A director whose name appears on a PEP list does not, on its own, put your client under the politically exposed person rules. Regulation 35 of the Money Laundering Regulations 2017 applies when the customer or its beneficial owner is a PEP, or a family member or known close associate of one. When that is the case, you need senior management approval, the source of wealth and source of funds, and enhanced ongoing monitoring. Since January 2024, a UK (domestic) PEP starts from a lower level of risk than a foreign one. In every case, the file should show who was screened, what came back, how you told a namesake from the real person, and what you decided. EntityWatch screens the client, its officers and its beneficial owners in the same check and drafts that record for you. It is free for up to five companies.
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By Martin Nymann, AddonNordic ApS, the company behind EntityWatch. Updated 26 October 2026.
- When do the PEP rules apply to a client company?
- What must you do when a beneficial owner is a PEP?
- What changed for UK PEPs in January 2024?
- Is the name on the PEP list really your client’s director?
- What should the file record?
- How does EntityWatch help?
- Frequently asked questions
When do the PEP rules apply to a client company?
They apply when the customer or the customer’s beneficial owner is a PEP, or a family member or known close associate of a PEP. Regulation 35(1) requires “appropriate risk-management systems and procedures to determine whether a customer or the beneficial owner of a customer is” one of those people. For a client company, that means two questions: who owns or controls it, and is any of them politically exposed?
Regulation 35(13) closes the gap a company could otherwise create. A business relationship with an individual “includes a reference to a business relationship with a person of which the individual is a beneficial owner”. A PEP who owns 40% of your client brings the full PEP measures with them, even though your engagement letter is with the company.
A director is different. A director who is not a beneficial owner is not, by that fact, within regulation 35(1). There is one exception that small practices meet in practice. Under regulation 28(6) and (7), when you have exhausted all possible means of identifying the beneficial owner of a body corporate and have not succeeded, you may treat the senior person responsible for managing it as the beneficial owner. If that person is a PEP, regulation 35 applies to them.
| Who has the PEP connection | Does regulation 35 apply? | What to do |
|---|---|---|
| Beneficial owner (over 25% or other control) | Yes, through 35(1) and 35(13) | Apply the measures in 35(5) and record the risk assessment under 35(3) |
| Family member or known close associate of a beneficial owner’s PEP connection | Yes | Same as above, scaled to the risk |
| Director who is not a beneficial owner | Not by itself | Weigh it as a risk factor in your client risk assessment and record why |
| Senior manager treated as beneficial owner under 28(6) | Yes | Same as a beneficial owner |
Who counts as a PEP is set out in regulation 35(14): heads of state and government and ministers, members of parliament, members of supreme courts, members of courts of auditors and central bank boards, ambassadors and high-ranking officers in the armed forces, members of the management bodies of state-owned enterprises, senior officials of international organisations, and members of the governing bodies of political parties. Regulation 35(12) excludes middle-ranking and more junior officials.
What must you do when a beneficial owner is a PEP?
Three measures, in addition to the enhanced due diligence of regulation 33. Regulation 35(5) requires a relevant person who proposes to have, or continue, a business relationship with a PEP, or a family member or known close associate of one, to:
- get approval from senior management for establishing or continuing the relationship;
- take adequate measures to establish the source of wealth and source of funds involved in the relationship;
- conduct enhanced ongoing monitoring of the relationship once it is entered into.
Before that, regulation 35(3) requires you to assess the level of risk associated with that customer and how far the enhanced measures should go. That assessment belongs in the file. A note that says “PEP, EDD applied” without the reasoning is the kind of entry a monitoring visit questions, as we cover in what your AML supervisor looks at in a client file.
The measures do not stop the day the person leaves office. Regulation 35(9) requires you to keep applying them for at least 12 months after the person ceased to hold the prominent public function, or longer if the risk calls for it. For family members and known close associates, regulation 35(11) ends the requirement as soon as the PEP leaves office.
For a small practice, “senior management” is usually the principal or the money laundering reporting officer. Record who approved, on what date and on what basis. The same discipline is set out in how to record an AML decision so it holds up at inspection.
What changed for UK PEPs in January 2024?
A UK PEP now starts from a lower level of risk than a foreign PEP. The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 inserted regulation 35(3A), in force from 10 January 2024. Where the customer is a domestic PEP, or a family member or known close associate of one, “the starting point for the assessment is that the customer or potential customer presents a lower level of risk than a non-domestic PEP”. If no enhanced risk factors are present, the enhanced measures should be less extensive than for a non-domestic PEP.
Three points keep this in proportion:
- It is still a PEP. The three measures in regulation 35(5) still apply. What changes is how far they go.
