A politically exposed person (PEP) is an individual who holds, or has held within the past 12 months, a prominent public function such as a head of state, a minister, a member of a parliament or legislative assembly, a senior official of an international organisation, or a senior military or judicial figure. Under the Money Laundering Regulations 2017, PEPs are considered to carry higher money-laundering risk, and firms must apply enhanced customer due diligence (EDD) when dealing with them, including senior management approval for the relationship and enhanced monitoring.
Why PEP status matters
The enhanced due diligence requirement for PEPs is a frequent area of FCA scrutiny. The obligation extends to immediate family members and known close associates of a PEP. Misidentifying a PEP, or failing to apply EDD, can expose a firm to regulatory action.
The FCA has been clear that firms should apply a proportionate, risk-based approach: domestic PEPs are generally treated as presenting lower risk than those entrusted with prominent public functions in higher-risk jurisdictions, and treatment should reflect the individual circumstances rather than blanket de-risking.
Who it applies to
All staff involved in customer onboarding, relationship management and compliance at firms subject to the MLR 2017.
Related terms
EDD, CDD, MLRO and beneficial ownership.