What is a politically exposed person (PEP)?
A PEP holds a prominent public office, or is their family member or close associate. The Australian legal meaning, and what Tranche 2 firms must do.
A politically exposed person (PEP) is someone who holds a prominent public office, such as a member of parliament, a senior judge or the head of a local council, along with their family members and known close associates. Australia's AML/CTF Act sets out three types: domestic, foreign and international organisation. When a customer, a beneficial owner or the person a service is for is a PEP, you may have to run extra checks before you start.
This page is for accountants, lawyers, conveyancers and real estate agents, regulated by the Australian Transaction Reports and Analysis Centre (AUSTRAC) since 1 July 2026.
What the law says a PEP is
Section 5 of the AML/CTF Act defines all three types. Section 1-5 of the AML/CTF Rules 2025 lists the offices that make someone a domestic PEP. The type follows the office, not the person's nationality. The definitions follow the international standard; our guide to FATF PEP guidance sets out where they differ.
| Type | Who it covers | Examples |
|---|---|---|
| Domestic PEP | Members of the Commonwealth, state and territory parliaments, and the offices listed in Rules section 1-5 | Governors, senior judges, heads of state departments, the head of a local government council, members of a parliamentary party's governing body, the Defence chiefs |
| Foreign PEP | A prominent office in the legislature, executive or judiciary of a foreign country | Heads of state, ministers, legislators, supreme court judges, ambassadors, senior military officers, heads of state-owned companies |
| International organisation PEP | A prominent function in a public international organisation | A head, deputy head or board member of a United Nations body |
Family members and close associates
Each type also covers the office holder's family members and close associates, who are PEPs of the same type. A family member includes a spouse or de facto partner, a child, a child's spouse or partner, and a parent. A close associate is someone known, from public or readily available information, to jointly own a company or trust with the office holder, to own one for their benefit, or to have other close business relations with them.
What the 2024 reforms changed
The AML/CTF Amendment Act 2024 moved the definitions from the Rules into the Act. Domestic PEPs became a fixed list of offices, replacing the 2007 Rules' general test of "a prominent public position or function". Close associates now include anyone with other close business relations. The check now also covers people acting for the customer, and must happen before the service starts. Your policies must now deal with former PEPs. The split between foreign PEPs and high-risk domestic ones did not change.
What a Tranche 2 business must do
Before you provide a designated service, you must establish on reasonable grounds whether a PEP is involved, covering the customer, anyone acting for them, any beneficial owner and anyone the service is for, such as a trust beneficiary (Act section 28). Keep records of how you decided (section 111).
| Obligation | Foreign PEP | Domestic or international organisation PEP |
|---|---|---|
| Enhanced customer due diligence (Act s 32) | Always | If the customer's money laundering and terrorism financing (ML/TF) risk is high |
| Senior manager approval before you start (Rules s 5-5) | Always | If high risk |
| Source of wealth and source of funds established before you start (Rules s 6-23) | Always | If high risk |
| An existing customer becomes a PEP (Rules ss 5-5, 6-24) | Review their know your customer (KYC) information; a senior manager decides whether to continue | The same, if high risk |
Key point
Under Australia's AML/CTF Act, a reporting entity must apply enhanced customer due diligence when the customer, a beneficial owner or anyone acting for the customer is a foreign PEP.
AUSTRAC describes source of funds as how and where the money for a specific transaction was obtained, and source of wealth as where the customer's entire wealth and assets came from. The evidence for each is in enhanced due diligence for PEPs. The triggers are in what enhanced due diligence is and when enhanced due diligence is required.
