ECSH33316 - Politically Exposed Persons

Introduction 

Enhanced due diligence (EDD) measures must be applied, in addition to customer due diligence measures, where the business has determined that a customer or potential customer is a politically exposed person (PEP), or a family member or known close associate of a PEP. This requirement reflects the increased risk of involvement in corruption and bribery, associated with the positions of influence held by PEPs. 

Please note, whilst EDD must be applied to PEPs, EDD will also apply in other circumstances where there are greater risks of money laundering or terrorist financing, as set out in ECSH33335. This page focuses specifically on PEP related obligations. 

Understanding who a business should classify as a PEP 

A PEP is defined in regulation 35(12) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) as an individual who is entrusted with prominent public functions, excluding middle-ranking or more junior officials.   

Prominent public functions are listed in regulation 35(14), these include:  

(a) heads of state, heads of government, ministers and deputy or assistant ministers   

(b) members of parliament or of similar legislative bodies   

(c) members of the governing bodies of political parties  

(d) members of supreme courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances  

(e) members of courts of auditors or of the boards of central banks  

(f) ambassadors, charges d’affaires and high-ranking officers in the armed forces  

(g) members of the administrative, management or supervisory bodies of State-owned enterprises   

(h) directors, deputy directors and members of the board or equivalent function of an international organisation.   

A family member of a PEP includes:  

  • A spouse or civil partner of the PEP. 

  • Children of the PEP and the spouses or civil partners of the PEP’s children. 

  • Parents of the PEP. 

A “known close associate” of a PEP is:  

  • An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relations with a PEP, for example, a PEP’s business partner. 

  • An individual who has sole beneficial ownership of a legal entity or a legal arrangement which is known to have been set up for the benefit of a PEP, for example, the trustee of a trust of which the PEP is a beneficiary. 

 

Domestic and non-domestic PEPs 

The term PEP applies to both UK and foreign nationals. From 10 January 2024, MLR 2017 introduced a distinction between domestic and non-domestic PEPs. Domestic PEPs are those entrusted with prominent public functions by the UK; all others are non-domestic PEPs. Before 10 January 2024 no such distinction existed. The changes were introduced under regulation 35(3A) and 35(12) (d-f) MLR 2017. The UK National Risk Assessment 2025 highlights that the UK is exposed to international corruption, including from corrupt foreign PEPs who may attempt to invest misappropriated wealth in the UK. See ECSH 33337 for guidance on how these are treated differently. 

When PEP status ends 

The obligation to apply EDD measures to PEPs continues for 12 months after they have left office, or for such longer period as the business considers appropriate, to address risks of money laundering/terrorist financing in relation to that person.  

For family members and known close associates of a PEP, the obligation to apply EDD measures ceases immediately as soon as the PEP has left their office. 

Policies controls and procedures of groups and subsidiaries in relation to PEPs 

Regulation 20 MLR 2017 requires group companies to ensure that: 

  • The policies, controls and procedures established under regulations 19(1) and 19A(1) MLR 2017 apply to all its subsidiary undertakings, including those located outside the UK, and any branches it has established outside the UK. 

  • The subsidiary undertakings and branches apply measures equivalent to those under MLR 2017, as far as permitted by the laws of the third country. This means domestic PEPs should be treated as lower risk (and therefore a lower level of EDD would apply) across a group unless it is unlawful to do so in that jurisdiction. 

Enhanced due diligence measures  

For guidance on the EDD measures the business must apply when establishing a business relationship or carrying out a transaction with a PEP, and testing procedures in relation to PEPs when conducting interventions, see ECSH 33337.