What are politically exposed person checks?

Under the AML/CTF Act, reporting entities must identify and verify their customers and apply measures that match the risk each one presents. AUSTRAC guidance treats PEPs as higher risk, so a PEP check runs at onboarding as part of customer identification. The customer's name and details are screened against commercial PEP databases, government sources and adverse media, and any match is confirmed with other identifiers such as date of birth and address to rule out false positives.

Rescreening then happens on a risk-based cadence, more often for higher-risk customers, and whenever something changes: an adverse media hit, a corporate restructure that creates new beneficial owners, or a move into a higher-risk product. Every search, decision and approval is recorded so the file stands up to an AUSTRAC audit.

PEP categories are broader than many people expect. Foreign PEPs hold public office in another country. Domestic PEPs hold prominent public functions in Australia: senior politicians, judges and senior public servants. International organisation PEPs are officials or executives of bodies such as multilateral institutions. Family members (a spouse or partner, parents, children and siblings) and close business or personal associates are treated with the same care, because illicit funds are often moved through proxies.

Whether a local councillor or mayor is a PEP depends on how prominent the role is and whether the person has influence over public funds, so the decision is made against the reporting entity's documented risk criteria. When a PEP finding is recorded, the file should show the relationship, the source evidence and how certain the match is.

A confirmed PEP or associate match triggers enhanced due diligence (EDD) rather than an automatic refusal. The entity confirms the person's identity and their link to the PEP, verifies their position and how long they have held it, and asks for evidence of source of wealth and source of funds, such as tax returns, property records or business financials. A foreign PEP automatically triggers senior management approval, source of wealth and funds checks and enhanced monitoring. For a domestic or international organisation PEP, the same measures apply where the entity assesses the risk as high.

The account is then monitored more closely, with transaction limits or alerts where the risk warrants it, and reviewed on a set schedule. If EDD uncovers unexplained wealth or suspicious transactions, the entity considers lodging a suspicious matter report with AUSTRAC. PEP lists and sanctions lists serve different purposes: a sanctions hit requires immediate blocking, while a PEP hit prompts EDD, so both are screened together.