Politically Exposed Persons

Update July 2025

The FCA released its Finalised Guidance (FG25/3) in July 2025 – The treatment of Politically Exposed Persons (PEPs) for anti-money laundering purposes. Updated Guidance included;

• Confirmation by the FCA that domestic PEPs must be generally treated as lower risk.
• An emphasis on proportionate and risk-based approaches requires a case-by-case basis for firms regarding risk assessment, rather than applying a generic approach to PEPs.
• Clarification that Non-executive Board Members (NEBMs) of civil service departments shouldn’t be treated as PEPs.
• Clarifying that a suitably senior person can sign off on business relationships with PEPs, with the FCA linking directly to the definition of ‘senior management’ in the Regulations.
• MLRO involvement – a suitably senior person can sign off on business relationships with PEPs, MLROs will still retain oversight of the process.
• A removal of EU guidance and replaced with UK legislative framework – now specifically aligning with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and their amendments.

Introduction

Credit unions are required to comply with new requirements for dealing with Politically Exposed Persons (PEPs) in accordance with the Fourth Money Laundering Directive (4MLD) which was implemented into UK law 26 June 2017.

Overall requirements

Credit unions need to have appropriate risk-management systems and procedure to identify when their member is a Politically Exposed Person (PEP) and to manage the enhanced risk arising from having a relationship with that member. This is because members who are PEPs have the potential to abuse their public office for private gain.

The FCA expects that firms achieve this in a proportionate manner, clarifying that there should be relatively few cases where it is necessary to decline a business relationship solely because of these requirements, and should only happen where a member poses a high money laundering risk.

Who is a Politically Exposed Person?

A Politically Exposed Person is an individual who is entrusted with ‘prominent public function’, although middle-ranking to junior officials may be not be caught. The definition includes but is not limited to the following:

• Heads of state, heads of government, ministers and deputy or assistant ministers, members of parliament or similar legislative bodies; (these include devolved and regional governments where these have executive decision making powers and include the Scottish Executive and Welsh Assembly)
• Members of the governing bodies of political parties
• Members of supreme courts, constitutional courts of other high-level judicial bodies, the decisions of which are not subject to further appeal (this is limited to the supreme court judges in the UK)
• Members of courts of auditors or of the boards of central banks (e.g. Bank of England);
• Ambassadors, charges d’affaires
• Highest-ranking officials in the armed forces
• Senior civil service (Deputy Permanent Secretary & Permanent Secretary in the UK)
• Members of the administrative, management or supervisory bodies of state owned (50%+) enterprises;
• Directors, deputy directors and members of the board or equivalent function of an international public organisation (e.g. UN, NATO)

Not included in the definition are: 

• Members of local government in the UK (it may be appropriate to include local government members in high-risk countries)
• More junior members of the civil service
• Any UK military officials other than Permanent Secretary / Deputy Permanent Secretary level or rank of Vice Admiral, Lieutenant General, Air Marshal or senior)

The definition of PEP would include members holding either foreign or domestic public offices. Whilst this definition is not exhaustive, it is worth noting that the scope of a PEP will be wider or narrower depending on the risk level of the PEP’s jurisdiction, for example, more junior officials from high risk countries should be flagged for the additional risk they pose. Individuals should continue to be treated as PEPs for a period of at least 12 months after ceasing to be entrusted with that public position, or for longer if the credit union considered it appropriate and commensurate to the money laundering or terrorist financing risk they pose.

Family and close associates of a PEP

The guidance states that family and known close associates should also be subject to greater scrutiny due to their connection with a PEP.  However, once the PEP leaves office, family members can be treated as normal members immediately i.e. the 12 month rule of continuing to treat a PEP as a PEP after they have left office does not apply to family members unless there is reason to believe they still pose a greater risk.

Family members

• A spouse or partner of that person
• children of that person and their spouses or partners;
• parents of that person
• siblings

N.B. This list is not exhaustive

In line with the risk based approach, it may be appropriate to use a wider definition of family members for higher-risk PEPs than for lower-risk PEPs. For example, a credit union might use the indicative list above for UK opposition MPs but include aunts and uncles and other extended family for PEPs from high-risk countries.

