The legislation and guidance clarifies that a case by case basis is required with the risk assessed of individual PEPs rather than applying a generic approach to all PEPs. The MLRs set out that all firms must apply a RISK SENSITIVE approach to identifying PEPs and then applying ENHANCED DUE DILIGENCE MEASURES.

The FSA has issued the following guidance

• FG 17/5 The treatment of politically exposed persons for anti-money laundering purposes

In this guidance, where the FCA are interpreting rather than restating legal obligations, this is shown in italics.

This guidance

• is aimed at any institution that has its anti-money laundering systems and controls overseen by the FCA.
• discusses how any institution can meet their obligations when opening new relationships or monitoring existing relationships. It applies only to business relationships undertaken in the course of business in the UK.
• The Financial Ombudsman Service will consider complaints from PEPs, their family members or close associates – and will take the guidance into account when deciding what is fair and reasonable in all the circumstances of a complaint.
• has not been approved by Treasury under Regulation 35(4)(b) and sections 330 & 331 of the Proceeds of Crime Act. However, Regulation 35)(4)(b)(i) states that firms may take into account any guidance that has been issued by the FCA.

Firms should only take additional measures beyond this guidance where:

• this is justified on the basis of their risk assessment
• risk factors are associated with that customer unrelated to their position or connection to a PEP Summary of the Guidance

The FCA expects that firms take appropriate but proportionate measures in meeting their financial crime obligations AND .

1. The guidance provides clarity on how firms should apply the definitions of a PEP in the MLRs in a UK context. This includes
   1. providing that firms should only treat those in the UK who hold truly prominent positions as PEPs and
   2. not to apply the definition to local government, more junior members of the senior civil service or anyone other than the most senior military officials.
   3. As such it is unlikely in practice that a large number of UK customers should be treated as PEPs.
2. Even where a UK customer does meet the definition of PEP because of the position they hold- or another country assessed as having similarly transparent anti-corruption regimes- a firm is required to recognise the lower risk of such customer s and apply the guidance on measures they can take in lower risk situations to meet their EDD obligations.
3. The guidance does, however, require firms to apply more stringent approaches where the customer is assessed as having a greater risk. In those circumstances firms will need to take further steps to verify information about the customer and the proposed business relationship. This is in line with the FCA’s financial crime guidance to date where the focus has been on managing higher risk PEP relationships.

Read more

https://www.fca.org.uk/publication/finalised-guidance/fg17-05.pdf

https://lnkd.in/dUNdRra