A Politically Exposed Person (PEP) is an individual entrusted with a prominent public function. Due to their position, they pose higher money laundering/terrorism financing risks. PEPs include heads of state, senior politicians, senior judicial officials, high-ranking military officers, and board members of state-owned enterprises.

FATF Recommendation 12 requires financial institutions to implement PEP screening measures. This includes: (1) identifying PEPs among customers, (2) assessing their risk level, (3) applying enhanced due diligence, (4) establishing senior management approval for business relationships. The FATF 40 Recommendations are the global standard for AML/CFT.

FATF categorises PEPs into: Domestic PEPs (within the country), Foreign PEPs (from other countries), and International Organisation PEPs. Family members and close associates of PEPs also fall under PEP regulations. The key is whether the person holds a prominent public function - not all government employees are PEPs.