What is a PEP? Politically exposed persons under the Wwft
A PEP — a politically exposed person — is someone who holds or recently held a prominent public function, together with their immediate family members and known close associates. If you enter into a business relationship with a PEP, you must apply enhanced due diligence under the Wwft, the Dutch anti-money laundering and anti-terrorist financing act. PEP status is emphatically not a suspicion: it is a risk classification that calls for additional care, and refusing every PEP as a matter of course misapplies the law. Three measures are mandatory — senior management approval, establishing source of wealth and source of funds, and enhanced ongoing monitoring.
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Who counts as a PEP
A PEP is someone who holds, or held within the past year, a prominent public function. The test is functional, not one of fame or wealth: a well-known entrepreneur or television presenter is not a PEP, while a municipal executive with budget authority — the Dutch wethouder, the alderman-equivalent on a city council — may well be. The catalogue of prominent public functions sits in the Uitvoeringsbesluit Wwft 2018, the implementing decree to the Dutch anti-money laundering act, and it mirrors the EU definition. If you already run a PEP policy in another member state, the categories below will look familiar; what differs is the supervisory expectation of how you evidence them.
| Category | Examples |
|---|---|
| Heads of state and government | Head of state, head of government, minister, state secretary or deputy minister |
| Parliament | Members of parliament or of a comparable legislative body |
| Judiciary | Members of supreme courts and of other high-level judicial bodies whose decisions are not subject to further appeal |
| Audit and central banking | Members of courts of audit and of the boards of central banks |
| Diplomacy and defence | Ambassadors, chargés d'affaires and high-ranking officers in the armed forces |
| State-owned enterprises | Members of the administrative, management or supervisory bodies of state-owned enterprises |
| Political parties | Members of the governing body of a political party |
| International organisations | Directors, deputy directors and members of comparable bodies of international organisations |
Middle-ranking and junior officials fall outside the definition. Since the fourth anti-money laundering directive the regime also applies to domestic PEPs, and this is the point foreign firms most often carry over incorrectly from home. If your group policy screens only for foreign officials — a common legacy of pre-2017 rules in several jurisdictions — your Dutch files will systematically miss Dutch ministers, members of the States General, judges of the Hoge Raad and board members of De Nederlandsche Bank. Whether a PEP is domestic or foreign does not decide whether you take measures; it may legitimately influence how heavy those measures are.
Family members and close associates (RCAs)
Family members and close associates are commonly abbreviated to RCAs — relatives and close associates. They are not PEPs themselves; they are people whose link to a PEP means the same enhanced measures apply. The abbreviation matters mostly because screening tools and vendor lists label them that way, and a file that treats an RCA hit as a false positive because "this person is not a PEP" misreads the whole point.
The circle around the PEP is where most files fall short, and it is precisely where the risk tends to sit: money that moves through a spouse, an adult child or a jointly held company rather than through the office-holder directly. The two categories are defined narrowly enough to be workable and broadly enough to catch the obvious structures.
| Category | Who is included | Where it goes wrong in practice |
|---|---|---|
| Immediate family members | The spouse or a partner treated as equivalent to a spouse; children and their spouses or equivalent partners; parents | Files record the client only. Adult children with their own accounts and their own names are rarely connected back to the parent |
| Persons known to be close associates | Persons who hold a joint beneficial interest with the PEP in a legal entity or arrangement, and persons who hold such an entity for the benefit of the PEP | Nothing in an onboarding form reveals this. It only surfaces if you map beneficial ownership and ask the second question below |
Note that the definition of close associate runs through beneficial ownership, which means your PEP work and your UBO analysis are the same exercise viewed from two angles. A firm that identifies UBOs properly has most of what it needs to spot close associates; a firm that treats UBO identification as a registry look-up will not have it.
Practical consequence: your intake question cannot simply be do you hold a public function. It must also ask whether the client is a family member of, or has a business connection to, someone who does. Without that second question you miss the entire associate category.
Why PEP status is not a suspicion
The PEP rules exist because public power carries an elevated risk of exposure to bribery and corruption — not because officials are presumed dishonest. That distinction has direct operational consequences, and it is worth stating explicitly in your policy, because staff who misread it produce two opposite failures.