Close Associates

• An individual known to have a joint beneficial ownership of a legal entity or legal arrangement or any other close business relationship with a PEP.
• 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.

Intermediaries and introducers

These guidelines still apply where a PEP, close associate, or family member is operating via a intermediary or introducer such as banking staff, lawyers, estate agents etc.

Identifying Politically Exposed Persons

The high level requirement is to have in place appropriate risk management systems and procedures to determine whether a customer or the beneficial owner[1] of a corporate is a PEP, or a family member or known close associate of a PEP.

This may be broken down into:

• Checking new members for PEP status before or during account opening (before establishment of business)
• Monitoring existing membership for changes in PEP status

Due to the risk-based approach there are no prescribed methods of identifying members as PEPs, however, the FCA expects firms to make use of any information that is reasonably available to them in identifying PEPs. family members or known close associates. In determining what measures you put in place the FCA expects that you take the following into consideration:

• Your own risk assessment of the money laundering/terrorist financing risks your credit union is subject to
• An assessment of the extent to which the risk would be increased by a business relationship with a PEP, family member or close associate
• Any information provided by the FCA, including the FCA’s Financial Crime guide, thematic reviews, speeches on financial crime issues or enforcement action and the FCA’s annual AML report

Information provided by members

Accuracy of Existing Customer Due Diligence Information

Key to ongoing monitoring PEPs status is the accuracy of information already held. Credit unions should monitor accounts for changes of customer profile, account activity and update member information where necessary.

Self Declaration Form

Credit unions are ultimately responsible for PEPs checking, therefore relying solely on something like a self-declaration form (which may be misunderstood and completed incorrectly), would likely not be compliant. However, such a declaration could be used in tandem with other methods, and credit unions may already collect useful information such as each member’s job occupation which may be cross referenced commonly held occupations by PEPs.

Staff training / media & internet

Credit unions should train staff on the definition of PEP to enable staff to flag up PEPs where staff recognise members as holding public office, or where information is disclosed by the member which allows staff to identify that person as a PEP or close associate. Often breaking news via the internet is the quickest way to learn that someone has taken public office or has retired, or to confirm a suspicion of status.

N.B. This is neither a minimum nor exhaustive list of measures a credit union should take. For example, a credit union may elect not to use self-declarations and may instead use a commercial screening service.

Public domain information 

Details found on parliamentary and governmental websites such as parliament.uk can help identify or confirm PEP status and some of this information has been compiled into open source PEPs lists[2]. Credit unions can also use reliable public registers such as Companies House’s register of companies and persons of significant control for establishing close associates.

The FCA states that firms should use a variety of sources where possible.

Commercial PEPs lists

There are a number of providers of commercially compiled PEPs lists, which on the whole, are more comprehensive in scope and have more features (such as a ‘fuzzy name’ search which does not require an exact spelling match) compared to free and open source lists. A credit union should continually assess any services it chooses to use e.g. by checking for persons recently promoted into public office to ensure that it is accurate and up to date. As with the other methods of identifying PEPs, commercial lists have their weaknesses and may present false results so should not be completely relied upon as a single solution.

In order to monitor the existing membership of a credit union on an ongoing basis, a credit union may decide to use service which is able to check the entirety of a credit union’s membership against a PEPs database at a moment in time or periodically. If using this approach, credit unions should make risk-based judgements on how frequently members need to compared to a PEPs database and whether certain types of members are higher or lower risk than others. ABCUL has been looking at a number of different services and will seek to provide further information in due course. For those credit unions using the Agiliti platform, a integrated PEPs and sanctions service is currently provided by Dow Jones.

N.B. A number of these services may be too costly for credit unions and use of such commercial lists is not strictly mandatory. The FCA’s position is as follows:

“In line with the nature and size of the firm, it may choose, but is not required, to use commercial databases that contains lists of PEPs family members and known close associates. A firm choosing to use such lists would need to understand how such databases are populated and will need to ensure that those flagged by the system fall within the definition of PEP, family member or close associate as set out in the regulations”

This is also in line with Financial Action Task Force guidance[3] where such services are not affordable.

