How to Screen for Politically Exposed Persons (PEPs)

Introduction

Politically exposed persons (PEPs) are individuals who hold or have recently held prominent public positions — heads of state, senior government officials, judges, military leaders, and senior executives of state-owned enterprises. Due to their access to public resources and decision-making authority, PEPs are considered at higher risk for involvement in corruption and money laundering. Canadian AML regulations require reporting entities to determine whether their clients are PEPs and to apply enhanced due diligence when they are.

Key Points

1. Three categories of PEPs: FINTRAC recognizes foreign PEPs (individuals holding public positions in a country other than Canada), domestic PEPs (individuals holding public positions in Canada), and heads of international organizations (leaders of organizations established by international treaties). Each category carries different obligations.

2. Family members and close associates: PEP screening must extend beyond the individual client to include their immediate family members (spouse, children, parents, siblings) and close associates (business partners and individuals with close personal relationships).

3. Ongoing obligation: PEP status is not static. A client who was not a PEP at onboarding may become one, and a former PEP may still carry elevated risk for a period after leaving office. Screening must be performed periodically, not just at onboarding.

4. Determination, not just screening: FINTRAC requires a “reasonable measures” determination — you must take steps to determine whether a client is a PEP, not simply rely on the client’s self-declaration.

Step-by-Step PEP Screening Process

1. Collect client information: Gather the client’s full legal name, date of birth, and country of residence. This information forms the basis of the PEP screening query.

2. Screen against PEP databases: Use a reputable PEP database that covers foreign PEPs, domestic PEPs, heads of international organizations, and their family members and associates. The database should be updated regularly to reflect changes in political appointments.

3. Review potential matches: PEP screening often produces potential matches that require human review. Compare the match details — name, date of birth, country, position — against the information you have about your client to determine whether the match is genuine.

4. Document the outcome: Record the screening date, the database used, the results, and your determination in the client’s compliance file. If the client is determined to be a PEP, document the enhanced due diligence steps you will apply.

5. Apply enhanced measures for confirmed PEPs: For confirmed PEPs, obtain senior management approval for the business relationship, establish the source of funds, and implement enhanced ongoing monitoring.

6. Re-screen periodically: Schedule regular re-screening of your client book against updated PEP databases to detect changes in status.

How Athenty Can Help

Athenty, a verification intelligence company, provides Smart IDV and KYC services with integrated PEP screening capabilities.

1. Automated PEP screening: Smart KYC screens every client against comprehensive global PEP databases — including foreign PEPs, domestic PEPs, and heads of international organizations — at the point of onboarding.

2. Family and associate coverage: Screening extends to known family members and close associates, as required by FINTRAC guidance.

3. Ongoing re-screening: Clients are automatically re-screened when PEP databases are updated, ensuring that changes in status are detected without manual intervention.

4. Clear match reporting: Potential matches are presented with full context — name, position, country, and match confidence — enabling efficient human review and documented determination.

Conclusion

PEP screening is a regulatory requirement that directly addresses one of the highest-risk categories of money laundering exposure. A structured, documented screening process — supported by reliable databases and automated re-screening — is the most effective way to meet this obligation. Athenty’s Smart KYC integrates PEP screening into the standard client onboarding workflow, making it a seamless part of your compliance program.