The first failure is refusing every PEP outright. Institutions that do this are applying the law incorrectly. Such de-risking does not reduce your risk; it moves the client to a party that looks less carefully, and it costs you business you had no reason to lose. Dutch supervisors have been consistent on this point: the statute asks you to know more, not to say no. The second failure is the mirror image — treating PEP status as a label to be recorded and then ignored, so that the file contains a flag but no additional knowledge. Both leave you unable to explain your decision when a supervisor or a correspondent bank asks.
PEP status is a risk classification. It changes what you must find out and how closely you watch. It does not, on its own, say anything about the integrity of the person in front of you.
The three mandatory measures
Where a client, a UBO or a representative is a PEP, three measures apply on top of ordinary customer due diligence. They are cumulative: doing two of the three well does not compensate for omitting the third.
| Measure | What it means in practice |
|---|---|
| Senior management approval | Entering into or continuing the relationship is approved by someone with sufficient seniority, and that approval is recorded with a date and the reasoning behind it. A name in a workflow tool without a rationale is not an approval a supervisor can review |
| Source of wealth and source of funds | Two separate enquiries. Source of wealth asks where the total accumulated wealth comes from; source of funds asks where the money used in this particular relationship comes from. A salary slip answers the second question and rarely the first |
| Enhanced ongoing monitoring | Tighter alert thresholds, shorter review cycles and more active follow-up of signals than for an ordinary client. Enhanced monitoring that consists only of a shorter review interval is not monitoring |
For a file that will withstand review, the sequence matters as much as the content:
- Establish and record the status — client, UBO, representative or authorised signatory, and on what basis: direct office-holder, family member or close associate.
- Document source of wealth and source of funds separately, with supporting evidence proportionate to the amounts and the country risk involved.
- Obtain senior management approval before the relationship starts, or before it continues if the status was identified later, and record what was weighed.
- Set the enhanced monitoring parameters explicitly — which thresholds, which review frequency, who follows up — so that the setting can be audited rather than inferred.
- Re-assess at each review and when a trigger event occurs, and record the outcome even when nothing has changed.
These sit on top of, not instead of, the standard steps described in our customer due diligence walkthrough.
The PEP declaration and why it is not enough
Many institutions ask clients to sign a PEP declaration: a form on which the client states whether he or she holds a prominent public function, or is a family member or close associate of someone who does. It is a useful intake instrument. It is not verification — it is a statement by the client, and the obligation to test that statement against independent information stays with you.
There are two reasons you cannot rely on the declaration alone. Someone with something to hide does not tick yes. And most people genuinely do not know that their father-in-law's business partner falls within the definition, because the definition is a legal construct rather than an intuitive one. Always combine the declaration with a check against a PEP list or with structured open-source research, and record which of the two you used.
Screening in practice
PEP screening resembles sanctions screening, but the consequence of an error is different. A missed sanctions hit is a breach in itself; a missed PEP hit is primarily a hole in your risk picture, which surfaces later as an unexplained transaction you cannot account for. The two processes are often run on the same engine, which is efficient but hides the fact that they need different tuning — see our note on sanctions compliance for where the two diverge. The recurring failure points:
- Transliteration. Names originating in Arabic, Cyrillic or Chinese script have several accepted Latin spellings. Screening configured for exact matching misses them systematically, and fuzzy matching that has never been tested is an assumption rather than a control.
- Screened only at onboarding. A client can become a PEP after the relationship has started — through election, appointment or a family member's appointment. Without periodic re-screening you will never learn of it.
- Only the client screened. UBOs, directors and authorised representatives belong in the same run. This is the single most common gap we see in files inherited from a group onboarding platform.
- List coverage unknown. Do you know which countries, which function levels and which degrees of kinship your data supplier actually delivers? If not, you do not know your own coverage, and you cannot answer the question when it is put to you.
- No record of the negative result. A screening run that produced no hits is evidence only if it was retained with its date, its parameters and the list version used.
Testing screening with deliberately distorted names and known false negatives is the only way to establish that the configuration does what the policy claims.
