Politically Exposed Persons (PEPs): A Guide for Accountants

A politically exposed person (PEP) is someone entrusted with a prominent public function — and that role brings a higher inherent risk of bribery and corruption. For accountancy and finance firms, identifying PEPs and applying the right level of scrutiny is a core anti-money laundering obligation. The rules changed in recent years, so it is worth being precise about who is a PEP and what that actually means for how you act for them.

Who counts as a PEP?

A PEP is an individual holding a prominent public position — for example a head of state, government minister, senior civil servant, senior military officer, member of a parliament, judge of a supreme court, ambassador, or a director of a state-owned enterprise. Crucially, the definition reaches beyond the individual: their family members (spouse, partner, children and their spouses, and parents) and their known close associates are also treated as PEPs by association. Local councillors and middle-ranking officials are generally not PEPs.

Domestic vs foreign PEPs

This is the area firms most often get wrong. Since amendments that took effect in January 2024, UK law requires that the starting point for a domestic PEP — someone entrusted with a prominent public function by the UK — is that they pose a lower risk than a foreign PEP. The Financial Conduct Authority's finalised guidance, published in July 2025, reinforces this: there should be no automatic enhanced measures such as verifying source of wealth for a domestic PEP unless other risk factors are present. Foreign PEPs, by contrast, remain higher risk by default.

What enhanced measures apply?

Where a PEP relationship is higher risk, firms must apply enhanced due diligence: establishing the source of the PEP's wealth and the source of funds involved in the relationship, obtaining senior management approval before onboarding or continuing the relationship, and applying enhanced ongoing monitoring. These sit on top of the standard customer due diligence applied to every client. The measures should be proportionate — a domestic PEP with no other risk indicators will warrant lighter treatment than a foreign PEP connected to a high-risk jurisdiction.

Risk factors that raise the bar

Even where the starting point is lower risk, certain factors push a PEP relationship up the scale. These include connections to high-risk jurisdictions, credible adverse media suggesting financial crime, roles with extensive international financial activity, and wealth or transaction patterns that do not fit the individual's known profile. A risk-based approach means reassessing as new information emerges, not just at onboarding.

How long does PEP status last?

A person must continue to be treated as a PEP for at least 12 months after they leave office, with the exact period determined on a risk-sensitive basis — someone who held a very senior role may warrant longer. Their family members and close associates, however, can generally be treated as ordinary customers from the point the PEP leaves office, subject to normal due diligence.

Practical steps for firms

Build PEP identification into onboarding through screening, keep clear records of why a person was or was not classified as a PEP, distinguish domestic from foreign status in your risk assessment, and document the proportionate measures applied. Keeping these skills sharp is a genuine professional-development need — our AML and compliance CPD courses work through PEP handling and risk-based due diligence in practical detail.

Applying a risk-based approach to PEPs

A politically exposed person (PEP) is someone entrusted with a prominent public function — along with their family members and close associates — whose position can make them higher risk for bribery and corruption. The key word is risk-based: being a PEP is not an accusation of wrongdoing, and the response should be proportionate to the actual risk the relationship presents, not a blanket refusal to act.

Enhanced due diligence in practice

Where a PEP relationship is identified, enhanced due diligence typically applies: senior management approval to establish or continue the relationship, establishing the source of wealth and source of funds, and closer ongoing monitoring of the relationship and its transactions. The depth of these measures should scale with the assessed risk — a domestic PEP in a low-risk role may warrant lighter measures than a foreign PEP in a high-corruption-risk environment.

Proportionality and review

Status as a PEP can change over time, and many frameworks allow a stepping-down of measures once someone has left public office and the residual risk has fallen. Document your risk assessment and the rationale for the measures applied — that record is what demonstrates a defensible, risk-based approach.

Frequently asked questions

Are all PEPs high risk?

No. Foreign PEPs are higher risk by default, but UK domestic PEPs must be treated as lower risk as a starting point, with enhanced measures applied only where additional risk factors exist.

Do family members of a PEP count as PEPs?

Yes, while the individual holds office. Spouses or partners, children and their spouses or partners, and parents are treated as PEPs by association. Once the PEP leaves office, family members can generally revert to ordinary customer treatment.

Can a firm refuse to act for a PEP?

A firm can decline business on risk grounds, but it should not refuse or close a relationship solely because someone is a PEP without considering the actual risk — the rules call for proportionate, risk-based treatment rather than blanket exclusion.

Handled well, PEP screening is not about treating public figures with suspicion — it is about applying scrutiny proportionate to a genuinely higher corruption risk, and being able to evidence that you did.