What Are PEPs and Sanctions Checks? PEP Screening Explained (2026)

Quick answer: PEP screening checks whether a customer, or the beneficial owner of a business customer, is a politically exposed person: someone entrusted with a prominent public function, or a relative or close associate of one. Sanctions screening checks the same people and entities against government sanctions lists. Both are core parts of KYC and AML compliance, and they usually run together at onboarding and throughout the customer relationship.

The two checks lead to different outcomes. A PEP match is a reason to apply enhanced due diligence, not to reject the customer. A confirmed sanctions match usually means you must block or refuse the business and, in some cases, report it.

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Who are Politically Exposed Persons (PEPs)?

A politically exposed person (PEP) is an individual who is, or has been, entrusted with a prominent public function. The FATF Recommendations group PEPs into three types:

• Foreign PEPs: people with prominent public functions in another country, such as heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned companies, and important political party officials.
• Domestic PEPs: people with the same kinds of roles in your own country.
• International organization PEPs: members of senior management of international organizations, such as directors and board members.

Family members and close associates of PEPs are covered too. Middle-ranking and junior officials are not PEPs.

Being a PEP doesn't mean a person has done anything wrong. Their position gives them influence over public money, contracts, and decisions, which makes them a higher risk for bribery and corruption. That's why regulators expect extra checks rather than refusals. Our guide to politically exposed persons goes deeper on the definition.

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What is PEP screening?

PEP screening is the process of checking customers, beneficial owners, and sometimes counterparties against PEP data to find out whether any of them hold, or are linked to, a prominent public function.

A typical PEP screening process looks like this:

1. Collect the customer's full name, date of birth, and nationality, and for businesses, details of beneficial owners and directors.
2. Screen them against PEP data, sanctions lists, and adverse media sources.
3. Review potential matches to rule out false positives, for example a different person with the same name.
4. For confirmed PEPs, apply enhanced due diligence: senior management approval, checks on source of wealth and source of funds, and closer ongoing monitoring.
5. Rescreen regularly and whenever a list or the customer's situation changes.

For example, if a cabinet minister applies for a loan, the bank doesn't simply reject the application. It confirms the match, gets senior management sign-off, establishes where the minister's wealth and funds come from, and monitors the account more closely. Signzy's PEP screening API automates the screening and matching steps.

What are Sanctions?

Sanctions are restrictions and prohibitions that governments and regulatory bodies impose to stop illegal activities. In the United States, the Office of Foreign Assets Control (OFAC) is responsible for putting economic and commercial sanctions on countries, administrations, and persons involved in operations that might threaten national security.

OFAC's best-known list is the Specially Designated Nationals and Blocked Persons List (SDN List). U.S. persons must block the property of listed persons and generally cannot deal with them. It isn't OFAC's only list, and other authorities maintain their own, including the UN Security Council, the EU, and the UK.

Name screening alone isn't enough. Under OFAC's 50 Percent Rule, an entity owned 50% or more, directly or indirectly and in aggregate, by one or more blocked persons is itself blocked, even if it doesn't appear on any list. That makes beneficial ownership checks an essential part of sanctions screening.

Sanctions are classified into different categories based on their purpose and consequences, such as economic, military, diplomatic, etc. Sanctions are critical for a country’s foreign relations, ensuring a secure business landscape and preventing illicit activities like terrorism financing, money laundering, and other financial crimes.

PEP and Sanctions Rules: What Changed in 2025 and 2026

• FATF: The February 2025 FATF Recommendations kept Recommendation 12 on PEPs unchanged. Foreign PEPs always need enhanced measures; domestic and international organization PEPs need them when the relationship is higher risk.
• European Union: The EU Anti-Money Laundering Regulation, Regulation (EU) 2024/1624, applies from July 10, 2027. It lists which functions count as PEP functions, requires risk-mitigating measures for at least 12 months after a person leaves office, and says PEP status alone shouldn't be a reason to refuse a customer. The new EU AML Authority (AMLA), operational since July 1, 2025, sent final draft customer due diligence standards covering PEP checks and sanctions screening to the European Commission in October 2026. They become binding only once adopted.
• United Kingdom: Since January 10, 2024, UK firms must treat domestic PEPs as lower risk than foreign PEPs as a starting point. The FCA's finalized guidance FG25/3, issued in July 2025, explains how to apply this proportionately.

How Can You Improve Your Sanctions Screening Process?

Businesses are required to screen people and companies against sanctions before onboarding them. Following are some of the tips you can implement into your system to improve your sanctions screening process:

1. Maintain up-to-date and thorough clients’ data through due diligence: Businesses must ensure that correct and sufficient details about their clients are obtained by conducting thorough checks and probes through Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) processes.
2. Screen collected data from clients against reliable sanctions lists: When checking data against sanction lists, businesses must ensure that the lists they are using are from reliable sources.
3. Implement reliable and verified screening technology: Businesses must implement verified and proven software to be reliable and accurate in finding matches against sanction lists.
4. Update sanction lists frequently: Since sanction lists are subject to change on a regular basis, businesses must remain updated with the latest sanction lists.

Why is it Important to Screen Against PEPs and Sanctions Lists?

Doing business with individuals or companies who are listed on PEPs and sanctions lists brings great risk to businesses. They end up paying huge penalties in case of any violations with sanction list screening.

In April 2023, British American Tobacco (BAT), a London-based tobacco giant, had to pay more than $629 million as penalties for violating US sanctions against North Korea.

Not just this, failure to identify sanctions evasion, criminals, or a PEP engaged in fraud brings harm to the businesses’ brand value.

In April 2019, Standard Chartered agreed to pay about $1.1 billion to US and UK authorities over sanctions breaches and weak anti-money laundering controls, after transactions linked to sanctioned countries went through its systems.

How Signzy Helps with PEP and Sanctions Screening

Since the number of PEPs or sanctioned entities is a small part of any business’ clientele, the process of looking for and screening these entities needs to be as streamlined as possible.

Businesses need access to a wide record that covers most, if not all PEPs and sanctioned entities. Since screening these individuals falls under regulatory obligations, this process is not something that can be discounted.

Signzy's PEP screening API checks customers against PEP data, sanctions lists, and adverse media drawn from more than 20,000 global media sources in a single call, so your team reviews real matches instead of searching by hand. To compare providers, see our guide to the best AML watchlist screening tools, and for how list checks apply to payments, read transaction screening vs transaction monitoring.