- “Domestic” means entrusted with prominent public functions by the United Kingdom (regulation 35(12)(d)). An overseas minister who lives in London is a non-domestic PEP.
- “Enhanced risk factors” are anything other than the PEP status itself (regulation 35(12)(f)): an unusual source of wealth, a complex ownership chain, a high-risk sector or country. If you find one, the lower starting point stops doing much work.
The file should say which starting point you used and why. “Domestic PEP, local councillor’s spouse, no enhanced risk factors found: source of wealth confirmed from the client’s own statement and accounts, approved by the MLRO on 26 October 2026” is a decision a supervisor can follow.
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Is the name on the PEP list really your client’s director?
Often not. PEP data is a list of names, and a common name will match people who have nothing to do with your client. A name match is a reason to check, not a finding. The useful question is whether anything distinguishes the two people.
Work through it in this order:
- Compare the date of birth. Companies House shows the month and year of birth for directors and individual PSCs. If the PEP entry gives a different year, it is a different person, and you can close the match with that reason.
- Compare the country and the role. A PEP entry for a provincial official abroad, against a UK director with no link to that country, is weak. Note what you compared.
- Look at what the entry does not say. Many PEP entries carry no date of birth at all. Then nothing on the register tells the two people apart. For a director who is not a beneficial owner, record the namesake as information and move on. For a beneficial owner, ask the client or check credible public information.
- Use what you already know. Regulation 35(15) says that for close associates you need only have regard to information in your possession or credible information that is publicly available. You are not expected to investigate every relative of every officer.
The same method applies to sanctions hits, with one difference: a possible sanctions match on a designated person must be cleared before you act. That process is in a client is a possible sanctions match: how to clear it and what to record.
What should the file record?
Enough for someone who was not there to see what you screened, what came back and why you decided as you did. A checklist for each PEP question:
- the names screened (the company, each officer and each beneficial owner) and the date;
- the lists checked, including the PEP source;
- each match, and what you compared it against: date of birth, country, role;
- your conclusion for each match: different person, namesake recorded as information, or PEP confirmed;
- for a confirmed PEP: domestic or non-domestic, the enhanced risk factors you found or did not find, the source of wealth and funds, who approved the relationship and when;
- the review date, and the date the PEP left office if that matters for regulation 35(9).
This sits inside the wider client file, section by section, as set out in the AML client file for accountants, and feeds the risk class in your client risk assessment.
How does EntityWatch help?
EntityWatch reads Companies House for a UK client and screens the company, its officers and its beneficial owners against the UK, EU, UN and OFAC sanctions lists and PEP data in the same check. It then drafts the client note in under a minute.
- Namesakes are sorted for you. A PEP entry whose year of birth contradicts the register’s year for the person is closed with that reason. A PEP entry with no date of birth against an officer who is not a beneficial owner is listed as information, not as a review point, with the reason given.
- A beneficial owner flagged as politically exposed raises the bar. The note says enhanced due diligence applies, whatever the overall risk class.
- The wording stays careful. Screening compares names only, so the note says “no match” or “possible name match routed to review”. It never says a person is a PEP.
- Your decision is the one that counts. You approve or change the risk class, and the approval is recorded with your name, the date and your reason.
- The check runs again. Monitored clients are re-read from the register and re-screened, so a new officer or owner is screened too.
EntityWatch does not identify family members or close associates for you, and it does not verify the identity of individuals. Use your existing ID provider for that. See how it works and pricing.
Frequently asked questions
Does a director who is a PEP make my client a PEP relationship?
Not by itself. Regulation 35 applies when the customer or its beneficial owner is a PEP, or a family member or known close associate of one. A director who is not a beneficial owner is a risk factor to weigh and record, unless you have treated that director as the beneficial owner under regulation 28(6).
Is a UK PEP lower risk since 2024?
The starting point is lower. Regulation 35(3A), in force from 10 January 2024, says a domestic PEP starts from a lower level of risk than a non-domestic PEP, and the enhanced measures can be less extensive if no other risk factors are present. Senior management approval, source of wealth and funds, and enhanced monitoring still apply.
How long do the PEP measures last after someone leaves office?
At least 12 months after the person stops holding the prominent public function, or longer if the risk calls for it, under regulation 35(9). For family members and known close associates, the requirement ends when the PEP leaves office, under regulation 35(11).
What if the PEP entry has no date of birth?
Then the register cannot tell the two people apart. For an officer who is not a beneficial owner, record the namesake as information. For a beneficial owner, ask the client or check credible public information, and record what you found.
To screen a client, its officers and its owners in one check, get started free with five companies and write your first client note.
This article is general information about the UK Money Laundering Regulations 2017, not legal advice.
This content was generated with artificial intelligence.