Following recent changes to the MLRs and its PEP review, the FCA is consulting on changes to its guidance for firms on applying a proportionate and risk-based approach to UK PEPs, their relatives and close associates for AML purposes.
The FCA says that its guidance generally remains fit for purpose but it is proposing changes to:
- reflect the new legal starting point that UK PEPs should be treated as lower risk;
- make clear that non-executive board members of civil service departments should not be treated as PEPs solely for that reason; and
- give greater flexibility in who can approve or sign off PEP relationships within firms.
The consultation closes on 18 October 2024.
Alongside the consultation announcement, the FCA has also published the findings of its PEP review. Most firms had systems and controls in place to implement the FCA’s guidance but the FCA still found areas for improvement, including:
- some firms used definitions for PEPs and RCAs that are wider than those in the MLRs and FCA guidance;
- some did not have effective arrangements to assess if the PEP classification was still appropriate after the PEP had left public office;
- a few did not consider the customer’s actual risk in their assessment and rating, and did not give a clear rationale for their risk rating;
- firms needed to improve the clarity and detail of their communications with PEP and RCA customers;
- most firms needed to improve their staff training; and
- some firms needed to update their policies to reflect recent legislative amendments to treat UK PEPs and RCAs as having a lower level of risk than a foreign PEP, unless they have other risk factors.