š¹ Definition
AML PEP Levels refer to the categorization of Politically Exposed Persons (PEPs) into different risk tiers, based on their level of political influence and potential exposure to bribery, corruption, or misuse of public funds. These levels help financial institutions implement a risk-based approach and determine the appropriate due diligence measures required when onboarding or maintaining relationships with PEPs.
š¹ Common Classification of PEP Levels
Level 1: Prominent International Figures
- Individuals holding high-ranking positions in international organizations, such as the United Nations, IMF, World Bank, or regional political bodies (e.g., European Union, ASEAN).
- Risk: Very high, due to global influence and cross-border financial access.
Level 2: Domestic/National PEPs
- Senior officials within a country, such as heads of state, ministers, members of parliament, judges of high courts, or top-ranking military personnel.
- Risk: High, given access to national-level power and budget control.
Level 3: Regional/State PEPs
- Public officials operating at regional or state levels, such as governors, regional ministers, or CEOs of state-owned enterprises.
- Risk: Moderate to high, depending on the nature of responsibilities and level of oversight.
Level 4: Local PEPs
- Individuals holding influence at the municipal or community level, such as mayors, local council members, or senior municipal administrators.
- Risk: Moderate, though may increase in countries with poor governance.
š¹ Risk and Due Diligence Considerations
High-Risk Tiers (Levels 1 & 2):
- Typically trigger Enhanced Due Diligence (EDD)
- Require source of wealth/funds verification, close monitoring of transactions, and frequent risk reviews
Factors Affecting PEP Risk Beyond Level Classification:
- Jurisdiction risk (corruption index, FATF status)
- Nature of position (budget authority, decision-making power)
- Proximity to financial flows or procurement roles
- Close associates or family members involved in the financial relationship
Ongoing Monitoring Obligations:
- Periodic re-screening against updated PEP lists
- Transaction pattern analysis for red flags or anomalies
- Watchlist and adverse media screening
