RCA (Relatives and Close Associates)

Definition

RCA stands for relatives and close associates. It is the category of people who fall within the scope of PEP measures because of their connection to a politically exposed person, rather than because of any public function of their own.

The two halves are defined differently.

Family members generally include a PEP's spouse or civil partner (or equivalent), their children and the children's spouses or partners, and their parents. Some jurisdictions extend the list, for example to siblings, and firms may choose to go further as a matter of policy.

Close associates generally include individuals known to have joint beneficial ownership of a legal entity or arrangement with a PEP, individuals with any other close business relationship with a PEP, and individuals who are the sole beneficial owner of an entity known to have been set up for the benefit of a PEP.

The word "known" matters. A firm is generally expected to act on relationships it knows about or should reasonably know about from the information available, not to investigate the private life of every customer.

Why a regulated firm cares

The simplest way for an official to hide the proceeds of corruption is to put them in someone else's name. A spouse's investment account, a son-in-law's property company or a long-standing business partner's trust are all more discreet than a personal account. RCA measures exist to close that route.

The risk an RCA carries is inherited, not intrinsic. The person may have an entirely private career and no record of their own anywhere. They matter only because of an edge that connects them to someone who does. That creates a distinctive problem: if the relationship is wrong, stale or misread, the whole risk assessment rests on nothing.

It also creates a fairness concern. Treating a private individual as higher risk because of an asserted relationship has consequences for them, and data protection rules expect firms to process that kind of information carefully and accurately.

How RCA status is detected and evidenced

RCAs are harder to find than PEPs. A PEP's role is recorded in official sources. A relationship often is not, or is recorded only in company registers, asset declarations, court documents or press coverage.

In practice firms rely on:

• customer declarations that ask about connections to public office holders;
• screening against datasets that record relationships as well as roles;
• corporate registry data showing co-ownership or co-directorship with a known PEP;
• adverse media and open sources that describe business or family ties.

For a confirmed RCA, the file should answer four questions:

1. Who is the PEP, and what is their role?
2. What is the relationship: spouse, child, business partner, co-owner? "Associate" on its own is not enough.
3. Which direction does it run? Relationship data is often stored without direction. A record linking two people as "in-law" needs to be read carefully to establish who is related to whom.
4. Where did the claim come from, and is it current? Marriages end and partnerships dissolve. A relationship recorded years ago may no longer hold.

Regulatory basis

FATF Recommendation 12 requires the PEP measures to be applied to family members and close associates of PEPs, and the FATF Guidance on Politically Exposed Persons (2013) discusses how to identify them. Directive (EU) 2015/849, as amended by Directive (EU) 2018/843, defines family members and persons known to be close associates and applies enhanced measures to them. In the UK, the Money Laundering Regulations 2017 contain equivalent definitions, and the FCA's finalised guidance on PEPs discusses proportionate treatment of family members and close associates.

A point that varies between regimes is what happens when the PEP leaves office. Under some rules, the obligation to treat family members and close associates as higher risk falls away when the PEP ceases to be a PEP, even though the PEP themselves may remain in scope for a further period. Firms should confirm the treatment required in their own jurisdiction.

Worked example (hypothetical)

A firm receives an application from Tomas Hale, who wants to open an account for a property holding company. Neither Mr Hale nor his company appears on any PEP dataset.

The company register, however, shows that the company has two equal shareholders: Mr Hale and Ms Irena Kostic. Screening confirms that Ms Kostic is the current finance minister of the fictional Republic of Morvia. Joint beneficial ownership of an entity with a PEP places Mr Hale in the close associate category.

The analyst records the PEP's role, the nature of the link (joint beneficial ownership of the applicant company), its source (the corporate register extract, dated) and that it is current. The relationship is then subject to the same enhanced measures that would apply to Ms Kostic herself, with particular attention to the source of the funds used to buy the properties.

Related terms

• PEP (Politically Exposed Person)
• PEP Level 1, 2, 3
• Beneficial Owner
• Entity Resolution
• KYB (Know Your Business)
• Adverse Media