Politically exposed persons (PEPs) are persons who currently occupy or have recently occupied high-level political offices, such as ministers, members of parliament, and directors of state-owned businesses. Due to their positions, they wield decision-making powers and have access to resources that raise their risks of bribery, corruption, and money laundering.

If a marketplace pays out money to vendors, service providers, or freelancers, its payment service provider must detect PEP status and apply enhanced due diligence measures at registration and throughout the business relationship. The status must be detected before any payouts begin. Failure to detect PEP status can cause suspension of marketplace payment accounts, disruption to the marketplace’s business, and harm to its image – even if no fraud occurs.

In this article, we explain PEPs, including laws about them in France, due diligence requirements, and strategies for platforms and marketplaces.

Key takeaways

• Politically exposed persons (PEPs) are persons who currently hold high-level public office or did so in the past year. The same due diligence measures also apply to their immediate family members and other close associates.
  
• PEP status does not equate to wrongdoing and is not a reason for refusal. It simply indicates a higher risk of corruption.
  
• PEP status triggers enhanced due diligence for businesses subject to anti-money laundering laws. These businesses must monitor relationships and transactions more closely.
  
• Marketplaces are not directly subject to such laws because they simply connect businesses and customers who might be PEPs. Instead, following these laws is the responsibility of the marketplace’s payment service provider, unless the marketplace is licensed as a payment provider.
  
• Detection is required from the start of the relationship and must continue throughout its lifespan because vendors can become PEPs if appointed or elected to office.
  

What are politically exposed persons (PEPs)?

PEPs are individuals who currently hold political office, judicial office, or major government positions or who have done so in the past year. Regulations also apply to their family members and close associates. PEP status indicates a higher risk of corruption but does not presume fraudulent activity.

The concept of PEPs derives from Recommendation 12 of the Financial Action Task Force (FATF), which sets international Anti-Money Laundering standards. It was then included in European directives and transposed by the French Monetary and Financial Code (CMF). PEP status attaches to the position, not the person. For example, members of parliament are PEPs because they sit on the National Assembly (Assemblée nationale), not because of their assets or background.

What is the difference between PEPs and beneficial owners?

PEPs refer to people who hold or who have held prominent public functions. Beneficial owners are individuals who hold more than 25% of a business’s shares or voting rights or who control it by other means.

A person can be both a PEP and a beneficial owner. For example, a professional vendor can have a beneficial owner who is a PEP.

What is the difference between PEPs and sanctioned persons?

Sanctioned persons have had their assets frozen. This prevents movements of funds held on their behalf or payouts of funds or financial resources to them. On the other hand, PEPs can open accounts and receive payments – but with additional monitoring.

A person can be a PEP and a sanctioned person. For example, a foreign minister might be under European restrictive measures. Their assets might be frozen without a risk analysis, which means no payouts would be made. This is the case even if they provided documentation that met PEP due diligence requirements.

Who are PEPs in France?

In France, public offices that confer PEP status are defined in Article R561-18 of the CMF. National offices are listed in the Order of 17 March 2023. They include the president, members of parliament and the government, and their close family and associates.

Here are the main positions that qualify an individual as a PEP:

• Political offices
  PEPs can be the president, prime minister, members of the government, presidents of the Senate (Sénat) or National Assembly, members of parliament, senators, and presidents or members of executive bodies of political parties.
  
• Judicial offices
  These include the president and members of the Constitutional Council (Conseil constitutionnel); members of the Council of State (Conseil d’État) other than temporary councillors without judicial duties; magistrates of the Court of Accounts (Cour des comptes); and members of the Court of Cassation (Cour de cassation).
  
• Central bank, diplomats, and defence
  These include members of the General Council of the Banque de France; ambassadors and chargés d’affaires; military chiefs of staff; Army, Navy, and Air Force chiefs of staff; and the secretary general of the Constitutional Council.
  
• State-owned businesses
  These can include chief executive officers, members of management boards, and directors and members of supervisory boards of certain state-owned institutions and businesses – in some cases, only if their revenue exceeds €50 million.
  

How do marketplaces verify PEPs?