Recently revised Joint Money Laundering Steering Group Guidance for credit unions also states that credit unions should put in systems and controls for detecting PEPs in line with the size and nature [4] .

Known Commercial PEPs List / AML screening providers

• C6 Group
• Comply Advantage
• Dow Jones
• Thomson Reuters
• World Compliance

N.B. Inclusion on this list does not constitute an endorsement or recommendation, credit unions should make their own assessments around whether a commercial PEPs checking list is necessary, and sufficient as part of their overall approach to PEPs screening.

N.B.2 The methods described above are neither a minimum nor exhaustive list of measures a credit union should take. For example, a credit union may elect not to use self-declarations and may instead use a commercial screening service.

Lower and higher risk PEPs

The guidance acknowledges that not all PEPs pose the same risks and discusses how firms may differentiate between PEPs that represent a lower risk and those who present a higher risk. In general, the FCA expects that UK PEPs should be treated as low risk unless indicators suggest otherwise. The guidance below describes these indicators of risk.

Lower risk indicators – products

Where a product accessed has been assessed as low risk for money laundering by the firm.

Lower risk indicators – geographical

A PEP may pose a lower risk if he/she solely operates in a country, such as the UK, that has the following characteristics:

• Associated with low levels of corruption
• Political stability and free and fair elections
• Strong state institutions
• Credible anti-money laundering defences
• A free press with a track record for probing official misconduct
• An independent judiciary and a criminal justice system free from political interference
• A track record for investigating political corruption and taking action against wrongdoers
• Legal protection for whistleblowers
• Well-developed registries for ownership of land, companies and equities

Credit unions may wish to consult the Corruption Perception Index (CPI), Financial Action Task Force’s (FATF) black list, or other third party resource to help evaluate geographic risk.

Lower risk indicators – personal and professional

• Is subject to rigorous disclosure requirements (such as registers of interests, independent oversight of expenses)
• Does not have executive decision making responsibilities (such as a government MP with no ministerial brief or an opposition MP)

Higher risk indicators – product

Where a product being accessed is capable of being misused to launder the proceeds of large-scale corruption.

Higher risk indicators – geographical

A PEP may pose a greater risk if she/he is from, or closely connected to, a country with some of the following characteristics:

• Associated with high levels of corruption
• Political instability
• Weak state institutions
• Weak anti-money laundering defences
• Armed conflict
• Non-democratic forms of government
• Widespread organised criminality
• A political economy dominated by oligopolistic actors with close links to the state
• Lacking a free press and where legal and other measures constrain journalistic investigation
• A criminal justice system vulnerable to political interference
• Lacking expertise and skills related to book-keeping, accountancy and audit, particularly in the public sector.
• Law and culture antagonistic to the interests of whistleblowers
• Weaknesses in the transparency of registries of ownership for companies, land and equities
• Human rights abuses

Credit unions may wish to consult the Corruption Perception Index (CPI), Financial Action Task Force’s (FATF) black list, or other third party resource to help evaluate geographic risk.

Higher risk indicators – personal and professional

• Personal wealth or lifestyle inconsistent with known legitimate sources of income or wealth
• Subject to credible allegations of financial misconduct (e.g. facilitated, made, or accepted bribes)
• There is evidence they have sought to disguise the nature of their financial circumstances
• Is able to influence, large public procurement exercises, particularly where procurement is not subject to competitive tender or otherwise lacks transparency.
• Is able to influence allocation of scarce government licences such as mineral extraction concessions or permission or significant construction projects.

The FCA states that this list is not exhaustive and asks firms to take into account that new indicators of corruption may emerge.

Lower and higher risk family or close associates

As with PEPs the FCA provides guidance around assessing which family members and close associates may represent a lower or higher risk of money laundering. The FCA expects family or known close associates of UK PEPs to be treated as lower risk unless there are circumstances to suggest otherwise. 

