In the dynamic landscape of financial regulation, UK accountants and bookkeepers face an ever-evolving set of responsibilities, particularly concerning Anti-Money Laundering (AML) compliance. A critical component of this is PEP screening, a process designed to identify and mitigate risks associated with Politically Exposed Persons (PEPs). The year 2025 brings significant updates to the regulatory framework, emphasising a more proportionate, risk-based approach while strengthening defences against financial crime.
This section provides a comprehensive overview of what constitutes a PEP, the inherent risks they present, and the specific AML compliance requirements for UK accounting professionals. We will delve into the latest guidance from key regulatory bodies such as HMRC, the Financial Conduct Authority (FCA), ICAEW, AAT, and ICB, ensuring you have the most up-to-date information to navigate the complexities of PEP screening effectively.
Key Points Summary
Understanding PEPs – Individuals in prominent public positions (UK or abroad) who present higher money laundering risks due to their influence and access.
Three Risk Categories – Domestic PEPs are now lower risk unless other factors exist; Foreign PEPs from high-risk jurisdictions require Enhanced Due Diligence; International PEPs depend on their organisation.
2025 Regulatory Shift – The FCA’s FG25/3 guidance emphasises proportionate, risk-based approaches rather than blanket high-risk treatment for all PEPs.
Enhanced Due Diligence Requirements – Source of wealth verification, source of funds documentation, senior management approval, and ongoing monitoring for high-risk PEP relationships.
Automation is Essential – Manual PEP checking is error-prone and time-consuming. Modern software provides real-time screening, ongoing monitoring, and comprehensive audit trails.
Integration Matters – Embedding PEP checks into your client onboarding workflow through API connections streamlines compliance and improves efficiency.
What Exactly is a Politically Exposed Person?
A Politically Exposed Person (PEP) is an individual entrusted with prominent public functions, either in the UK or elsewhere. Due to their position and influence, PEPs can be susceptible to corruption, bribery, and other illicit activities, making them a higher risk for money laundering and terrorist financing.
For accountants and bookkeepers, accurately identifying and assessing the risks associated with PEP clients is fundamental to robust AML compliance.
What is a PEP?
A Politically Exposed Person (PEP) is an individual who holds, or has held, a prominent public position or function. This includes heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, and important political party officials. The definition also extends to their immediate family members and close associates, who may be used to conceal illicit funds.
The inherent PEP risks stem from the potential for their position to be abused for private gain, either directly or through their connections. This can manifest as bribery, embezzlement, or the use of their influence to facilitate money laundering. Accounting professionals must be vigilant in identifying these risks, particularly when dealing with complex financial structures or transactions that appear inconsistent with a client’s known legitimate income or business activities.
The Three PEP Categories You Need to Know
Understanding the different PEP categories is crucial for applying a proportionate risk-based approach. The 2025 regulatory updates, particularly the FCA’s Finalised Guidance FG25/3, have provided important clarifications on how these categories should be assessed.
- Domestic PEPs – These are individuals holding prominent public positions within the UK. Historically, all PEPs were treated with a high level of scrutiny. However, the revised 2025 guidance clarifies that Domestic PEPs should generally be treated as lower risk, unless other specific risk factors (unrelated to their PEP status) are identified. This allows for a more nuanced and proportionate approach to UK-based public officials. Examples include senior politicians, judges, high-ranking civil servants, and military officers.
- Foreign PEPs – These are individuals who exercise prominent public functions outside the UK. Due to varying levels of corruption and governance in different jurisdictions, Foreign PEPs typically warrant a higher-risk classification. Enhanced Due Diligence (EDD) is particularly important for PEPs from countries identified by the Financial Action Task Force (FATF) as “Call for Action” jurisdictions.
- International PEPs – This category includes individuals who hold prominent positions in international organisations, such as directors, deputy directors, or members of the board of international bodies. The risks associated with International PEPs are assessed based on the specific organisation and the individual’s role.
The regulatory framework also extends to family members and close associates of PEPs, as they can be used to facilitate illicit activities. Firms must assess the actual risk posed by these individuals rather than applying an automatic high-risk classification.
UK AML Regulations & PEP Screening Requirements for Accountants & Bookkeepers
The cornerstone of the UK’s AML regime is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), which has seen several amendments and clarifications, particularly for 2025. It is important to note that there is no standalone “UK Money Laundering Act 2024”; rather, the MLRs 2017 continue to be the primary legislation, updated through various statutory instruments and guidance.