There are three steps to verifying PEP status: obtain a beneficial owner declaration at registration; look up the name in an up-to-date PEP database; and check any matches against official sources. The first verification step occurs at the start of the relationship – before payout occurs – and is repeated throughout the relationship’s lifespan.

The declaration at registration does not satisfy the requirement because the person might not be aware of the legal definition of PEPs or might not disclose their status. Marketplaces must look up the person in a PEP database – using their first and last name, date of birth, and nationality – to narrow down the search. If the result is ambiguous, the next step is to check the Official Journal (Journal officiel, or JO), National Assembly or Senate websites, or publications by the High Authority for Transparency in Public Life (Haute Autorité pour la transparence de la vie publique, or HATVP).

For vendors based in other member states, each country defines its own list of prominent public functions and sends it to the European Commission. The lists are then published in the Official Journal of the European Union. Platforms operating in multiple countries might have to check several national references. Commercial PEP databases can typically handle this.

What laws apply to PEPs in France?

Laws that apply to PEPs are based on the FATF’s Recommendation 12, European anti-money laundering directives, and the CMF. Article R561-18 of the CMF defines PEPs. Article L561-10 of the CMF requires enhanced due diligence for customers or beneficial owners who are PEPs. Article R561-20-2 of the CMF sets forth the applicable measures.

Entities subject to anti-money laundering and terrorism financing laws – as listed in Article L561-2 of the CMF – are required to perform due diligence. These include banks, payment service providers (e.g., payment institutions and e-money institutions), and crypto asset service providers.

The Prudential Supervision and Resolution Authority (Autorité de contrôle prudentiel et de résolution, or ACPR) supervises financial institutions. Intelligence Processing and Action Against Clandestine Financial Circuits (Tracfin) – which is France’s financial intelligence unit – collects suspicious activity reports. Failure to conduct due diligence – including detecting PEPs and applying enhanced measures – is heavily penalised.

For its supervised entities, the ACPR’s sanctions committee can issue warnings or reprimands, prohibit certain transactions, or withdraw licences. It can also issue fines of up to €100 million or 10% of net annual revenue. It regularly sanctions failures to detect PEPs, such as the case against Abeille Vie, which was fined €3.5 million in 2023.

Note: Regulation (EU) 2024/1624 takes effect 10 July 2027. It adds leaders of certain regional and local municipalities with more than 50,000 inhabitants to the list of PEPs, as well as siblings of chiefs of staff, heads of government, ministers, deputy ministers, and undersecretaries. For former PEPs, measures remain in place for at least 12 months and then as long as risks persist. The regulation also extends the measures to one-time transactions with PEPs if the transaction – not just the business relationship – requires due diligence.

What due diligence is required for PEPs?

When working with PEPs, entities must implement four measures. This includes employing a detection procedure, having a member of management approve PEP relationships, establishing the origin of assets and funds, and monitoring transactions more closely. These measures must remain in place as long as the PEP is in office and for one year afterward.

Detect PEP status

Marketplaces must verify the status of customers, beneficial owners, and their family members and associates. The requirement applies at the start of and throughout the relationship because a person might become a PEP during the relationship.

Approve the relationship

A member of the entity’s executive committee – or a person designated by them – must decide whether to approve the relationship with a PEP. The decision must be recorded and stored in the customer’s file.

Establish the origin of assets and funds

The ACPR requires information on the occupation, family members, and assets of a PEP. This must be accompanied by documentation, such as payslips, tax notices, or lease agreements. This information must be fairly accurate to determine asset makeup. For example, a range of €0 to €500,000 would be considered too broad.

Marketplaces can look at factors such as whether the vendor’s sales are consistent with their profile.

Increase monitoring

Monitoring can involve more sensitive detection thresholds or scenarios. Red flags could include sudden spikes in sales, prices out of line with the market, and repeat customers who are connected to each other. These might trigger a closer examination and a report to Tracfin, if activity appears suspicious.

Documents on PEPs must be kept for five years after the end of the relationship. A lack of documentation is a reason to terminate the relationship.

