Regulation 35(12)(a) defines a PEP as an individual entrusted with prominent public functions, other than as a middle ranking or more junior official. Regulation 35(14) lists the functions included: heads of state, heads of government, ministers and deputy or assistant ministers; members of parliament or similar legislative bodies; members of the governing bodies of political parties; members of supreme courts, constitutional courts or other courts whose decisions are not usually subject to further appeal; members of courts of auditors or 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; directors, deputy directors and board members of international organisations. HMRC's guidance at AMLG11650 explains how this applies in the UK. Members of the Scottish Parliament, Northern Ireland Assembly and Welsh Senedd are included; members of UK local government are not. Of the UK judiciary, only Supreme Court judges are included. Senior officials qualify at Permanent Secretary or Deputy Permanent Secretary level, or the equivalent military rank, and civil servants below that level are not normally treated as PEPs. For state owned enterprises, HMRC limits the category to profit making enterprises where the state owns more than 50% or otherwise has control. Party officials are generally caught only where they sit on a national governing...

Politically exposed persons: AML rules for accountants

Q: What does this look like in practice?

Illustration only. A practice is asked to prepare the self assessment return and rental accounts of a backbench MP who owns two let properties, and the accounts of a consultancy company owned by the MP's spouse. Both are within the PEP rules: the MP as a domestic PEP and the spouse as a family member. With no enhanced risk factors, the firm records the lower starting risk, obtains the MP's published register of interests and uses the prior year return and mortgage statements to establish source of wealth and funds. The principal approves both engagements in writing. Monitoring is set at each year end, with an immediate review if the MP becomes a minister or the consultancy starts invoicing public bodies. Twelve months after the MP leaves parliament the firm reviews whether PEP treatment can stop for the MP; for the spouse, it can stop when the MP leaves office unless other risks are present.

A politically exposed person (PEP) is someone entrusted with a prominent public function, such as a minister, MP, senior judge or ambassador, and the Money Laundering Regulations 2017 treat PEPs, their close family and known close associates as requiring enhanced due diligence. Before acting, an accountant needs senior management approval, adequate measures to establish source of wealth and source of funds, and enhanced ongoing monitoring. UK PEPs start from a lower risk position than foreign PEPs, so the extent of those checks can be lighter unless other risk factors are present.

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Who counts as a PEP?

Regulation 35(12)(a) defines a PEP as an individual entrusted with prominent public functions, other than as a middle ranking or more junior official. Regulation 35(14) lists the functions included:

heads of state, heads of government, ministers and deputy or assistant ministers;
members of parliament or similar legislative bodies;
members of the governing bodies of political parties;
members of supreme courts, constitutional courts or other courts whose decisions are not usually subject to further appeal;
members of courts of auditors or 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;
directors, deputy directors and board members of international organisations.

HMRC’s guidance at AMLG11650 explains how this applies in the UK. Members of the Scottish Parliament, Northern Ireland Assembly and Welsh Senedd are included; members of UK local government are not. Of the UK judiciary, only Supreme Court judges are included. Senior officials qualify at Permanent Secretary or Deputy Permanent Secretary level, or the equivalent military rank, and civil servants below that level are not normally treated as PEPs. For state owned enterprises, HMRC limits the category to profit making enterprises where the state owns more than 50% or otherwise has control. Party officials are generally caught only where they sit on a national governing body with significant executive power. The FCA’s 2025 guidance on PEPs (FG25/3) also states that non executive board members of UK civil service departments should not be treated as PEPs.

Who are family members and known close associates?

Under regulation 35(12)(b), family members include a PEP’s spouse or civil partner, their children and the children’s spouses or civil partners, and their parents. Known close associates under regulation 35(12)(c) are individuals known to have joint beneficial ownership of a legal entity or arrangement with a PEP, or any other close business relations with a PEP, and individuals with sole beneficial ownership of an entity or arrangement known to have been set up for a PEP’s benefit.

Regulation 35(15) limits the inquiry: in deciding whether someone is a known close associate, a firm need only have regard to information in its possession or credible information that is publicly available. HMRC adds that a wider circle of relatives, such as siblings, may be treated as subject to EDD where the PEP has been assessed as higher risk.

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How are domestic PEPs treated?

