Politically exposed person — who qualifies, what to do
A politically exposed person is a definition before it is a risk rating. Most of the argument inside firms is not about what to do with a PEP — Article 42 of Regulation (EU) 2024/1624 answers that in three measures — but about whether a given customer is one. The AMLR settles far more of that than the old framework did: it names the functions, sets population thresholds for the regional and local limbs, defines family members and close associates, and points at a single published list. This piece walks the definition, the three measures, the authoritative sources, and what happens when the person leaves office.
1. Which functions actually qualify
Article 2(1)(34) AMLR defines a politically exposed person as a natural person who is or has been entrusted with prominent public functions. Within a Member State the list runs: heads of State, heads of government, ministers and deputy or assistant ministers; members of parliament or of similar legislative bodies; members of the governing bodies of political parties, but only where the party holds seats in national executive or legislative bodies, or in regional or local ones representing constituencies of at least 50,000 inhabitants; members of supreme courts, constitutional courts or other high-level judicial bodies whose decisions are not subject to further appeal except in exceptional circumstances; members of courts of auditors or of the boards of central banks; ambassadors, chargés d’affaires and high-ranking officers in the armed forces; members of the administrative, management or supervisory bodies of enterprises controlled by the state, or — where the enterprise is a medium-sized or large undertaking or group — by regional or local authorities; and heads of regional and local authorities, including groupings of municipalities and metropolitan regions, again with at least 50,000 inhabitants. A residual limb catches other prominent public functions provided for by individual Member States.
Three further limbs sit outside the national one. In an international organisation: the highest-ranking officials, their deputies, board members or equivalent, plus representatives to a Member State or the Union. At Union level: functions equivalent to heads of State and government, ministers, parliamentarians, senior judges, auditors, central bankers, ambassadors and senior military officers. In a third country: functions equivalent to the national list.
Two details do real work in screening. The state-owned-enterprise limb turns on the control relationships in Article 22 of Directive 2013/34/EU, not on a shareholding percentage of the firm’s choosing — and where the controller is a regional or local authority it bites only above that Directive’s medium-sized-undertaking test. And the two 50,000-inhabitant thresholds mean the answer for a local politician depends on a population figure, a data point most screening files do not carry.
2. Family members and close associates
Article 46 extends the whole regime — Articles 42, 44 and 45 — to family members and to persons known to be close associates. Both terms are defined, and more narrowly than the phrases suggest.
A family member under Article 2(1)(35) is a spouse or a person in a registered partnership, civil union or similar arrangement; a child, and that child’s spouse or equivalent partner; and a parent. A sibling counts only for the most senior limb — heads of State and heads of government, and equivalent functions at Union level or in a third country. The brother of a serving minister is therefore not a family member here; the brother of a head of government is.
A person known to be a close associate under Article 2(1)(36) is either someone known to have joint beneficial ownership of legal entities or arrangements, or any other close business relations, with a PEP; or someone with sole beneficial ownership of an entity or arrangement known to have been set up for the de facto benefit of a PEP. Both limbs rest on a knowledge standard, which makes this the hardest part of the regime to evidence: family links are usually documentable, close association is a judgement the firm makes and must record. AMLA is due to issue guidelines on the criteria by 10 July 2027.
3. The three measures
A PEP classification prohibits nothing. Article 42(1) adds exactly three measures on top of the ordinary due diligence in Article 20, and they apply to occasional transactions as well as business relationships. What supervisors find is rarely a firm banking PEPs; it is a firm flagging PEPs and then not evidencing these three.
| # | Measure | What “done” looks like |
|---|---|---|
| 1 | Senior management approval for carrying out the occasional transaction, or for establishing or continuing the business relationship | A dated decision by a named person with the authority to take it — not a system flag cleared by an analyst |
| 2 | Adequate measures to establish the source of wealth and source of funds involved | Two separate answers, separately evidenced: how the money was accumulated, and where this money came from |
| 3 | Enhanced, ongoing monitoring of the business relationship | A monitoring regime demonstrably different from the standard one — different thresholds, different frequency — not merely a label |
Note the wording of the first: approval is required for continuing a relationship, not only for establishing one. A customer who becomes a PEP mid-relationship triggers it at that point, so the trigger has to hang off a re-screening event. A control design in which senior-management approval is reachable only from the onboarding workflow will fail on the customer who is elected in year three.
4. Where the authoritative list lives
Article 43 builds a chain ending in a single published document — worth knowing, because commercial screening data is a convenience rather than the source of truth.
Each Member State issues and keeps up to date a list of the exact functions qualifying under its national law, and must ask each international organisation accredited on its territory to do the same. Those lists also cover functions entrusted to representatives of third countries and international bodies accredited at Member State level, and go to the Commission and AMLA. The Commission draws up the Union-level list, assembles everything into a single list, publishes it in the Official Journal of the European Union, and AMLA makes it publicly available on its website.
That gives a firm a defensible reference point for two recurring arguments: whether a particular office qualifies at all, and which national variations apply to a cross-border book. Where the notified lists reveal common additional categories relevant across the Union, the Commission may supplement the definition by delegated act — so the perimeter can widen without the Regulation being reopened.
5. Leaving office does not switch the regime off
Article 45 handles the person who ceases to hold a prominent public function, and it is most often implemented as a timer when it is actually a risk judgement.