Do marketplaces have special requirements for PEPs?

Marketplaces are not directly subject to anti-money laundering or terrorism financing laws because they only connect vendors and customers. However, the payment service providers marketplaces use to pay out funds are subject to such laws. The provider assumes responsibility for due diligence for vendor accounts.

Marketplaces can be responsible for due diligence if they are licensed as payment or e-money institutions or if their business falls into one of the categories named in Article L561-2 of the CMF. In 2017, the ACPR sanctioned Lemon Way – a payment service provider for marketplaces – for failure to detect PEPs.

Note: PEP status alone is not a legitimate reason to refuse or end a relationship, even for marketplaces. Instead, entities need to ask vendors for additional information on their occupations, family members, and assets and monitor their transactions more closely. The government confirmed this in a ministerial response in July 2026.

What actions do marketplaces need to take to detect PEPs?

Marketplaces need to check for PEP status at the start of relationships with vendors, service providers, and hosts. They need to obtain the names of beneficial owners and ask them about their status or use the payment service provider's registration process.

Here is a closer look at what marketplaces need to do.

Ask clear questions at registration

Questions need to cover the vendor, immediate family members, and associates, as well as each beneficial owner, whether they own more than 25% of shares or voting rights or control the business by other means. If no individual is identified as a beneficial owner based on these criteria and there is no reason to be suspicious, the legal representative or representatives – as defined by law – are considered the beneficial owners.

Forward information to the payment service provider

Depending on the integration method (e.g., hosted registration or application programming interface [API] integration), the vendor either provides their information directly to the payment service provider or the platform collects it and forwards it. In both cases, the provider performs the verification. The payment services contract specifies each party's role and the required response times for document requests.

Withhold payouts

The vendor's first payout can be withheld until the provider has completed verification. Depending on the platform, the vendor can continue posting offers as long as funds are withheld. This minimises the platform's risk without disrupting the vendor's activity. Confirmation of PEP status alone does not justify refusal or termination of relationships with vendors.

Look for risk factors

High-value items, consulting services, and property rentals can require manual rather than automatic verification, along with documentation about the business and periodic re-examinations of the account. Vendors based in high-risk countries – as identified by the FATF or European Commission – require the enhanced due diligence measures provided for by law.

Train employees in contact with vendors

Marketplace employees need to know how to explain documentation requests without revealing the reason for them. The existence, contents, and results of suspicious activity reports are confidential.

Prepare for 2027

Beginning 10 July 2027, the list of PEPs and the monitoring period for former PEPs will be extended. Marketplaces will need to prepare for new registration questions, record the end dates of positions in the database, and re-verify vendors who are already registered, as they will also fall under the expanded scope.

How can marketplaces simplify PEP detection?

Simplifying PEP detection involves consulting PEP databases maintained by specialised providers at the time of registration. The databases contain names of people in public office and their family members and associates. Marketplaces must compare vendor identities to the database, and an analyst must examine any ambiguous cases.

The reliability of the process hinges on six factors, which affect both the number of false positives and the ability to identify PEPs:

• Structure identity information
  Vendors' first names, last names, dates of birth, and nationalities must be entered in separate fields. Without this separation, there is an increased risk of multiple search results with the same name and excessive false positives.
  
• Calibrate match scores
  The system does not search for exact matches because there can be multiple ways to spell the same name. Instead, it calculates a match percentage between the vendor's identity and each database result. Marketplaces need to test match score thresholds on real cases before applying them.
  
• Re-check the database
  Each update to the PEP database triggers a new check of vendors already on the list. This helps identify those who have become PEPs following an election or appointment.
  
• Confirm alerts
  The system categorises matches returned based on the position held, country, and amounts at stake. An analyst must examine each alert and decide if the vendor is the person in the database.
  
• Document each decision
  The detection system records the database version, score, analyst's name, and conclusion. These elements serve as proof in the event of an audit.
  
• Link PEP status to transaction tracking
  Vendors who are confirmed PEPs are automatically subject to stricter monitoring rules. Their status becomes a factor in the detection process.
  

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FAQs about politically exposed persons (PEPs) in France