Politically Exposed Persons (PEPs)

Politically Exposed Persons (PEPs)

A politically exposed person (PEP) is someone who has been appointed by a community institution, an international body or a state, including the UK, to a high-profile position within the last 12 months.

Under MLR, the main aim of applying additional scrutiny to work involving PEPs is to mitigate the risk that the proceeds of bribery and corruption may be laundered, or assets otherwise stripped from their country of origin.

Identifying a PEP

PEPs can be:

• heads of state, heads of government, ministers, and deputy or assistant ministers
• members of Parliament
• members of courts of auditors or of the boards of central banks
• ambassadors, chargés d’affaires and high-ranking officers in the armed forces
• members of the administrative, management or supervisory bodies of state-owned enterprises
• members of supreme courts, constitutional courts or other high-level judicial bodies whose decisions are not generally subject to further appeal, except in exceptional circumstances

PEPs also include:

• the person’s family members
• close business associates
• beneficial owners of the person’s property (someone who enjoys the benefits of ownership even though the title of the property is in another person’s name)

See MLR 35 for more information.

You should take a risk-based and proportionate approach to identifying whether you have a PEP as a client.

Situations which might suggest you have a PEP client include:

• receiving funds from a government account
• receiving communications on official letterhead from the client or a related person
• general conversation with the client or person related to the client which links the person to a PEP news reports suggesting your client is a PEP or is linked to one

The Financial Conduct Authority (FCA) expects firms to use information that’s reasonably available to them to help identify PEPs, including:

• public domain information, such as parliament and government websites
• reliable public registers, such as the Companies House ‘register of companies’ and ‘people with significant control register’
• commercial databases that contain lists of PEPs, family members and known close associates

You do not have to actively investigate whether beneficial owners of a client are PEPs. However, if you know that a beneficial owner is a PEP, you should consider what extra measures, if any, you need to take when dealing with that client.

E-verification providers and internet sources can often provide information about individuals and:

• their source of wealth outside of the political position
• their remuneration for their current role

They can also show whether there are any credible allegations of, or investigations into, criminal activity which you should consider when assessing risk.

Update to FCA Guidance 2025

in July 2025 the FCA updated its guidance to reflect changes to the legislative framework in the UK since 2017.

In the updated guidance, the FCA:

• Clarify that firms should not treat non-executive Board members of civil service departments in the UK as PEPs.
• Reflect changes to The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (Money Laundering Regulations 2017) .
• Update sign off for PEP business relationships.

A PEP is someone holding a prominent public position who is entrusted with prominent public functions either in the UK or elsewhere in the world.

Domestic and Foreign PEPs

The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 came into force on 10 January 2024 and make amendments to the UK’s PEP regime.

For the purpose of conducting due diligence on a client, where a client or potential client is a domestic PEP, or a family member or a known close associate of a domestic PEP then:

• the starting point for the assessment is that the client or potential client presents a lower level of risk than a non-domestic PEP, and
• if no enhanced risk factors are present, the extent of enhanced client due diligence measures to be applied in relation to that client or potential client is less than the extent to be applied in the case of a non-domestic PEP

A ‘domestic PEP’ means a politically exposed person entrusted with prominent public functions by the United Kingdom.

Handling PEP clients

If your client is a PEP, you should apply enhanced due diligence measures. You should also treat business with PEPs on a case-by-case basis.

Under regulation 35 of the MLR 2017 if your client is a PEP you must:

• get senior management approval for the business relationship
• take adequate measures to establish the source of wealth and source of funds
• closely monitor the business relationship throughout

It’s also recommended that you tell those responsible for monitoring risk assessments in your firm that a business relationship with a PEP has begun.

Once you establish that you have a PEP client, you can look at the basis on which they’re categorised (lower or higher risk) and the nature of the service they’re asking you to undertake. This will help you make sure that your enhanced due diligence is proportionate and effective.

Lower risk PEPs

Asking basic questions and documenting the responses may adequately mitigate the increased risk of money laundering if:

• there’s no question of unusual funding
• the transaction is regularly carried out by non-PEPs

Higher risk PEPs

You may need to ask further questions and gather more documentary evidence if the:

• jurisdiction which appointed the PEP is higher risk
• funding for the transaction is substantial or from an unusual source
• type of transaction is higher risk

Regulation 33(6) of MLR2017 indicates some transactions which may be high risk, especially where a PEP is involved.

Higher risk PEPs may still pose some risk after they leave office. Because of this, you may choose to do enhanced due diligence for longer.

A risk-based approach only relates to how many questions you ask. You should ask as many as you need to be comfortable that the activity is consistent with the legitimate funds available to the PEP and that you do not suspect money laundering.

Republic of Ireland Guidance

The Minister for Justice, with the consent of the Minister for Finance, has issued Guidelines under section 37(12) of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended) clarifying those functions in the State that may be considered to be prominent public functions for the purposes of the Act. This will assist firms to identify domestic Politically Exposed Persons (PEPs) when conducting their risk assessment.

Additional Resources

FATF Guidance on Politically Exposed Persons

FCA Guidance July 2017