How long someone remains a PEP, and what changes in 2027
Once the function ends, the Wwft requires you to maintain the enhanced measures for a minimum of twelve months. After that you make a risk-based assessment of whether the elevated risk has genuinely gone. For a former minister with continuing influence and an intact network, it seldom has after a single year; for a local official without budget authority, it usually has. The twelve months is a floor, not an expiry date, and the point that matters for your file is the reasoning: record why you are ending or maintaining the status, not merely the date on which you did so.
From 10 July 2027 the EU anti-money laundering regulation (AMLR) applies directly across all member states, replacing much of what national implementing legislation now covers. For PEPs this means a more prescriptive and more uniform set of definitions and record-keeping expectations, and less room for divergence between your Dutch entity and its sister entities elsewhere in the EU. Institutions that put their PEP identification, source-of-wealth files and screening coverage in order now will have correspondingly less to repair then. For the wider picture of how the Dutch framework fits together in the meantime, see our guide to AML/CFT in the Netherlands.
Frequently asked questions
What is a PEP?
A PEP, or politically exposed person, is someone who holds a prominent public function or held one within the past year. Examples include a head of state, a minister, a member of parliament, a senior judge, a central bank board member, an ambassador, a high-ranking military officer and a board member of a state-owned enterprise. Immediate family members and known close associates fall within the definition as well.
Is a PEP suspicious?
No. PEP status says nothing about a person's integrity; it is a risk category, not an accusation. The reasoning behind it is that people with public power face a heightened risk of becoming involved in bribery or corruption, which justifies additional care rather than refusal. An institution that rejects all PEPs as a matter of policy is applying the law incorrectly and losing clients without need.
What is a PEP declaration?
A PEP declaration is a form on which a client states whether he or she holds a prominent public function, or is a family member or close associate of someone who does. It is a useful intake instrument but not a conclusive control, because it is the client's own statement. You remain obliged to test that statement against independent information such as a PEP list or structured open-source research.
Which measures apply to a PEP?
Three obligations apply on top of ordinary customer due diligence: approval of the relationship by senior management, investigation into the source of the wealth and into the source of the funds used in the relationship, and enhanced ongoing monitoring of transactions. The three are cumulative, so performing two of them well does not compensate for omitting the third.
How long does someone remain a PEP after leaving office?
The Wwft requires you to maintain the enhanced measures for at least twelve months after the function ends, and then to make a risk assessment of whether the elevated risk has disappeared. In practice the risk attached to senior functions often persists for longer. Record the reasoning for ending or maintaining the status rather than only the date.
Do family members and business partners fall within scope?
Yes. Immediate family members are covered: the spouse or equivalent partner, children and their spouses or partners, and parents. The same applies to known close associates, meaning persons who hold a joint beneficial interest with the PEP in a legal entity or arrangement, or who hold such an entity for the benefit of the PEP. This second category is the one most frequently missed in practice.
Do I have to screen for domestic PEPs as well?
Yes. Since the fourth anti-money laundering directive the PEP regime applies to domestic politically exposed persons and to officials of international organisations as well as to foreign officials. For a firm entering the Dutch market this means Dutch ministers, members of parliament and central bank directors must be identified in your files. The distinction between domestic and foreign does not determine whether you take measures, but it may influence how heavy those measures are.
What does RCA mean in PEP screening?
RCA stands for relatives and close associates: the family members and close business associates of a politically exposed person. An RCA is not a PEP, but the same enhanced due diligence measures apply — senior management approval, establishing the source of wealth and funds, and enhanced ongoing monitoring. Most screening tools flag RCAs with their own label, which is why files sometimes dismiss an RCA hit on the mistaken ground that the person is not a PEP.
Sources
- Wet ter voorkoming van witwassen en financieren van terrorisme (Wwft) — wetten.overheid.nl
- Uitvoeringsbesluit Wwft 2018 — wetten.overheid.nl
- Uitvoeringsregeling Wwft — wetten.overheid.nl
- Regulation (EU) 2024/1624 (AMLR) — EUR-Lex
- Wwft — Open Boek Toezicht, De Nederlandsche Bank
- Financial Action Task Force (FATF)
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