In banking, PEP stands for Politically Exposed Person.
A PEP is an individual who holds, or has held, a prominent public function. This includes politicians, government officials, judges, military leaders, and senior executives of state-owned companies.
Banks have a heightened duty of care when dealing with PEPs due to the increased risk of money laundering and other financial crimes. This is because PEPs may be more susceptible to bribery, corruption, and other illicit activities.
Banks often have specific policies and procedures in place for dealing with PEPs. These may include:
- Enhanced due diligence: This involves conducting more thorough background checks on PEPs, including verifying their identity, source of funds, and business activities.
- Increased monitoring: Banks may monitor PEP accounts more closely for unusual transactions or activity.
- Reporting requirements: Banks may be required to report suspicious activity involving PEPs to the relevant authorities.
It is important for banks to be aware of the risks associated with PEPs and to take appropriate measures to mitigate these risks.
