Enhanced due diligence for PEPs in Australia
Under Australia’s AML/CTF Act, a foreign politically exposed person (PEP) always triggers enhanced due diligence, and a domestic or international organisation PEP triggers it when the customer is high risk. Before you provide the service, you establish their source of funds and source of wealth and get senior manager approval. Then you keep monitoring.
This guide is for compliance officers and practice managers at reporting entities, including the accountants, lawyers, conveyancers and real estate agents regulated from 1 July 2026. It sets out the steps Australian Transaction Reports and Analysis Centre (AUSTRAC) expects. They apply when a politically exposed person (PEP) is your customer, a beneficial owner or the person a service is for.
Who counts as a PEP?
A PEP is an individual entrusted with significant public responsibilities and power. The AUSTRAC guidance on PEPs follows section 5 of the AML/CTF Act and names three types: foreign, domestic and international organisation.
Domestic PEPs include members of Commonwealth, state and territory parliaments, the Governor-General, High Court justices and senior judges. Heads of state government departments and local councils, and the most senior defence officers, are also on the list.
Family members of a PEP are PEPs of the same type. So are known close associates. On public or readily available information, they co-own a company or trust with the PEP, own one for the PEP’s benefit, or have other close business relations with them.
Being a PEP does not mean someone is involved in crime. AUSTRAC asks you to assess each PEP’s risk case by case. For the international standard behind these rules, see our guide to FATF PEP guidance.
When is enhanced due diligence required for a PEP?
Three types of PEP, and a former PEP
| Type | Who | Enhanced due diligence and senior manager approval |
|---|---|---|
| Foreign PEP | Holds a prominent public position in a foreign country, such as a head of state, minister, supreme court judge or ambassador | Always |
| Domestic PEP | Holds a prominent public position in Australia, such as a member of parliament, a senior judge or the head of a state department | Where the customer is high risk |
| International organisation PEP | A head, deputy head or board member of a public international organisation, such as a United Nations body | Where the customer is high risk |
| Family member or known close associate | Connected to a PEP of one of the types above | The same as that type |
| Former PEP | Has left the position, so is no longer a PEP | Senior manager approval always; enhanced due diligence if high risk. No fixed cut-off |
Source: AUSTRAC, Politically exposed persons (PEPs) Reviewed
It depends on the type. A foreign PEP always triggers enhanced customer due diligence under section 32 of the Act. A domestic or international organisation PEP triggers it where the customer is high risk.
The trigger is not limited to the customer. It applies if a beneficial owner, a person acting for the customer, or a person the service is for, such as a trust beneficiary, is a foreign PEP.
Key point
Under Australia’s AML/CTF Act, a reporting entity must apply enhanced due diligence when a customer or their beneficial owner is a foreign PEP.
A former PEP is no longer a PEP, and there is no fixed cut-off such as 12 months. You still need senior manager approval to serve them. Their former role can keep their risk high, and a high risk means enhanced due diligence.
Your risk rating decides the domestic and international organisation cases, so record why you rated the customer as you did.
How do you check whether someone is a PEP?
You must establish on reasonable grounds whether the customer is a PEP before you provide the service. The same check covers anyone acting for them, any beneficial owner and anyone the service is for.
How you do it can match the size and complexity of your business. AUSTRAC gives these examples:
- Ask: whether the person, a family member or a close associate is a PEP, at onboarding and later
- Search: the internet, sanctions and other government lists, and social media
- Use a database: a specialist PEP database or a third-party provider’s reports
- Check official lists: the Australian Government Directory and DFAT’s list of senior diplomatic appointments
If a provider screens for PEPs for you, check that it searches for the positions the Act defines. Search other spellings of the name, and other names the person is known by.
What does enhanced due diligence for a PEP involve?
Enhanced due diligence for a PEP, in order
For a foreign PEP, or a domestic or international organisation PEP where the customer is high risk
- Before the service
Establish who is a PEP
The customer, anyone acting for them, beneficial owners, and anyone the service is for.
- Evidence
Source of funds and source of wealth
Establish both on reasonable grounds. If you cannot, do not provide the service.
- Approval
Senior manager approval
Before you provide the service or continue the relationship.
- Ongoing
Monitor the relationship
Watch for changes in PEP status and for unusual transactions.
