FAQ: Do I need to treat a client as a politically exposed person?

I am acting for the buyer of a residential property. The client has advised me that he is a member of a political party in the UK. Should I treat him as a politically exposed person?

Regulations 35 and 36 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 deal with politically exposed persons (PEPs). The definiti

on of a PEP applies to all persons appointed by governments and authorities anywhere in the world, including in the UK.

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 a prominent public function by a public institution, an international body or a state. Middle-ranking and junior officials are not PEPs. Members of governing bodies of political parties are PEPs, but the members themselves would not be, nor would members of their family.

Pursuant to the Money Laundering and Terrorist Financing (Amendment) Regulations 2023, domestic PEPs are still subject to enhanced due diligence (EDD) but must be treated as lower risk than overseas PEPs, unless there are any other factors that increase the level of risk. Firms should consider amending their policies and procedures to make it clear that domestic PEPs should normally be subject to a lesser standard of EDD.

For further information, please see section 6 of the Law Society’s Anti-money laundering guidance for the legal sector and our practice note on handling complaints.