Lower risk

Therefore for foreign PEPs, family members or close associate may pose a lower risk if:

• He or she is associated with a PEP who themselves poses a lower risk
• He or she is associated with a PEP who is no longer in office
• He or she is under 18 years of age

Higher risk

The family and close associate may pose a higher risk if they have any of the following characteristics:

• Wealth derived from the granting of government licenses (mineral extraction, monopoly provider of services, or permission for significant construction projects.)
• Wealth derived from preferential access to the privatisation of former state assets
• Wealth derived from commerce in industry sectors associated with higher-barriers to entry or lack of competition, particularly where these barriers stem from law, regulation or other government policy
• Wealth or lifestyle inconsistent with known legitimate sources of income or wealth
• Subject to credible allegations of financial misconduct (e.g. bribery)
• Appointment to a public office that appears inconsistent with personal merit

Measures firms should take when they identify a member as a PEP, or a family member or known associate

The regulations require that enhanced customer due diligence measures are taken to manage and mitigate the risks posed by PEPs and their families and known close associates. Where the decision is made to take such measures, the decision and subsequent actions should be clearly documented. This includes having the appropriate systems to identify people as PEPs, their close associates and family members. Regulations require that firms:

• Obtain approval from senior management (i.e. SMF 17 Money Laundering Reporting Officer role) for establishing or continuing business with such persons.
• Take adequate measures to establish source of wealth and funds that are involved in transactions with such persons
• Conduct enhanced, ongoing monitoring.

Lower risk measures:

• Seek to make no enquiries of a PEP’s family member or close associate except those necessary to establish whether such a relationship exists.
• Take less intrusive and less exhaustive steps to establish the source of wealth and source of funds of PEPs, family members or known close associates; for example, you may use information already available to the institution (such as transaction records or publically available information) only making further inquiries of the individual where anomalies arise. Firms should minimise the amount of information they collect and how they verify it where collecting source of wealth information for lower risk PEPs.
• Oversight and approval of the relationship takes place at a less senior level of management (e.g. MLRO).
• After the firm becomes aware a PEP has left office, promptly cease to apply any enhanced measures to family and close associates
• A business relationship with a PEP or a PEP’s family and close associates is subject to less frequent formal review.

Higher risk measures

• Take more intrusive and exhaustive steps to establish the source of wealth and source of funds of family members or known close associates of a PEP.
• Oversight and approval of the relationship takes place at a more senior level, such as the person holding the overall responsibility for financial crime responsibility under the Senior Managers Regime.
• Business relationship with PEP or a PEP’s family and close associates is subject to more frequent and thorough formal review as to whether the business relationship should be maintained.

Corporate Members

Credit unions should identify when a PEP is a beneficial owner of a corporate member. If you establish that a beneficial owner of a corporate member is a PEP then, in line with the risk-based approach you should assess the risks posed by the involvement of the PEP and apply appropriate measures in accordance with the guidance above. An example would be applying customer due diligence measures in cases where the PEP is merely a figurehead for an organisation to applying enhanced due diligence where it is apparent that the PEP has significant control or ability to use their own funds in relation to the corporate member.

Further reading

• UK Money Laundering Regulations 2017
• Joint Money Laundering Steering Group Guidance
• FCA Final Guidance on PEPs
• FCA Financial Crime Guide
• European Supervisory Authorities Guidelines on risk factors
• Financial Action Task Force (FATF) – Guidance on PEPs
• Financial Action Task Force’s (FATF) black list

Conclusion

ABCUL is currently exploring options with third party providers on a collective bargaining model with the credit union sector. We will update this information guide with further information of these options in due course.

As always, we value your feedback, if you have any questions about compliance, or believe there is something we can add to this guide please contact your Member Relationship Managers by emailing them direct, on members@abcul.org or by dialling 0161 832 3694.

Last Reviewed: July 2025

[4] Joint Money Laundering Steering Group guidance: Credit Unions, “Steps taken by a credit union will include identifying politically exposed persons (PEPs) by introducing systems and controls which are in line with the nature and size of the credit unions, using information gathered by the credit union during the onboarding process. This may involve using information reasonably available to them, including a variety of public domain information (such as parliamentary and government websites, reliable news sources and public registers), but the use of commercial databases is not mandatory.”