Politically exposed persons: direct PEPs and persons connected to them

Direct PEP: the function and its prominence

Section 4(5)(a) of the AML Act concerns prominent public functions of national or regional significance. Examples include parliamentarians, leading local-government representatives, senior judicial officials and central-bank leadership. Comparable foreign, EU and international-organisation functions also qualify. PEP status is not limited to foreigners or non-EU countries.

The actual function and powers matter. Ordinary civil servants or public-company employees are not automatically PEPs because of their employer. A differently named foreign role may still qualify if its prominence matches the definition. For a Czech function, use the current national list, which FAÚ treats as exhaustive, and establish the category corresponding to the actual role. For foreign functions use the relevant official sources.

Connected persons: each relationship has conditions

Section 4(5)(b) covers close persons, partners or beneficial owners of the same entity or trust, and other known close business relationships. It also covers beneficial owners of structures known to have been created for a direct PEP’s benefit. Do not classify every supplier, colleague or person sharing a surname as connected.

The statutory PEP definition concerns individuals. For companies, still assess beneficial owners and relevant representatives and the resulting AML duties. A recorded director is not automatically a verified beneficial owner. For associations or special structures, clarify the legal role and actual influence.

Guideline 7 interprets a shareholder narrowly for deriving status: the interest must exceed 25%, similarly to the direct PEP from whom status derives. This does not automatically classify every minority shareholder. For beneficial owners, guidance distinguishes material, formal and fallback roles; the article on PEP connections explains the procedure. Assess another known close business relationship separately.

Status triggers measures, not accusations

Confirmed status leads to proportionate enhanced due diligence, wealth-origin checks, monitoring and responsible approval under the relevant rules. PEP status is not automatically a sanctions match or universal service ban. Assess suspicious circumstances separately. Historical status does not end merely when a database removes a name; former functions require Section 54(8) assessment.

Record the reason for status, not merely the result

For a direct PEP, establish the specific function and period in office. For a derived PEP, also record the link to the specific holder of a prominent public function. A general politics label provides insufficient evidence for subsequent review. If the client is both a direct and derived PEP, retain both relevant branches. Ending one function may not remove the other reason for measures.

Offer understandable examples of public functions and links, a way to add information and a response for uncertainty in the questionnaire. The PEP label is often unclear to clients. Ask for facts enabling legal assessment and have the responsible role verify the conclusion. A positive finding does not allege dishonesty. Give workers a communication procedure explaining the statutory reason for additional information without publicly disclosing status.