What is a politically exposed person (PEP)?

“I’ve been instructed by the chief executive of a local authority in the purchase of a property in his personal capacity. Are they a politically exposed person under the Money Laundering Regulations 2017?”

In the UK, only those who hold truly prominent positions should be treated as politically exposed persons (PEPs).

The definition should not be applied to local government, more junior members of the civil service or military officials other than those holding the most senior ranks.

This should be borne in mind as many commercially available PEP checking tools may have a much lower threshold for considering an individual a PEP.

A PEP is a person who has been entrusted within the last year (or for a longer period if you consider it appropriate to address the risks in relation to that person) with one of the following prominent public functions by a public institution, an international body, or a state, including the UK.

A list of PEP roles is set out at regulation 35(14) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017:

• heads of state, heads of government, ministers and deputy or assistant ministers
• members of parliament or similar legislative bodies
• members of governing bodies of political parties
• members of supreme courts, of constitutional courts, or any judicial body whose decisions are not subject to further appeal, except in exceptional circumstances
• members of courts of auditors or of the boards of central banks
• ambassadors, charges d'affaires and high-ranking officers in the armed forces
• members of the administrative, management or supervisory bodies of state-owned enterprises
• directors, deputy directors and members of the board of equivalent function of an international organisation. In addition to the primary PEPs listed above, a PEP also includes (regulation 35(12))
• family members of a PEP – spouse, civil partner, children, their spouses or partners, and parents, and
• known close associates of a PEP – persons with whom joint beneficial ownership of a legal entity or legal arrangement is held, with whom there are close business relationships, or who is a sole beneficial owner of a legal entity or arrangement set up by the primary PEP

For more information, see chapter 6.19 of the anti-money laundering guidance for the legal sector.