Who are Politically Exposed Persons (PEPs) under MLR 2017

Under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), Relevant Persons are required to implement Enhanced Due Diligence (EDD) measures when engaging with customers that are Politically Exposed Persons (PEPs). To fulfil this obligation, the first step is identifying whether a customer qualifies as a PEP. To do so, it is important to understand what the term Politically Exposed Person (PEP) means. This infographic aims to answer the fundamental question: “Who are Politically Exposed Persons?” Let’s explore this in detail.

Definition of Politically Exposed Persons (PEP):

As defined under MLR 2017, a PEP is an individual entrusted with prominent public functions. However, PEP does not include a middle-ranking officer or more junior official.

Meaning of ‘Individuals Entrusted with Prominent Public Functions’:

Under MLR 2017, the following categories of individuals are considered to be entrusted with prominent public functions:

Heads of State and Heads of Government
Ministers, Deputy Ministers 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 any Judicial Body Whose Decisions are not Subject to Appeal Except in Exceptional Circumstances
Members of Courts of Auditors or of Board of Central Banks
Ambassadors and Charges D’Affaires
High-Ranking Officers in the Armed Forces
Members of Administrative, Management, or Supervisory Bodies of State-Owned Enterprises
Directors, Deputy Directors, and Members of the Board or Equivalent Function of an International Organisation

Family Members and Known Close Associates of PEP:

Under MLR 2017, Enhanced Due Diligence (EDD) measures are applicable to family members and known close associates of PEP as well.

Family members of PEP include:

Spouse
Civil partner
Children
Spouse or civil partners of PEP’s children
Parents

Known close associates of PEP include:

Individuals who have joint beneficial ownership of a legal entity or legal arrangement or any other close business relations with a PEP
Individuals who have sole beneficial ownership of a legal entity or legal arrangement set up for a PEP’s benefit

Types of PEP:

Under MLR 2017, there are two types of PEP: domestic PEP and non-domestic PEP.

Domestic PEPs are those PEPs that are entrusted with prominent public functions by the UK
Non-domestic PEPs are those PEPs that do not fall under the category of domestic PEP

Enhanced Due Diligence (EDD) Treatment for PEPs:

Under MLR 2017, EDD must be applied for PEP, their family members, and known close associates. However, a domestic PEP poses a lower risk than a non-domestic PEP, and if no enhanced risk factors are present, the extent of EDD measures applied to domestic PEP is less than that for a non-domestic PEP.

Politically Exposed Persons (PEPs) under MLR 2017: Final Thoughts

MLR 2017 requires Relevant Persons to have in place risk management systems and procedures that help them in determining whether their customer, or a beneficial owner of their customer, is a PEP, or a family member or known close associate of a PEP. In this infographic, we have discussed the meaning of PEP, understanding which is the first step in recognising a PEP. To enhance detection, Relevant Persons can make use of AML software, such as PEP screening solutions, for more efficient and effective identification of PEPs.