Skip to main content
FinCrime Institute
Category: Politically Exposed Persons

Known Close Associate

Also known as: KCA, Known Close Associate of a PEP, Close Associate, Relevant Close Associate, Relatives and Close Associates (RCA) (related grouping)
Simply put

A Known Close Associate is a person who has a close personal or business connection to a politically exposed person (PEP), such as someone with shared business interests or a close relationship. Because of this link, financial institutions may treat them as carrying similar risks to the PEP and apply extra checks. Being classified as a Known Close Associate does not mean the person has done anything wrong; it is a risk-management categorisation rather than a finding of misconduct.

Formal definition

In the UK, a 'known close associate of a politically exposed person' is a defined term used in the FCA Handbook glossary, which points to the definition set out in regulation 35(12) of the Money Laundering Regulations. In practice, the category captures individuals with close business or personal links to a PEP (sometimes framed within the broader grouping of Relatives and Close Associates, or RCAs), and it is distinct from family members/relatives, which many frameworks treat as a separate sub-category. Identifying and assessing close associates is generally part of the enhanced measures applied to PEP-connected customers, though the precise scope, terminology, and the extent to which associates must be traced vary by jurisdiction and should be confirmed against the applicable regulation. Practitioners note that the associate category tends to be harder to identify and evidence than family relationships, as it turns on the nature and closeness of the relevant business or personal connection rather than a fixed status.

Why it matters

Politically exposed persons are treated as higher-risk customers because their position may expose them to opportunities for bribery, corruption, or the misuse of public funds. A key limitation of focusing only on the PEP is that risk can be displaced onto people around them. A Known Close Associate, someone with a close business or personal connection to a PEP, may hold assets, conduct transactions, or provide access to financial services in ways that reflect the PEP's underlying risk without the PEP appearing directly. Identifying and assessing close associates therefore helps close a gap that PEP screening alone would leave open.

The category matters operationally because it is generally treated as part of the enhanced measures applied to PEP-connected customers. In the UK, the term is defined via the FCA Handbook glossary, which points to regulation 35(12) of the Money Laundering Regulations, and the scope, terminology, and depth of tracing required vary by jurisdiction and should be confirmed against the applicable regulation. Close associates are commonly discussed within the broader grouping of Relatives and Close Associates (RCAs), but the associate category is distinct from family members or relatives, which many frameworks treat as a separate sub-category.

It is important to stress that classifying someone as a Known Close Associate is a risk-management categorisation, not a finding of misconduct. The designation triggers additional checks and scrutiny; it does not establish that the person, or the connected PEP, has done anything wrong. Firms should apply the category to detect, deter, and manage risk while avoiding the assumption that association alone evidences wrongdoing.

Who it's relevant to

CDD and onboarding teams
Staff responsible for customer due diligence need to recognise when a prospective or existing customer may be a Known Close Associate of a PEP, so that appropriate enhanced measures can be considered. Because the association turns on the nature and closeness of a business or personal connection rather than a fixed status, this is generally harder to identify and evidence than a family relationship, and teams should confirm the applicable scope against the relevant regulation.
Financial crime and AML compliance officers
Compliance functions design and oversee the PEP and RCA frameworks under which close associates are assessed. They must keep the associate category distinct from relatives, calibrate how far connections are traced based on a risk-based approach, and ensure the treatment reflects the applicable regime, in the UK, the definition set out via the FCA Handbook glossary and regulation 35(12) of the Money Laundering Regulations.
Screening and technology providers
Vendors supplying PEP and RCA screening tools support the identification of individuals with close business or personal links to PEPs. Given that terminology and scope vary by jurisdiction and that associates are typically harder to evidence than relatives, screening logic and data need to reflect these distinctions rather than treating all connected parties as a single fixed category.
Investigators and analysts
Financial intelligence analysts and investigators may examine transactions or relationships involving Known Close Associates as part of assessing PEP-related risk. They should treat the classification as a risk indicator that warrants further scrutiny, not as evidence that the associate or the connected PEP has engaged in wrongdoing.

Inside KCA

Association to a PEP
A Known Close Associate is a natural person identified as having a close business or personal relationship with a Politically Exposed Person (PEP). The concept exists to extend PEP-related scrutiny to individuals through whom a PEP might channel funds or exercise influence, rather than being an independent risk category on its own.
Business or joint ownership relationship
KCA status typically captures persons who have joint beneficial ownership of a legal entity or arrangement with a PEP, or who otherwise maintain close business connections. Note the distinction between beneficial ownership and legal ownership when assessing such relationships.
Sole beneficial ownership set up for a PEP's benefit
Guidance in many jurisdictions also treats as a KCA a person known to be the sole beneficial owner of a legal entity or arrangement that was set up for the de facto benefit of a PEP.
Distinction from family members
KCAs are generally treated separately from a PEP's family members in most frameworks. Both categories may attract PEP-related measures, but the defining criterion for a KCA is the nature of the association rather than kinship.
Source and status of the term
The concept derives from the FATF Recommendations, which are international standards rather than binding law, and is transposed with variations into instruments such as the EU AML Directives and national frameworks. Exact definitions, scope, and any thresholds should be confirmed against the applicable regulation, as they can diverge by jurisdiction.
Risk-based application
Identifying a person as a KCA is generally a trigger for applying enhanced scrutiny measures proportionate to assessed risk. It is a compliance classification used to detect, deter, and manage risk, not a determination of wrongdoing.

