you do with a confirmed match is a separate, risk-based judgment.

Why does PEP screening matter?

PEP screening can help organizations meet regulatory compliance requirements, detect and prevent financial crime, and protect their reputation. 

Satisfying legal and regulatory compliance

PEP screening is part of the broader anti-money laundering and counter-terrorist financing framework. FATF Recommendation 12 requires firms to have risk management systems to identify PEPs and obtain senior management approval before establishing or continuing a relationship. Firms must also take reasonable steps to verify source of wealth and funds and conduct enhanced ongoing monitoring. 

What happens when a program doesn’t hold up is a matter of public record. The Financial Conduct Authority (FCA) fined Standard Bank £7.6 million for these failures, offering a reminder of why robust monitoring is crucial.

Managing financial crime risk

Bribes, diverted procurement funds, and misappropriated state assets all have to be washed before anyone can spend them. PEP screening helps identify corruption risks before it leads to money laundering. For example, screening RCAs can reveal that a spouse is holding a brokerage account, the adult child is on the property title, and an associate is fronting a shell company. Finding these links early lets you set the right level of monitoring for the relationship you’re really in.

Mitigating reputational risk 

Fines are recoverable, but being named as the institution that banked a corrupt official is harder to move past. Deposits tied to public corruption can cost an institution correspondent banking relationships, trigger de-risking by partners, and stall licensing applications. For fintechs, one high-profile PEP failure can jeopardize a charter application or a sponsor bank relationship.

What is the PEP screening process? 

A robust PEP screening process is more than a one-time check at signup; it’s a consistent and ongoing workflow. These six steps move from data collection to continuous monitoring.

Step 1: Collect identifying data

Collect full legal name, date of birth, nationality, country of residence, and known aliases or alternate transliterations. This matters most for names originating in non-Latin scripts, where inconsistent romanization causes both missed matches and false positives. Identity verification at onboarding produces this data as a byproduct.

Step 2: Screen against PEP and watchlist databases 

Run your data against PEP databases and adjacent watchlists, including sanctions lists, law enforcement lists, and, where your risk appetite calls for it, adverse media. Matching is undefined by design because exact-match logic can miss obvious variants. 

Step 3: Review potential matches

Many potential matches are not your customer. A reviewer compares the alert record against what you know about the applicant, such as date of birth, nationality, jurisdiction, occupation, and clears the ones that don’t line up. Document the reasoning on cleared alerts, not just confirmed ones. A false positive dismissed without documentation is the one an examiner may question.

Step 4: Assess confirmed hits 

A confirmed PEP doesn’t automatically mean the customer is too risky to onboard. Consider their seniority, country (the corruption profile and AML regime involved), role, whether the person is current or former, and whether your customer is the PEP or an RCA.

Step 5: Apply enhanced due diligence

Higher-risk PEP relationships call for enhanced due diligence. The FATF requires senior management approval, source of wealth and source of funds, and enhanced ongoing monitoring for all foreign PEPs. These requirements also apply to domestic and international organization PEPs in higher-risk cases. Tighter transaction monitoring thresholds and a shorter review cycle are how firms implement that in practice.

Step 6: Monitor and re-screen on an ongoing basis

People become PEPs after onboarding. Elections, appointments, and promotions change a customer's status without any action on their part, so a screen that runs only at signup goes stale immediately.

Plaid Monitor supports daily rescans of your customer base against sanctions and PEP lists. Each screening is marked as “cleared”, “pending review” when a hit surfaces, or “rejected” once a reviewer confirms a valid match. New hits go into a pending review queue for your team to manage. 

What is a PEP watchlist, and how is it used?

A PEP watchlist is a structured database of individuals holding or formerly holding prominent public functions, compiled from government directories, official gazettes, parliamentary registers, corporate registries, and media reports. Records typically include role, jurisdiction, dates in office, and known relatives and associates.

A PEP watchlist isn’t a sanctions list. Sanctions lists, such as the OFAC's Specially Designated Nationals (SDN) List, the United Nations (UN) Consolidated List, or the European Union (EU) Consolidated List, are legally binding. Providing services to a listed person on a sanctions list can be a criminal offense. On the other hand, a PEP watchlist carries no legal restriction.

What’s the difference between PEP screening vs sanctions screening vs KYC? 

These three checks get bundled into one onboarding flow, which makes it easy to forget they answer different questions and carry different obligations.

PEP screening vs sanctions screening 

Sanctions screenings can restrict a relationship outright, while PEP screening only flags individuals for closer review. If a customer is on a sanctions list, you generally can’t do business with them unless an OFAC license allows it.  You may also have blocking and reporting obligations with statutory deadlines since there’s no risk appetite to apply. 

PEP screening vs KYC 

KYC is the umbrella process of establishing a verified understanding of who your customer is (identity verification, beneficial ownership, customer due diligence, and risk rating). PEP screening is one component inside it, running against the identity data KYC produces. KYC tells you who the customer is, while PEP screening tells you what their public role implies about risk.

What should you look for when choosing PEP screening software and tools?

PEP screening software can vary. Here’s what to look for: 

• Data coverage and origin: Which jurisdictions are covered, which PEP tiers are included, whether RCAs are included, and how long former officials are retained.

• Match accuracy and settings: How well the software handles transliteration, name order, and diminutives. Can you fine-tune the sensitivity rather than apply one global threshold?

• Continuous monitoring: Daily rescans of the full customer base rather than periodic batch reviews, with configurable behavior for active and inactive customers.

• Review workflow: Features like alert assignment, role-based access, case notes, and a queue your analysts can actually use. 

• Audit trail: A clear record of every decision, including cleared alerts. Examiners want to see your reasoning, not just your outcomes.

• Integration and scale: API and webhook support, plus a shared view with identity verification data so PEP results sit alongside the onboarding record.

→ “With case management, ongoing monitoring, and list provisioning, Plaid Monitor fits all of our needs and saves us from going to multiple providers”

How Plaid helps with PEP screening

Plaid Monitor screens users against PEP and sanctions watchlists and adverse media sources. The lists are updated daily, and daily rescans scale to 100M+ users. Results appear in the same dashboard as Identity Verification, so the screening record sits beside the identity record it was built from. 

A Plaid enterprise customer reported reducing alert review time by up to 77%, saving almost 16 hours of manual screening work per month. Programs are configurable, so you can set match sensitivity, choose which lists to screen, and decide how ongoing screening behaves.

Plaid Monitor supports AML screening and watchlist checks as part of your compliance workflow. Explore Plaid Monitor or read the Monitor documentation to see how it fits your stack.