A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public position, such as a head of state, government official, or high-ranking political figure, or their close associates and family members. Due to their position of power and influence, PEPs are considered higher risk for involvement in corruption, bribery, and other financial crimes. 

When it comes to financial crime compliance, identifying and managing relationships with PEPs is crucial for institutions. Financial organisations are required to perform Enhanced Due Diligence (EDD) on PEPs to assess the risk of illicit activities associated with their transactions. This involves scrutinizing the source of their wealth, monitoring transactions for suspicious activities, and adhering to stricter regulatory requirements. Effective management of PEP relationships helps institutions mitigate the risk of facilitating financial crimes and ensures compliance with Anti-Money Laundering (AML) regulations.