Common questions

Answers to the questions practitioners most commonly ask about KCA.

Is a Known Close Associate the same as a Politically Exposed Person (PEP)?
No. A Known Close Associate is not itself a PEP; the two are distinct categories that are often conflated. A PEP is a person entrusted with a prominent public function, while a KCA is a person who has a close business or personal relationship with a PEP. The KCA classification derives its significance from that connection rather than from the associate holding a public function themselves. In many jurisdictions, KCAs and family members of PEPs are addressed alongside PEP requirements precisely because they may be exploited to hold or move assets on a PEP's behalf, but treating the labels as interchangeable is inaccurate. The FATF Recommendations and instruments such as the EU AML Directives generally address close associates as a related-but-separate category, and exact definitions and scope should be confirmed against the applicable regime.
Does identifying someone as a Known Close Associate mean they have done something wrong?
No. A KCA designation is a risk-classification and due-diligence trigger, not a finding of criminality or an allegation of wrongdoing. It signals that the relationship may present a higher risk profile warranting closer scrutiny, but the status itself establishes nothing about the individual's conduct. Classifying a person as a KCA typically informs the level of customer due diligence applied and may prompt enhanced measures, yet it should not be treated as evidence of money laundering, corruption, or any offence. The distinction between a compliance risk indicator and a criminal-law conclusion should be maintained throughout the customer relationship.
How do we identify whether a customer is a Known Close Associate of a PEP?
Identification generally combines information gathered during customer due diligence with external sources. Firms typically use a mix of customer-provided information, screening against commercial PEP and adverse-media databases, corporate registries, and open-source research to establish whether a customer has a close business or personal relationship with a PEP. Because 'close associate' involves a relationship rather than a public role, identification often depends on understanding the customer's business connections, joint ownership arrangements, and known personal ties. The precise reasonableness standard for how far a firm must look varies by jurisdiction and should be confirmed against the applicable regulations and any supervisory guidance.
What level of due diligence should apply once a customer is classified as a KCA?
In many jurisdictions, associates of PEPs are subject to enhanced due diligence (EDD) measures similar to those applied to the PEP relationship, applied on a risk-sensitive basis. Such measures may include senior management approval to establish or continue the relationship, establishing the source of wealth and source of funds, and enhanced ongoing monitoring of the relationship and transactions. These are measures to detect, deter, and manage risk rather than guarantees against misuse. The specific obligations, and whether they are mandatory or risk-based for associates as opposed to PEPs themselves, differ across the FATF standards, the EU framework, the UK Money Laundering Regulations, and US requirements, and should be verified against the relevant instrument.
How should a firm handle a customer who ceases to be a Known Close Associate because the linked PEP leaves office?
The end of a PEP's public function does not automatically remove associated risk. Many frameworks provide that a person who was a PEP should continue to be treated on a risk-sensitive basis for a period after leaving office, and by extension the risk attaching to a close associate may persist rather than lapsing immediately. Firms generally apply ongoing risk assessment rather than an automatic declassification, considering factors such as the level of residual influence and the nature of the relationship. Whether any specific time period applies, and how it is calculated, varies by jurisdiction and should be confirmed against the applicable regulation and internal risk policy.
How should the KCA classification and supporting rationale be documented?
Firms should generally record the basis for the KCA classification, the linked PEP relationship, the enhanced measures applied, any senior management approvals obtained, and the outcome of source of wealth and source of funds enquiries. Documentation supports the auditability of risk-based decisions and demonstrates to supervisors that due diligence was conducted, while also enabling consistent ongoing monitoring. Record-keeping obligations, including retention periods and the form of records, are set by the applicable regime rather than by a single universal standard, so specific requirements should be confirmed against the relevant rules governing the obliged entity.

Common misconceptions

A Known Close Associate is the same thing as a PEP's family member.
In many frameworks these are distinct categories. A KCA is defined by a close business or personal association with a PEP, while family members are captured through kinship. Both may attract PEP-related measures, but the qualifying criteria differ and should be assessed against the applicable regulation.
Identifying someone as a KCA means they have engaged in wrongdoing.
KCA is a compliance classification that triggers enhanced scrutiny proportionate to risk. It reflects a relationship-based risk indicator, not evidence of money laundering, terrorist financing, or any offence, and it does not by itself establish criminal conduct.
The definition of a KCA is uniform across all jurisdictions.
The concept originates in the FATF Recommendations, which are standards rather than binding law, and is implemented with variations in instruments such as the EU AML Directives and national regimes. Scope and precise wording can differ, so the definition and any obligations should be confirmed against the applicable local framework.

Best practices

Confirm the precise definition, scope, and any thresholds for KCA status against the specific regulation applicable to your obliged entity, rather than assuming a single global standard.
Assess the nature of the association, whether it is joint beneficial ownership, a close business relationship, or sole beneficial ownership of an entity set up for a PEP's benefit, when determining KCA status, and document the basis for the classification.
Distinguish KCAs from PEP family members in your policies and records, while recognising that both categories may warrant PEP-related measures.
Apply enhanced scrutiny measures proportionate to the assessed risk once a person is identified as a KCA, treating the classification as a risk-management trigger rather than a conclusion of wrongdoing.
Ensure analysts understand that a KCA designation, alert, or match does not establish criminal conduct and must not be treated as proof of an offence.
Periodically review KCA determinations as relationships and the underlying PEP status change, and keep classification rationales auditable.