Introduction to Politically Exposed Persons (PEPs) in Malaysia

Need more information regarding Politically Exposed Persons (PEPs):


Bank Negara Malaysia (BNM) has recently revised the policy document1 concerning anti-money laundering, countering the financing of terrorism and targeted financial Sanctions for the designated non-financial business profession and non-bank financial institutions. Part of the revised document deals with the issues of a person who holds a prominent position in our government/ foreign government who has a higher risk of committing the crime of money laundering/ terrorist financing and what must a reporting institution do if they have clients who are beneficiary to such individual/ if they have clients who fall under such a category.

Such individuals are termed ‘politically exposed persons (PEPs)’. We shall briefly look at this revision below.

What is a ‘Politically Exposed Person (PEPs)’?

Under the revision, a PEPs refers to:

  1. Foreign individuals/ Foreign PEPs who are or who have been entrusted with prominent public functions by a foreign country. For Example, Heads of State or Government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations and important political party officials;
  2. Domestic individuals/ Domestic PEPs who are or have been entrusted domestically with prominent public functions. For example, Heads of State or Government, senior politicians, senior government (includes federal, state and local government), judicial or military officials, senior executives of state-owned corporations and important political party officials; or
  3. Any persons who are or have been entrusted with a prominent function by an international organisation which refers to members of senior management. For example, directors, deputy directors and members of the Board or equivalent functions.

Essentially, they are individuals who hold prominent public positions/ positions by a country, be it a domestic or foreign country. Due to their role, they may be more susceptible (for this article)/ potentially involved in money laundering and terrorist financing (ML/TF) activities.

Who are those considered ‘close associates’ to PEPs?

The revision refers to these individuals as any individual closely connected to any PEPs, either socially or professionally. In this regard, it includes:

  1. Extended family members, such as relatives (biological and non-biological relationship);
  2. Financially dependent individuals (e.g. persons salaried by the PEP such as drivers, bodyguards, secretaries);
  3. Business partners or associates of the PEP;
  4. Prominent members of the same organization as the PEP;
  5. Individuals working closely with PEP (e.g. work colleagues); or
  6. Close friends.

What needs to be done by a reporting institution if its customer is a beneficiary of the individuals listed above/ if its customer is an individual listed above?

A. Foreign PEPs Scenario

  1. Reporting institutions are required to perform enhanced customer due diligence (CDD) where the money (ML/TF) risks are assessed as higher risk;
  2. For any business transactions secured through agents, reporting institutions shall ensure their agents perform CDD as specified in this policy document and also set out the process that must be undertaken by agents in conducting CDD as well as appropriate enforceable action by reporting institutions in the arrangement or agreement with agents; and
  3. Reporting institutions should also ensure that the enhanced CDD is not a one off exercise i.e. it must be an ongoing CDD.

B. Domestics PEPs Scenario

  1. Reporting institutions are required to conduct risk profiling on their customers and assign ML/TF risk rating that is commensurate with their risk profile; and
  2. All the points mentioned above.

Will/ Can the status (PEP) cease?

Yes. A cessation of PEP status is possible i.e. a reporting institution can actually delist a person from PEP status. To do so, a reporting institution shall consider the following factors in determining whether the status of a PEP who no longer holds a prominent public function should cease:

  1. The level of informal influence that the PEP could still exercise, even though the PEP no longer holds a prominent public functions; and
  2. Whether the PEP’s previous and current functions, in official capacity or otherwise, are linked to the same substantive matters.

Need more information regarding Politically Exposed Persons (PEPs):


  1. https://amlcft.bnm.gov.my/publication/AML_CFT_TFS_PD.pdf.

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