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A Politically Exposed Person (PEP) is an individual who holds, or has held, a prominent public office domestically or in a foreign country, along with certain family members and close associates, who is subject to enhanced identity and source-of-funds due diligence under Canada's anti-money-laundering rules.
Since October 11, 2024, FINTRAC's anti-money-laundering rules explicitly extend to the mortgage sector, requiring mortgage brokers, lenders, and administrators to take reasonable measures to determine whether a new client is a domestic politically exposed person, a foreign politically exposed person, a head of an international organization, or a close family member or associate of one. This is an ongoing obligation, not a one-time check — reporting entities must periodically reassess whether a client's circumstances have changed.
In practice, FINTRAC treats a client's own self-declaration, gathered during the application, as an acceptable way to meet the determination requirement. If a client is identified as a PEP, additional measures typically follow, such as senior management approval and enhanced source-of-funds verification, so brokers should build a PEP question into intake rather than treat it as an afterthought at underwriting.
Effective for the mortgage sector since October 11, 2024: FINTRAC's updated rules require mortgage brokers, lenders, and administrators to take reasonable measures to determine PEP, foreign PEP, or HIO status for new business relationships.
Covers family and close associates too: the obligation extends beyond the individual to their family members and persons closely associated with a foreign PEP.
Self-declaration is acceptable: FINTRAC treats a client's own attestation of PEP status, gathered as part of the application, as an acceptable way to meet the determination requirement.
Ongoing, not one-time: reporting entities must periodically reassess whether an existing client's circumstances have changed, rather than checking PEP status only at intake.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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