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PEP & Sanctions

PEPs and sanctions, explained

Two of the most misunderstood checks in AML/CTF. One means “take extra care”; the other means “stop”. Here is the difference, and what an agency actually does about each.

Two different checks, two different responses

People often lump “PEP and sanctions screening” together as one task. They are screened at the same time, but what you do with a hit is completely different.

  1. Check 01
    PEP match → enhanced checks

    A politically exposed person is higher risk, not prohibited. You apply enhanced customer due diligence and document your decision — then you can proceed.

  2. Check 02
    Sanctions match → stop

    Dealing with a sanctioned person or entity is a criminal offence. A genuine match means do not proceed, do not make assets available, and seek advice immediately.

What is a PEP?

A politically exposed person (PEP) is someone who holds, or has held, a prominent public position — plus their close family members and known close associates. The position gives them potential influence that can be misused for corruption or bribery, which is why the Act treats them as higher risk.(Source: AUSTRAC, “PEPs, foreign PEPs and politically exposed persons”, retrieved 23 May 2026)

The Act recognises three categories:

  • Foreign PEP — holds a prominent public position for a foreign country (e.g. head of state, government minister, senior judge, senior military officer, or executive of a foreign state-owned enterprise). Foreign PEPs are treated as high risk by default.
  • Domestic PEP — holds a prominent public position in Australia. Assessed on a risk basis rather than automatically high risk.
  • International organisation PEP — holds a senior position in an international organisation. Also assessed on a risk basis.

Crucially, the definition reaches beyond the individual. Spouses, partners, children and their spouses, parents, and known close business associates can all qualify — which is why an apparently ordinary buyer can still be a PEP by association.

A PEP is not a red card

Being a PEP is not a reason to refuse service. It is a reason to look more closely. Plenty of legitimate buyers are PEPs — a foreign diplomat’s adult child, a retired official, the spouse of a senior public servant. The obligation is to apply enhanced due diligence and keep a record of how you managed the risk, not to walk away from the deal.

For a foreign PEP, and for any PEP your risk assessment rates as high risk, enhanced customer due diligence typically includes:

  • Senior sign-off — a person with appropriate seniority approves entering or continuing the relationship.
  • Source of funds and wealth— take reasonable measures to establish where the money for the purchase comes from, and how the customer’s wealth was built.
  • Closer ongoing monitoring — keep a higher level of scrutiny on the relationship and transactions.

(Source: AUSTRAC, “Enhanced customer due diligence”, retrieved 23 May 2026)

What are sanctions?

Australian sanctions law prohibits dealing with the assets of designated persons and entities, or making assets available to them. Unlike Tranche 2, sanctions law is not new and does not start in July 2026 — it applies to everyone, including real estate agents, right now.

There are two overlapping regimes:

  • Australian autonomous sanctions — imposed by Australia under the Autonomous Sanctions Act 2011 and Regulations.
  • United Nations Security Council sanctions — implemented in Australian law under the Charter of the United Nations Act 1945.

Both are administered by the Department of Foreign Affairs and Trade (DFAT), which publishes a single Consolidated List of every designated person and entity. Screening against that list is how you check.(Source: DFAT, “Consolidated List”, retrieved 23 May 2026)

A sanctions match is a hard stop

If a customer is a genuine match to the DFAT Consolidated List, you must not proceed. Providing a sanctioned person with a designated service — or making an asset like property available to them — can be a criminal offence, with penalties that apply to the individual involved, not just the business. Stop, escalate to your Compliance Officer, and obtain advice before doing anything further.

Most “hits” are false positives caused by common names. The job is to confirm whether a hit is a true match — by comparing dates of birth, nationality and other identifiers — and to keep a record of that assessment either way. For the detail on penalties, see our blog post, the DFAT criminal penalty most agents have never heard of.

Why this matters in Australian property

Property is an attractive way to move and store value, and Australian real estate regularly involves the exact customers these checks are designed for:

  • Overseas and migration-linked buyers, where a family member may be a foreign PEP.
  • Purchases through trusts and companies, where the beneficial owner — not the named buyer — is the person to screen.
  • High-value transactions that are exactly the kind sanctions evasion seeks out.

You screen the people who matter: the buyer, the seller, and the beneficial owners behind any company or trust. See how this fits the wider obligations in our real estate agency obligations guide.

Screening checklist

PEP, sanctions and adverse media in one screen

AMLHive checks buyers, sellers and beneficial owners against PEP, DFAT sanctions and adverse-media data in seconds — and logs every result automatically in your audit trail, hit or no hit.

Start free until 30 June 2026Read the AUSTRAC guide

Frequently asked questions

If a buyer is a PEP, do I have to refuse them?

No. A PEP is a higher-risk customer, not a prohibited one. You apply enhanced due diligence — senior sign-off, source of funds, closer monitoring — and you can proceed with the transaction.

Do sanctions only apply from 1 July 2026?

No. Australian sanctions law applies to everyone now, regardless of Tranche 2. You should already be checking that you are not dealing with a sanctioned person or entity.

The screen returned a match. Is that a problem?

Not necessarily. Most matches on common names are false positives. The task is to confirm whether it is a true match using identifiers such as date of birth and nationality — and to record your assessment. Treat a confirmed sanctions match as a hard stop and seek advice.

Who exactly do I need to screen?

The customer and the beneficial owners behind them. For a company or trust buyer, that means screening the individuals who ultimately own or control the structure, not just the entity name.

Sources & further reading

Disclaimer: This guide is general information only and is not legal, financial or compliance advice. AMLHive is not affiliated with AUSTRAC, DFAT or the Australian Government. You should obtain independent professional advice for your specific circumstances. Always check the current AUSTRAC and DFAT guidance and the relevant legislation before relying on the information above.