Domestic PEP: Key Points
- Meaning: A domestic politically exposed person, often shortened to domestic PEP, is someone who holds a prominent public position or role in an Australian government body.
- Why it matters: PEPs can be targeted for bribery and corruption because they hold influence, so they often carry higher ML and TF risk. Being a PEP does not mean wrongdoing, it means you must apply additional risk based measures.
What changes in 2026: AUSTRAC has published reforms guidance for PEP obligations that will apply from 31 March 2026 for existing reporting entities, and Tranche 2 entities must be ready to apply PEP controls from 1 July 2026.
What is a domestic politically exposed person
AUSTRAC explains that a politically exposed person is an individual who holds a prominent public position or role in a government body or international organisation, either in Australia or overseas. Immediate family members and close associates are also considered PEPs.
AUSTRAC identifies three types of PEPs. Domestic PEP, foreign PEP, and international organisation PEP. A domestic PEP is someone who holds a prominent public position or role in an Australian government body.
This definition is important for Tranche 2 businesses because many of your clients may be senior public officials, political party executives, senior government executives, judges, senior military officers, or closely linked individuals.
Definition of domestic PEPs under the reforms guidance
AUSTRAC’s reforms guidance provides a detailed list of domestic PEP positions. The list includes, for example, members of Commonwealth or state or territory legislatures, certain political party governing body members, the Governor General, state Governors, senior judges, and accountable authorities under the Public Governance, Performance and Accountability Act framework, among other prominent roles.
For a practical compliance program, you do not need staff to memorise every position. You need staff to understand what prominent public position means and to use reliable screening and escalation processes when there is a potential match.
Why domestic PEP screening is required
PEPs often have influence over budgets, procurement, approvals, and grants. AUSTRAC explains that because PEPs hold positions of power and influence, they can be a target for corruption and bribery attempts, and ultimately for money laundering or terrorism financing activities. AUSTRAC also stresses that being a PEP does not automatically mean criminal activity.
FATF guidance reinforces the same idea. The FATF Recommendations require additional AML and CTF measures for business relationships with PEPs because their positions may be abused for laundering illicit funds or predicate offences such as corruption. FATF also stresses these measures are preventive and should not be read as meaning all PEPs are involved in crime.
For Tranche 2 entities, this is particularly relevant in:
Real estate transactions where approvals, rezoning, or public contracts may be linked
Company formation and restructuring where public officials may hide ownership through intermediaries
Legal matters involving trust accounts or movement of large funds
High value goods and precious metals transactions where anonymous purchasing is attempted
How to identify a domestic PEP in day to day work
Step 1: Ask the right onboarding questions
Include a simple question in onboarding such as whether the customer, beneficial owner, or controlling person holds a prominent public position, and explain what that means in plain language.
Step 2: Screen names properly
Use name screening and watchlist tools that include PEP data sources, and ensure the process covers customers and associated persons, including beneficial owners and controllers where relevant.
Step 3: Treat matches as a workflow, not a verdict
PEP screening creates alerts. Your job is to resolve those alerts, document the decision, and apply proportionate measures.
Practical examples
Example 1: State government senior executive buying property through a trust
A trust buys an investment property. The trustee is a company and the controlling person is a senior government executive. That individual is likely a domestic PEP. Your firm should document the PEP status, assess risk, and apply enhanced steps where appropriate.
Example 2: Local council leader using a private company for a transaction
A client is a director of a company involved in a transaction. Screening indicates the person holds a prominent public role in a government body. Treat them as a domestic PEP until the alert is resolved and documented.
Example 3: Immediate family member of a domestic PEP
A customer is the spouse of a domestic PEP. AUSTRAC notes immediate family members can also be considered PEPs. This should be captured in your procedures and screening logic.
Best practice controls for domestic PEP risk
Build a clear PEP procedure inside your AML and CTF program
AUSTRAC expects your AML and CTF program to outline how you identify PEPs and what steps you take when dealing with them.
Apply a risk based approach, not a blanket refusal
Domestic PEP does not automatically mean reject. It means assess, document, and apply controls proportionate to the risk.
Use enhanced customer due diligence where warranted
AUSTRAC explains enhanced customer due diligence as extra checks, additional information and verification, particularly where the ML and TF risk is high.
For PEPs, enhanced steps often include deeper source of wealth and source of funds analysis, senior management approval for higher risk cases, and more frequent ongoing review.
Keep records that explain your decisions
If a regulator reviews a file, the question will not be whether you screened. The question will be whether you understood the alert, resolved it correctly, and applied appropriate measures.
Prepare for staged commencement
AUSTRAC confirms the new Rules commence in stages, with Tranche 2 obligations starting 1 July 2026. Tranche 2 businesses should build and test their PEP workflow well before that date.
Common challenges
Over reliance on self declaration, without screening
False positives that are not resolved and documented properly
Confusion between domestic PEP and foreign PEP requirements
Weak source of wealth analysis where the customer has complex assets
Staff uncertainty leading to inconsistent outcomes across offices
Final Thoughts on Domestic PEPs Answered
Domestic politically exposed person is a core AML and CTF concept because it helps you identify corruption exposure early. For Tranche 2 businesses, a simple and consistent PEP workflow, combined with proportionate enhanced checks, is one of the clearest ways to demonstrate an outcomes based approach to risk management under Australia’s modernised regime.
“Bookmakers sit at a natural convergence point for cash, speed and anonymity. AUSTRAC’s focus reflects the reality that wagering platforms can be misused as value transfer mechanisms if risk controls are not actively applied.”