Regulation 35(3A), inserted from 10 January 2024, changed the starting point for UK PEPs. A domestic PEP is one entrusted with prominent public functions by the United Kingdom (regulation 35(12)(d)). For a domestic PEP, or their family member or known close associate:

the starting point is that they present a lower level of risk than a non domestic PEP; and
if no enhanced risk factors are present, the extent of enhanced due diligence applied is less than for a non domestic PEP.

“Enhanced risk factors” means risk factors other than the person’s status as a domestic PEP or connection to one (regulation 35(12)(f)). EDD is still required: what changes is how much. HMRC gives examples of a lighter approach for lower risk PEPs: approval at a less senior management level, establishing source of wealth and funds from information already held or publicly available, and less intensive ongoing monitoring.

What must a firm do when a client is a PEP?

Regulation 35(1) requires appropriate risk management systems and procedures to determine whether a client or a client’s beneficial owner is a PEP, family member or known close associate. Once that is established, regulation 35(3) requires the firm to assess the level of risk and the extent of EDD to apply. Regulation 35(5) then imposes three minimum measures, in addition to the general enhanced due diligence duties under regulation 33:

Senior management approval for establishing or continuing the business relationship.
Adequate measures to establish source of wealth and source of funds involved in the relationship or transactions.
Enhanced ongoing monitoring of the relationship once it is entered into.

“Senior management” is defined in regulation 3 as an officer or employee with sufficient knowledge of the firm’s money laundering risk exposure and sufficient authority to take decisions affecting it. In a small practice that will usually be a principal or the money laundering reporting officer, but the approval must be a real decision, recorded and dated, rather than a formality. The general approach to enhanced due diligence applies on top.

How do firms find out whether a client is a PEP?

HMRC suggests asking the client, using public information such as government and parliament websites, news sources and the Electoral Commission, and using commercial screening tools. If a screening database is used, the firm should understand how it is populated and check that anyone flagged actually meets the legal definition. ICAEW’s monitoring reviewers have noted that many electronic services focus on sanctions, PEP and adverse media screening rather than verifying identity, so a PEP screen does not replace the identity checks in customer due diligence.

What if a PEP owns a client company?

Regulation 35(1) extends to beneficial owners, and regulation 35(13) says a business relationship with an individual includes one with a person of which the individual is a beneficial owner. So a company owned by an MP brings the PEP rules into play. HMRC notes that this does not make the company or its other owners PEPs, but if the PEP has significant control and can use their own funds through the entity, a higher risk is indicated. Identifying the owners is covered in verifying beneficial owners.

How long does PEP status last?

When a PEP leaves office, regulation 35(9) requires the firm to continue the regulation 35(5) measures for at least 12 months, or longer if it considers that appropriate to address the risk. HMRC indicates that going beyond 12 months will normally only be needed for a PEP assessed as higher risk. For family members and known close associates, regulation 35(11) ends the requirement as soon as the PEP leaves office, unless other reasons justify treating them as higher risk.

What does this look like in practice?

Illustration only. A practice is asked to prepare the self assessment return and rental accounts of a backbench MP who owns two let properties, and the accounts of a consultancy company owned by the MP’s spouse. Both are within the PEP rules: the MP as a domestic PEP and the spouse as a family member. With no enhanced risk factors, the firm records the lower starting risk, obtains the MP’s published register of interests and uses the prior year return and mortgage statements to establish source of wealth and funds. The principal approves both engagements in writing. Monitoring is set at each year end, with an immediate review if the MP becomes a minister or the consultancy starts invoicing public bodies. Twelve months after the MP leaves parliament the firm reviews whether PEP treatment can stop for the MP; for the spouse, it can stop when the MP leaves office unless other risks are present.

What are the common mistakes?

Treating local councillors or mid level civil servants as PEPs, which wastes effort, or missing devolved legislators, which is a breach.
Screening only the client and not its beneficial owners.
Applying full foreign PEP procedures to UK PEPs, contrary to regulation 35(3A).
Recording approval after work has started rather than before the relationship is established.
Not keeping a record of the PEP checks made, which HMRC says firms must keep.

Supervisors look closely at PEP procedures on monitoring visits; see AML supervision for accountants.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.