For UK accountants and bookkeepers, compliance with these regulations is not merely a legal obligation but a professional imperative. The 2025 reforms emphasise a strategic recalibration towards a more risk-led and proportionate approach to AML, moving away from blanket compliance requirements. This means firms must tailor their policies, controls, and procedures (PCPs) to match their specific risk profile and business activities.
Key PEP screening requirements for UK accountants and bookkeepers include:
- Client Identification & Verification – At the outset of any business relationship, firms must identify whether a client, beneficial owner, or key principal is a PEP. This involves checking against reliable PEP databases and collecting sufficient information to verify their identity.
- Risk Assessment – A thorough risk assessment must be conducted for all clients, with particular attention to PEPs. This assessment should consider the client’s source of wealth and funds, the nature of the business relationship, and any geographical risk factors.
- Enhanced Due Diligence (EDD) – For clients identified as high-risk PEPs (e.g., those from FATF “Call for Action” countries or involved in unusually complex transactions), EDD is mandatory. This involves obtaining additional information, increasing the frequency of monitoring, and obtaining senior management approval for the business relationship.
- Ongoing Monitoring – The business relationship with PEP clients must be subject to continuous scrutiny. This includes monitoring transactions for unusual patterns and regularly updating client information and risk assessments.
- Record Keeping – Detailed records of all PEP screening decisions, due diligence conducted, and ongoing monitoring activities must be maintained for at least five years after the end of the business relationship.
- Reporting Suspicious Activity – If any suspicion of money laundering or terrorist financing arises, a Suspicious Activity Report (SAR) must be filed with the National Crime Agency (NCA) via the firm’s Money Laundering Reporting Officer (MLRO). This obligation applies regardless of the client’s PEP status.
The 2025 amendments to the MLRs also include technical adjustments such as the conversion of monetary thresholds from euros to sterling and a refinement of EDD requirements to focus on the highest-risk jurisdictions. These changes aim to simplify compliance while ensuring robust defences against illicit finance.
The PEP Screening Process: A Step-by-Step Guide for Your Practice
Implementing a robust PEP screening process is fundamental for UK accountants and bookkeepers to meet their Anti-Money Laundering (AML) obligations in 2025. This process should be integrated seamlessly into your client onboarding and ongoing monitoring procedures, adopting a proportionate, risk-based approach as advocated by the Financial Conduct Authority (FCA) in its Finalised Guidance FG25/3.
The goal is not merely to identify a Politically Exposed Person (PEP), but to understand the specific risks they pose and apply appropriate levels of Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD). A well-defined PEP screening procedure ensures compliance, protects your practice from financial crime, and maintains workflow efficiency.
Client Inquiry & Initial Data Collection
Gather basic client information, including identity, address, and nature of the proposed business relationship. This forms the foundation for all subsequent checks.
Automated PEP Screening
Utilise PEP screening software UK to automatically check client details against global PEP lists and sanctions databases. This initial screen PEP step is crucial for early identification.
Risk Assessment & Initial CDD
Based on screening results and collected data, conduct an initial risk assessment. If no PEP match or other high-risk factors are found, proceed with standard CDD for PEP. If a potential PEP is identified, escalate for further review.
Enhanced Due Diligence (EDD) for PEPs
If a client is confirmed as a PEP and assessed as high-risk (e.g., foreign PEPs from high-risk jurisdictions), initiate EDD. This involves deeper scrutiny into their financial background and the nature of the relationship. This is a crucial step in AML compliance.
Senior Management Approval
For all PEP relationships, particularly those requiring EDD, obtaining senior management approval is a mandatory regulatory requirement. This demonstrates a robust control environment.
Client Onboarding & Ongoing Monitoring
Once approved, the client can be onboarded. Crucially, PEP relationships require enhanced ongoing monitoring, with regular reviews and continuous screening to detect any changes in status or risk profile.
Choosing the Right PEP Screening Software & Tools
The manual process of checking PEP lists can be time-consuming, prone to error, and difficult to scale. For UK accountants and bookkeepers, particularly those with a growing client base, investing in automated PEP screening solutions is no longer a luxury but a necessity. These solutions significantly enhance workflow efficiency and accuracy, ensuring compliance with the evolving 2025 AML regulations.
When choosing PEP screening software UK, consider the following key features:
- Global PEP Database Coverage – The software should access comprehensive and frequently updated global PEP lists, including domestic, foreign, and international PEPs, as well as their family members and close associates.
