FCA has published a guidance consultation on treatment of PEPs under the draft 2017 MLRs. FCA is obliged to issue the guidance, which it says it has prepared using information it has on when firms have not applied CDD measures that were proportionate with the risk a PEP posed. The draft guidance stresses that is it not appropriate to apply the same measures to all relationships with PEPs:
- proposes a definition for who should and should not be considered a PEP, family member or close associate;
- asks for views on whether there are situations FCA has not considered that present higher or lower risks, and whether it should consider other risk factors. Among the factors FCA considers would make PEPs lower risk are that, for example, the PEP operates solely in a country with low corruption levels and credible AML defences, with an independent judiciary and well developed registries for ownership of land, companies and equities. Other factors might include that the PEP has no executive decision-making responsibilities, or is subject to rigorous disclosure requirements. Higher risk PEPs would be those that, for example, operate in countries known for high levels of corruption, with weak state institutions, poor AML defences, non-democratic governments and no free press, those who can influence large public procurement exercises, or those whose wealth or lifestyle is inconsistent with known legitimate sources of income or wealth. Similar criteria would apply to a PEP’s close family members; and
- whether there are additional measures firms should take in higher or lower risk situations. FCA suggests that low risk PEPs can be subject to less intrusive or exhaustive steps and that they and their family members could no longer be treated as PEPs as soon as the PEP leaves office. Oversight and approval of relationships would take place at a higher level for high-risk PEPs, and business relationships with them or their close families be monitored more often.
It asks for comments by 18 April.