The firm must take the continuing risk arising from the former function into account in its Article 20 risk assessment, and apply one or more of the enhanced measures in Article 34(4) until that risk no longer exists — and in any case for not less than 12 months after the person ceased to hold it. Twelve months is a floor, not an expiry date. Article 45(3) applies the same duty to new business, so a “former PEP” cannot be onboarded as an ordinary customer merely because the office ended before the application.
The Article 34(4) menu the firm chooses from runs to seven items: additional information on the customer and beneficial owners; on the intended nature of the relationship; on source of funds and source of wealth; information on the reasons for transactions and their consistency with the relationship; senior-management approval; enhanced monitoring through more and better-timed controls; and requiring the first payment through an account in the customer’s name at a credit institution held to standards no less robust than the AMLR’s.
6. Three scenarios
Scenario one: the mayor who was never screened. A firm onboards a retail customer who heads a municipal authority in another Member State; screening returns no match because the vendor taxonomy is oriented to national office-holders. Facts to rule: heads of regional and local authorities qualify at 50,000 inhabitants or more, and each Member State publishes the exact functions qualifying under its own law. What the analyst does: check the stated occupation against the published national list rather than only the vendor match, and record the population basis for the conclusion. Outcome: a defensible classification either way, and the screening gap logged as a data problem rather than a false negative.
Scenario two: the customer elected in year three. A long-standing business customer becomes a deputy minister; re-screening raises the flag and the analyst applies enhanced monitoring. Facts to rule: Article 42(1)(a) requires senior management approval for continuing the relationship, and source of wealth and source of funds must be established even where the relationship predates the appointment. What the compliance officer does: route the case to a named senior manager for a dated continuation decision, and open source-of-wealth work on the historical accumulation instead of leaning on transaction history already held. Outcome: all three measures evidenced from the date of appointment, not one.
Scenario three: the business partner who is not family. A customer shares beneficial ownership of a holding company with the sibling of a serving minister. Facts to rule: a sibling counts only for the head of State and head of government limb, so the minister’s sibling is not a family member — but joint beneficial ownership with a PEP, or any other close business relations, makes a person a known close associate, and Article 46 applies the full regime to them. What the analyst does: test against the close-associate limb rather than stopping at the family-member table, and record what the firm knew and how. Outcome: the right classification for the right reason, in a file that survives the question “on what basis did you decide?”.
7. Two adjacent provisions worth holding
Article 44 covers PEPs who are beneficiaries of life or other investment-related insurance policies: reasonable measures must establish whether the beneficiary, or where relevant its beneficial owner, is a PEP, no later than at payout or assignment. Where higher risks are found, senior management is informed before payout and the whole policyholder relationship gets enhanced scrutiny.
Article 34(5) then adds a wealth-management overlay that PEP files frequently cross. Where a higher-risk relationship involves handling assets of at least EUR 5,000,000 through personalised services for a customer holding total assets of at least EUR 50,000,000 — excluding the private residence — three further measures apply on top: risk-mitigating procedures specific to the personalised service, additional information on source of funds, and management of conflicts of interest between the customer and the staff handling compliance for them.
8. FAQ
Can we refuse to bank PEPs?
The AMLR does not require refusal and does not authorise a blanket ban — it requires three additional measures. A categorical exit policy raises de-risking questions rather than answering them.
How long does PEP status last after leaving office?
Enhanced measures continue until the residual risk from the former function no longer exists, and in any case for not less than 12 months from the date the person ceased to hold it. The end of that period is a recorded risk decision, not an automatic reset.
Is a local politician a PEP?
Heads of regional and local authorities qualify where the authority — including groupings of municipalities and metropolitan regions — has at least 50,000 inhabitants. The same threshold applies to governing-body members of political parties represented at regional or local level.
Are siblings covered?
Only for heads of State and heads of government, and equivalent functions at Union level or in a third country. For every other prominent public function the family-member definition covers spouses and equivalent partners, children and their partners, and parents.
Where is the definitive list of qualifying functions?
Member States notify their national lists to the Commission and AMLA; the Commission adds the Union-level list, assembles a single consolidated list, and publishes it in the Official Journal. AMLA makes that single list publicly available on its website.
Who has to approve a PEP relationship?
Senior management, for carrying out the transaction or for establishing or continuing the relationship. Because “continuing” is included, the approval must be reachable from a periodic re-screening event and not only from onboarding.
Does the regime reach employees of state-owned companies?
It reaches members of the administrative, management or supervisory bodies of enterprises controlled by the state under Article 22 of Directive 2013/34/EU — and, where the controller is a regional or local authority, only for medium-sized or large undertakings or groups. Ordinary employees are not caught by that limb.
9. What to do, today
- Check screening configuration against the published national lists, not only a vendor taxonomy — the residual limb in Article 2(1)(34)(a)(ix) means the perimeter is set nationally.
- Add the population test to the local-office logic. Without an inhabitants figure the regional and local limbs cannot be applied at all.
- Make senior-management approval reachable from re-screening, not just onboarding, and capture it as a dated decision by a named person.
- Keep source of wealth and source of funds as two separately evidenced answers, and open source-of-wealth work afresh when an existing customer becomes a PEP.
- Write the close-associate test into the procedure with a record of what was known and how, and watch for the AMLA guidelines due by 10 July 2027.
- Replace automatic 12-month de-flagging with a recorded risk decision, and make sure Article 45(3) catches a former PEP applying as a new customer.
- Check whether any PEP relationship crosses the Article 34(5) thresholds, which add three further measures on top of the Article 42 three.
Related: Enhanced due diligence · Source of funds vs source of wealth · What is a beneficial owner · The EU AML package timeline