- Advanced Matching Logic – Look for solutions that employ fuzzy logic and AI-driven capabilities to handle name variations, aliases, transliterations, and reduce false positives, ensuring accurate identification.
- Real-Time & Ongoing Monitoring – The ability to perform real-time checks during onboarding and continuous monitoring throughout the client lifecycle is crucial. This ensures that changes in a client’s PEP status are promptly identified.
- Risk Scoring & Categorisation – Effective software will provide risk scores and categorise PEPs based on their role, geographic risk, and other factors, helping you apply a truly risk-based approach.
- Integration Capabilities – Seamless PEP screening integration with your existing client onboarding, CRM, or AML case management systems is vital for streamlined operations.
- Audit Trail & Reporting – The software should automatically generate detailed audit trails and reports of all screening activities, decisions, and rationale, which is essential for regulatory inspections.
- User-Friendliness & Support – An intuitive interface and reliable customer support are important, especially for automated PEP screening solutions for UK bookkeepers and small accounting firms.
Introducing FigsFlow: The Best PEP Screening Software for Accountants
Here’s how FigsFlow compares with other solutions in the market:
Integrating PEP Screening with Your Client Onboarding Workflow
Effective PEP screening integration into your existing client onboarding workflow is crucial for both compliance and workflow efficiency. A disjointed process can lead to delays, increased costs, and potential compliance gaps. The goal is to embed PEP checks as a natural, automated step within your client acceptance journey, rather than an afterthought.
For UK accountants and bookkeepers, this means leveraging technology to streamline the process. Many modern AML software solutions offer API integrations that allow them to connect directly with your CRM, practice management software, or dedicated onboarding platforms. This creates a seamless flow of information and automated triggers for screening.
Prospect Engagement
Initial contact with a potential client. Information is gathered to determine service needs.
Initial Client Data Collection
Collection of all necessary client identification documents and basic background information.
Automated PEP & Sanctions Screening
Client data is automatically fed into the chosen PEP screening software for real-time checks against relevant databases.
Risk Assessment & EDD Review
Screening results are reviewed. If a PEP is identified, a detailed risk assessment is performed, and EDD procedures are initiated if required.
Senior Management Approval (if PEP)
For all PEP relationships, senior management provides formal approval to proceed, documenting their decision and rationale.
Client Acceptance & Ongoing Monitoring
Once all checks are complete and approvals obtained, the client is onboarded, and continuous monitoring is initiated.
Conclusion
PEP screening isn’t optional in 2025. The regulatory landscape demands robust compliance, but risk-based approaches mean you can work smarter, not harder.
Technology has transformed manual processes into manageable workflows. Automated screening and integrated systems remove the guesswork from compliance.
The 33% increase in HMRC supervision fees is a wake-up call for practices treating AML as an afterthought.
FigsFlow helps UK accounting and bookkeeping firms implement robust PEP screening without enterprise complexity. Real-time screening, ongoing monitoring, and comprehensive documentation that satisfy regulatory requirements.
Don’t wait for a compliance issue to force your hand.
Watch FigsFlow Work
Frequently Asked Questions
PEP screening is the process of identifying whether a client, beneficial owner, or key principal is a Politically Exposed Person. It involves checking individuals against global PEP databases to assess potential money laundering and corruption risks. This screening is a fundamental requirement under UK Anti-Money Laundering regulations for accountants and bookkeepers.
PEP stands for Politically Exposed Person, someone who holds or has held a prominent public position. In the UK, this includes senior politicians, judges, high-ranking civil servants, and military officers. The definition also extends to their immediate family members and close associates who may be used to conceal illicit funds.
PEP screening must be conducted at client onboarding and then continuously throughout the business relationship. Ongoing monitoring is essential because a client’s PEP status can change at any time. High-risk PEP relationships require more frequent reviews, with many firms conducting quarterly or semi-annual checks alongside transaction monitoring.
Yes, PEP screening is mandatory for all UK accountants and bookkeepers under the Money Laundering Regulations 2017. Failure to conduct proper PEP screening exposes your practice to regulatory penalties, reputational damage, and potential involvement in financial crime. HMRC and professional bodies actively supervise firms for compliance with these requirements.
FigsFlow automates the entire PEP screening process in less than 30 seconds. Simply enter your client’s details, and the software checks against comprehensive global PEP and sanctions databases in real-time. You receive instant risk scores, automated ongoing monitoring, and complete audit trails that satisfy regulatory requirements without manual effort.
