Politically Exposed Persons (PEPs) are individuals who hold or have held prominent public positions, such as government officials, high-ranking military personnel, and senior executives of state-owned enterprises. The term also applies to their immediate family members and close associates, as they may also have access to valuable information and resources.
The reason why PEPs are of particular interest to financial institutions and regulatory authorities is that they are considered to be at a higher risk of involvement in corruption, money laundering, and other illicit activities. As a result, financial institutions and other organizations are required to implement enhanced due diligence measures when dealing with PEPs to identify and mitigate the risks associated with these types of clients.
Overall, the purpose of identifying PEPs is to ensure that financial institutions and organizations can effectively manage the potential risks associated with these individuals and prevent the misuse of financial systems for illicit purposes.