# FINTRAC PEP and HIO Requirements for MSBs: Beyond Screening

- URL: https://cbesgroup.ca/insights/msb-regulated/pep-hio-compliance-msb-fintrac
- Author: Eugene Jakubov, Licensed Lawyer & Senior Consultant (https://cbesgroup.ca/author/eugene-jakubov)
- Publisher: CBES Group (https://cbesgroup.ca/)
- Published: 2026-09-28
- Language: English (en)
- Category: MSB & Regulated
- Summary: Identifying a customer as a PEP or HIO is only the first step. Learn when MSBs must make a determination, which additional measures apply and why screening alone is not enough.
- Other languages:
  - Français (fr): https://cbesgroup.ca/fr/insights/msb-regulated/conformite-ppv-doi-esm-canafe (Markdown: https://cbesgroup.ca/fr/insights/msb-regulated/conformite-ppv-doi-esm-canafe.md)
  - Español (es): https://cbesgroup.ca/es/insights/msb-regulated/cumplimiento-pep-hio-msb-fintrac (Markdown: https://cbesgroup.ca/es/insights/msb-regulated/cumplimiento-pep-hio-msb-fintrac.md)
  - 中文 (zh): https://cbesgroup.ca/zh/insights/msb-regulated/pep-hio-hegui-msb-fintrac (Markdown: https://cbesgroup.ca/zh/insights/msb-regulated/pep-hio-hegui-msb-fintrac.md)
  - Русский (ru): https://cbesgroup.ca/ru/insights/msb-regulated/pep-hio-komplaens-msb-fintrac (Markdown: https://cbesgroup.ca/ru/insights/msb-regulated/pep-hio-komplaens-msb-fintrac.md)

Politically exposed person (PEP) and head of an international organization (HIO) screening is a familiar part of compliance for most MSBs. But identifying a customer as a PEP or HIO is only the first step.

FINTRAC's requirements differ depending on who has been identified, the nature of the relationship or transaction, and the level of risk involved. Understanding these distinctions is important because not every PEP or HIO should automatically be treated in the same way.

## When Does an MSB Need to Make a PEP/HIO Determination?

MSBs must take reasonable measures to determine whether certain individuals are PEPs, HIOs, their family members or, in certain circumstances, close associates.

This requirement applies when an MSB enters into a business relationship with a customer, as part of the periodic monitoring of that relationship, or when information arises that gives the MSB reasonable grounds to suspect that an existing customer may fall into one of these categories.

There are also specific requirements for certain high-value transactions.

> PEP/HIO screening is not simply a one-time check performed when a customer first comes on board. It forms part of the ongoing monitoring of certain customer relationships.

## A PEP Match Does Not Automatically Mean the Customer Is Ineligible

If a customer is identified as a foreign PEP, additional due diligence measures are required. These include taking reasonable measures to establish the person's source of wealth and applying enhanced measures to the business relationship, such as enhanced ongoing monitoring.

A PEP/HIO policy should not simply flag a customer and stop there. It needs to guide staff through what happens after the identification is made.

## What Happens When Additional Measures Are Required?

Depending on the circumstances, an MSB may need to establish the customer's source of wealth and, for certain transactions, the source of the funds or virtual currency involved.

Certain transactions involving PEPs or HIOs also require review by a member of senior management. FINTRAC generally provides a 30-day period for applicable PEP/HIO determinations and measures in prescribed circumstances.

MSBs must also maintain appropriate records of their determinations. These can include:

- the person's position and organization;
- the date the determination was made;
- source of wealth information, where applicable; and
- details of any required senior management review.

## Your Policy Needs to Go Beyond Screening

Having screening software or asking a PEP/HIO question during onboarding is not, on its own, a complete PEP/HIO compliance process.

Your policies and procedures should clearly explain when screening is required, [how potential matches are reviewed](https://cbesgroup.ca/insights/msb-regulated/fintrac-reporting-listed-person-entity-property-2025), how risk is assessed, when a matter needs to be escalated, and what additional measures must be taken.

For business owners, this is worth reviewing periodically. A process may appear to work well at the customer onboarding stage while still leaving gaps in ongoing monitoring, escalation or documentation. This is one of the areas we highlight in our guide to [ongoing compliance beyond registration](https://cbesgroup.ca/insights/msb-regulated/beyond-registration-msb-corporation-ongoing-compliance).

If you are unsure whether your current PEP/HIO procedures reflect FINTRAC's requirements, the Approved MSB Services team can review your policy and help ensure your screening, risk assessment and escalation procedures work together as they should.

> This article is for informational purposes only and does not constitute legal advice. For specific guidance on your MSB's compliance obligations, please consult a qualified professional or [contact our team](https://cbesgroup.ca/contacts) directly.

## FAQ

**Q: When must an MSB make a PEP/HIO determination?**

A: When it enters into a business relationship with a customer, as part of the periodic monitoring of that relationship, and when information arises that gives reasonable grounds to suspect an existing customer is a PEP, HIO, family member or, in certain circumstances, close associate. There are also specific requirements for certain high-value transactions.

**Q: Does a PEP match make a customer ineligible?**

A: No. Identifying a customer as a PEP or HIO is only the first step. If the customer is a foreign PEP, additional due diligence is required, including reasonable measures to establish source of wealth and enhanced ongoing monitoring of the business relationship.

**Q: What additional measures may be required?**

A: Depending on the circumstances, an MSB may need to establish the customer's source of wealth and, for certain transactions, the source of the funds or virtual currency involved. Certain transactions involving PEPs or HIOs also require review by a member of senior management.

**Q: How long does an MSB have to complete PEP/HIO measures?**

A: FINTRAC generally provides a 30-day period for applicable PEP/HIO determinations and measures in prescribed circumstances.

**Q: What records must an MSB keep for PEP/HIO determinations?**

A: Records can include the person's position and organization, the date the determination was made, source of wealth information where applicable, and details of any required senior management review.