Where accountants get it wrong
- Domestic PEPs
- Members of Australian parliaments, and the offices listed in Rules s 1-5Such as a Supreme Court judge or the head of a state department, and their families
- Local councils
- The head of the council, such as a mayorAn ordinary councillor is not on the list
- Former PEPs
- No longer a PEP once they leave the positionNo fixed cooling-off period, but the former role can keep their risk high. Your policies must deal with when a senior manager approves one
- Domestic PEP risk
- Not automatically highIn AUSTRAC’s examples, a new mayor and a federal politician’s child are rated medium risk, and neither needs senior manager approval
- Foreign PEPs
- The extra measures, whatever the risk ratingEnhanced due diligence, senior manager approval, and source of wealth and source of funds, before you start
- Family members
- Spouse or de facto partner, child, child’s spouse or partner, parentPEPs of the same type as the office holder
Sources: AUSTRAC, Politically exposed persons (PEPs); AUSTRAC, Domestic PEP examples; Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (ss 5, 32); Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (ss 1-5, 5-5, 6-23) Reviewed
"Only foreign politicians count"
Domestic PEPs are in the Act too. A state MP, a Supreme Court judge and the head of a state department are all domestic PEPs, and so are their families.
"Every councillor is a PEP"
The Rules list the head of a local government council, not every councillor. AUSTRAC's own example is an accounting client who is elected mayor and so becomes a domestic PEP.
"A PEP is a PEP for life"
AUSTRAC says a person stops being a PEP when they leave the position. There is no fixed cooling-off period, but the former role can keep their risk high. Your policies must deal with when a senior manager approves a former PEP, and AUSTRAC expects that approval.
"Every PEP is high risk"
Not domestic PEPs. In AUSTRAC's examples, a new mayor and a federal politician's child are rated medium risk, and neither needs senior manager approval. Foreign PEPs get the extra measures whatever the rating.
Key point
Under Australia's AML/CTF Act, the spouse or de facto partner, child, child's partner and parent of an office holder are PEPs of the same type.
A worked example
The worked example, step by step
A family trust for a couple, set up by an accounting practice
- Onboarding
Ask about PEP status
One client says her father is a minister in another country’s government.
- The office
Her father is a foreign PEP
The office decides the type, not the person’s nationality.
- Family members
The couple are foreign PEPs too
She is one as his child, and her husband as the spouse of his child.
- Before you start
Apply the foreign PEP measures
Enhanced due diligence, senior manager approval, and source of wealth and source of funds.
If her father were a state MP, both would be domestic PEPs, and the risk rating would decide.
-
Set up the trust
Sources: Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (ss 5, 32); Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (ss 5-5, 6-23); AUSTRAC, Politically exposed persons (PEPs) Reviewed
An accounting practice is asked to set up a family trust for a couple, a designated service under the Act. Asked during onboarding, one says her father is a minister in another country's government.
Her father is a foreign PEP, so she is one as his child, and her husband is one as the spouse of his child. Before starting, the practice must apply enhanced due diligence, get senior manager approval, and establish their source of wealth and source of funds. If her father were a state MP, both would be domestic PEPs, and the practice's risk rating would decide whether those steps apply.
What StackGo does here
StackGo's IdentityCheck verifies identity, then screens the legal name and date of birth from the ID document against over 3,000 PEP data sources, plus sanctions and adverse media, for every party, including directors and beneficial owners. A possible match is a prompt to look, and you decide. Assess records a High, Medium or Low risk rating and the decision against the client, and Monitor re-screens monitored clients every month. Senior manager approval and source of wealth evidence follow your own anti-money laundering and counter-terrorism financing (AML/CTF) policies, on the same client file. See how Screen works.
Book a demo to see a PEP screen run on a client record.
Frequently asked questions
Is a mayor a politically exposed person?
Yes. The Rules list the head of a local government council as a domestic PEP.
Is a PEP the same as a sanctioned person?
No. The Act asks two separate questions: is the person a PEP, and are they designated for targeted financial sanctions.
Do I have to report a PEP to AUSTRAC?
No. AUSTRAC says PEPs are not automatically involved in unlawful activity. You lodge a suspicious matter report only when you suspect something on reasonable grounds.
Sources
Checked on 24 October 2026.
- Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (ss 5, 28, 32, 111, table 6)
- Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (ss 1-5, 5-5, 6-23, 6-24)
- Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024
- AML/CTF Rules 2007, compilation of 26 January 2024
- AUSTRAC, Politically exposed persons (PEPs), updated 29 July 2026
- AUSTRAC, Domestic PEP examples, updated 24 July 2026
- AUSTRAC, Source of funds and source of wealth, updated 13 October 2026
- AUSTRAC media release, laws cover thousands more businesses, 1 July 2026