Source: AUSTRAC, Politically exposed persons (PEPs) Reviewed
For a foreign PEP, or a domestic or international organisation PEP where the customer is high risk, three things come before the service. You establish their source of funds and source of wealth, and a senior manager approves.
Source of funds is how the person obtained the money for this transaction, such as salary or a property sale. It is not the bank account the money came from. Source of wealth is how they built their overall net worth.
Key point
Under Australia’s AML/CTF Act, a reporting entity that cannot establish a PEP’s source of funds and wealth when required must not provide the service.
The same approval applies later. If an existing customer, or their beneficial owner, becomes a PEP of this kind, you need senior manager approval to continue. You must also review, update and where appropriate reverify their know your customer (KYC) information.
Enhanced due diligence should also manage the risk, not only watch it. AUSTRAC lists measures such as more frequent reviews, closer transaction monitoring and, where needed, declining the service.
What evidence shows source of funds and wealth?
Start with what you already hold, then ask the customer, then verify as their risk requires. AUSTRAC’s source of funds and wealth guidance lists documents you could use, including:
- bank statements, payslips and tax returns
- a probated will, or a court order such as a divorce settlement
- sale and purchase agreements, and property or land registers
- records of business ownership, and business and company registers
- audited financial statements
- written confirmation from a lawyer or accountant
Public information about a PEP is often easier to find, so internet searches, media reports and published lists of prominent people can help. If the explanation does not fit what you know, review their risk and consider a suspicious matter report.
What should a PEP file show?
- PEP status
- How you established itWeb page extracts, names and phrases searched, and why you decided. Required under s 111 of the AML/CTF Act
- Approval
- Senior manager, before the serviceYour AML/CTF policies name who is authorised to give it
- Source of funds and wealth
- Established on reasonable groundsThe information collected and how you verified it
- Risk rating
- The rating and whyDecides whether a domestic or international organisation PEP needs enhanced due diligence
- Monitoring
- Changes in PEP status, unusual transactionsAnd the reviews that followed
Sources: AUSTRAC, Politically exposed persons (PEPs); AUSTRAC, Source of funds and source of wealth Reviewed
You must keep records that show how you established whether a person is a PEP, under section 111 of the Act. AUSTRAC suggests keeping extracts of web pages, the names and phrases you searched for, and why you decided they are or are not a PEP.
Keep the approval, the source of funds and wealth evidence, and the risk rating on the same file. Then anyone reviewing it can follow each decision.
Frequently asked questions
Is there a 12-month rule for former PEPs?
No. AUSTRAC sets no fixed period. A former PEP still needs senior manager approval. Consider whether they keep influence, how long ago they left the role and whether they are still politically connected.
Do I need a paid PEP database?
Not always. AUSTRAC says your method can depend on your size and how often you deal with PEPs. A specialist database helps if you often need thorough checks or are likely to have PEP customers.
What if a customer becomes a PEP after onboarding?
You must take reasonable steps to find out. Ask when you reverify their details, run periodic checks and watch for transactions that suggest their circumstances changed. Ongoing monitoring re-runs the screen for you.
Do I report a PEP to AUSTRAC?
Not for being a PEP. AUSTRAC says PEPs are not automatically involved in unlawful activity. You submit a suspicious matter report only if you have reasonable grounds for a suspicion, for example when their funds or wealth cannot be explained.
Next steps
Check your current clients for PEPs who were onboarded without these steps. Then confirm your policies name who approves PEP clients and what evidence they need. Our customer due diligence checklist covers the standard checks around them.
StackGo’s IdentityCheck screens every party against PEP, sanctions and adverse media inside the customer relationship management (CRM) or practice software your team already uses. It records a High, Medium or Low risk rating and re-screens monitored clients every month. See how IdentityCheck supports AUSTRAC Tranche 2 compliance.
Sources
The facts on this page come from these sources, checked on 21 October 2026.
- AUSTRAC, Politically exposed persons (PEPs)
- AUSTRAC, Enhanced customer due diligence
- AUSTRAC, Source of funds and source of wealth
- AUSTRAC, Anti-money laundering and counter terrorism laws cover thousands more businesses (1 July 2026)
- Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (ss 5, 32, 111)
- Anti-Money Laundering and Counter-Terrorism Financing Rules 2025